Swimming in Subsidies: The National Flood Insurance Program must dry up.

Swimming in Subsidies: The National Flood Insurance Program must dry up.

Op-ed in The National Review
June 26, 2008

Already, the news of
the massive flooding in the Midwest has
disappeared from most newspaper front pages. And, indeed, the worst is probably
over: hydrologists believe that the Mississippi
River crested on June 22 and 23 and probably will not flood again in
2008. Although it is cold comfort for people who have lost homes, cars, and
loved ones, the nation avoided any enormous levee breaks in heavily populated
areas, dispensed relief efficiently, and kept loss of life to a minimum. By some
standards, America’s relief efforts seem to have
worked.

But this apparent success hides one simple fact: We got lucky.
An extra foot or so of water would have inundated towns, caused billions in
damage, and killed many more. Despite billions in subsidies for breakwaters,
flood barriers, relief, and flood insurance, there’s little hope of solving
America’s flooding problem anytime
soon. Unless the nation wants to go on risking massive loss of life from
flooding every decade, we need a fundamentally different policy based on one
simple principle: the government should not subsidize any new development in
areas likely to flood.

To
begin with, using tax dollars to build new breakwaters — a practice many
conservatives show a strange attraction for — is almost always a bad idea.
Environmentalists are mostly right when they say that wetlands do a better job
controlling floods than government-built rock-piles. And longstanding Army Corps
of Engineers policies — beginning with 1936’s National Flood Control Act — have
encouraged plenty of development in places that probably should have been left
wild. In a few cases, cities might well follow the example of Grand Forks, North
Dakota (inundated in 1997’s Red River Floods) and use some likely-to-flood areas
as parkland, golf courses, or wilderness. Most often, however, there’s little
choice but to strengthen the existing breakwaters: it’s not realistic to argue
that every flood prone town should move.

The real problem — the truly
enormous subsidy for building in flood-prone areas — lies with the National Flood Insurance Program
(NFIP) that provides individual coverage for homes and small businesses.
Although changes that both houses of Congress have passed will correct its most
obvious absurdities — insuring second homes against flood and rebuilding
properties dozens of times — NFIP remains deeply troubled. Each year, it
requires massive subsidies. Indeed, Congress had little choice but as to forgive
the $18 billion in debt that it has run up since 1999 (both houses of Congress
have voted to do that). Likewise, it has had very mixed results in encouraging
safer building. The flood maps used to set rates have only a vague relationship
to actual risk and, as a result, the rates that individual property owners pay
have a lot more to do with guesswork than actuarial calculation.

Even
more seriously, the fundamental standard that the program sets — homes can be
built on areas likely to flood every 100 years but not more often than that —
encourages development. A home on a 100-year flood plain has more than a one in
four chance of flooding during a typical 30-year mortgage. This is simply too
often. And adding wind damage to the flood program — something the House of
Representatives and some insurance companies favor doing — would make things
even worse.

Although there’s no way to terminate flood insurance
tomorrow, Congress needs to spend the next few years looking over the program
very carefully. In the long run, the United States needs a strategy that
will result in private, self-sustaining flood insurance. Among other things,
creating a viable private flood insurance market will require efforts to improve
the quality of flood maps and encourage property owners to strengthen their own
homes. Individuals who wish to live in flood-prone areas and developers who wish
to build there shouldn’t face undo restrictions on using their own property. But
they shouldn’t expect a dime for subsidized insurance, roads, breakwaters,
schools, or anything else that taxpayers will pay for rebuilding.

Gilbert F. White — a one-time president of Haverford College
who is considered the father of
floodplain management — put it simply: “Floods are acts of God,” he wrote.
“Flood losses are acts of man.” And that’s the bottom line.