Thursday, November 29, 2012

An Utterly Indefensible Federal Program

I am not a reflexive critic of government spending, as I believe that government has an important role in society.  But in this era of constrained financial capabilities and the need to cut spending, recent events reveal one program that makes no sense--and is a huge financial risk for taxpayers.  

That program is the National Flood Insurance Program.  Private insurance companies years ago grasped that insuring oceanfront properties is a poor financial risk.  Climate change--as highlighted by hurricane Sandy--exposes the huge potential costs to the Federal government (and taxpayers).  The Federal program now covers an estimated $527 billion of properties, with potential losses to the government of $1.25 trillion.

So with talk about budget cuts and the need to curb entitlement spending dominating the discussion, it seems that reform of this program requires immediate attention.  The program should be phased out or else the perverse financial incentives for building in some of the highest-risk areas of the country should be removed.  Most of us would be delighted to be able to live along the coast--but doing so should be on one's own--not with the backing of U.S. taxpayers.

Steve Lehman

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