John likes to point out the inefficiency of subsidizing flood insurance for coastal residents. But the inefficiencies aren't limited to coast states. Ohio residents want their piece of the pie too!
Legislation meant to stabilize the finances of the federal government’s flood-insurance program has put a big dent in the Berry family budget.
The federal governments's flood insurance program is the National Flood Insurance Program (NFIP). John and I have both railed against NFIP before (That cover picture still cracks me up). The legislation being referred to is the Biggie-SmallsBiggert-Waters Flood Insurance Reform Act.
Debi Berry, 57, and her husband, Rick, 64, live in the village of LaRue, a flood-prone area in Marion County. They used his first Social Security check to pay their flood-insurance premium, which has nearly doubled this year to $1,089, from $622 in 2013.
Flood insurance premia doubled in the past year due to the removal of many NFIP subsidies for flood insurance by the Notorious B.I.G. Biggert-Waters Flood Insurance Reform Act.
“I could have thought of better uses for that money,” Mrs. Berry said.
Like Ohio State Buckeye Football season tickets! Or a bunch of scratch-offs!
But the couple needs the coverage. Floodwater from the Scioto River crept into their basement in 2011 and came close in December, and their home lender requires them to carry flood insurance.
The Scioto (pronounced Sigh-OH-ta) River is best described as a murky stream of brownish muck--sometimes a torrent after a lot of rain, or snow melt, that meanders through central Ohio, eventually merging with the Olentangy (pronounced OH-lin-tan-jee) River in downtown Columbus.
“I’m not sure I’d want to chance it without it,” she said. “We’ve been on the edge too often. I’m not sure I’d want to play that lottery game.”
But I could've used that extra money to play the Ohio lottery.
Dean Colby, 66, and his wife, Jan, 56, also of LaRue, weren’t as lucky as the Berrys. They have no basement, so in December the water rose 16 inches in their one-story home — for the second time since 2011.
"Fool me once, shame on — shame on you. Fool me — you can't get fooled again."
They can’t use the $37,000 government check they just got for repairs until they learn if they're eligible for a second fund to raise the structure. They haven’t checked their escrow, but if their premium went up, they have no choice but to pay. They still have a mortgage, and houses in the village do not sell, Mrs. Colby said.
Maybe that's because they keep getting filled with water?
But now, the couples might be in line for a break on their premiums. Last week, Congress sent to President Barack Obama legislation meant to roll back some of the increases that homeowners across the country have experienced since Congress passed a flood-insurance-reform act in 2012.
Ummm...the new legislation did not roll back any price increases, because the Big Daddy Kane Biggert-Waters Flood Insurance Reform Act (BWFIRA) didn't RAISE prices. The BWFIRA removed subsidies in the NFIP that were responsible for establishing prices LOWER than were efficient. The BWFIRA simply took a step towards eliminating inefficient subsidies and returning prices to their efficient, unsibsidied, socially more deisrable levels.
Now back to the snark.
The 2012 act aimed to shore up a program that is $24 billion in the hole.
But what's $24 billion really. Crap, Warren Buffett is giving away $1 billion of his own money to anyone who gets a perfect NCAA bracket (this seems like a good time to remind you to join the 2014 EnvEcon NCAA Tournament Challenge). If Warren Buffet can give away $1 billion of his own money, why can't the NFIP give away $24 billion of everyone else's money?
It's not the same thing?
Obama has indicated he plans to sign the bill.
...because he remembers as a kid how much fun it was to build a sand castle on the Hawaiian beaches and then watch the tide roll in to wash the sand castle away, only to start anew anew tomorrow.
That's the childhood equivalent of the incentives built into the NFIP subsidies.
One aim of the 2012 law was to roll back some of the federal subsidies that critics say have spurred private insurers to largely avoid the flood-insurance market.
Because private insurers know that the low premia the government charges are NOT FISCALLY VIABLE.
But the law resulted in huge increases in flood-insurance costs at a time when prices of regular homeowner policies were on the rise anyway because of extraordinary losses caused by tornadoes and other powerful storms in recent years.
Sad? Of course.
Bad policy? Of course.