Obama Tries to Scale Back Government Flood Insurance
The National Flood Insurance Program may well have earned the dubious honor of being the American government’s worst major undertaking. NFIP, as it’s commonly called, theoretically exists to provide flood insurance to the vast bulk of flood-prone Americans homeowners who can’t get it from the private sector while simultaneously encouraging communities to preserve wetlands and make themselves more flood resistant. It hasn’t worked. Since Congress created it in 1968, NFIP has encouraged development in areas where it wouldn’t have otherwise happened and caused the destruction of millions of acres of environmentally sensitive floodplains. Furthermore, the program has built up a debt of more than $19 billion and has no practical way to pay it back. Right now, people who pay low NFIP premiums (as little as $119 a year) can get their houses rebuilt an unlimited number of times with taxpayer backing. Despite obvious absurdities, however, the program has simply drifted along for more than three decades with only a handful of significant changes. The Obama administration, however, has shown a willingness — albeit a cautious one — to begin moving the program in the right direction.
To begin with, the administration has rejected ideas that would make things worse. Mississippi Democrat Rep. Gene Taylor has long called for the inclusion of wind insurance in the program and convinced most House Democrats and some Republicans from flood-prone areas to go along. Because the proposal would cost a lot while displacing much private sector insurance, however, it’s a terrible idea. (The proposal died in the Senate.) In any case, both Secretary of Homeland Security Janet Napolitano and FEMA Administrator Craig Fugate (whose agency runs NFIP) have rejected the idea out of hand. Likewise, proposals to monkey with flood maps and allow more government-subsidized development — something the Bush administration considered more than once — have gotten a decidedly cold reception from Obama’s team.
While the administration hasn’t yet announced any specifics, furthermore, both Fugate and NFIP head Edward Connor have given speeches around the country calling for dialogue on how to change the program. Both have also made it clear that they’re open to the idea that the government should reduce its role, beef up environmental protections, encourage private insurers to begin writing flood coverage, and raise rates in many areas. In early November, in fact, they plan to host a two-day listening session devoted to a freewheeling debate over NFIP.
Like many of the current President’s promises for change, however, it will take time to see if the administration will deliver on broad statements or simply go the big government route. So far, however, the Obama administration appears to be moving NFIP in the right direction.