Outrageous: Your Tax Dollars Bailing People Out (page 2 of 2)

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One former director of the NFIP has called the flood program "a danger to the nation."

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Even nuttier is the way the government pays to rebuild properties that flood year after year. By 1998 the National Wildlife Federation had already identified nearly 32,000 properties in 300 cities that had been flooded and repaired two or more times. By unintentionally encouraging development, the NFIP has contributed to environmental damage that worsens the impact of storms. Building in or near fragile areas like marshlands and coasts erodes the buffers that can prevent more severe inland flooding—one of the likely culprits behind the damage wrought by Hurricane Katrina.

Of the properties destroyed by floods, almost 5,600 were worth less than what it cost to repair them.

According to a 2005 report by the nonpartisan Congressional Research Service, owners of properties that flood repeatedly receive 30 percent of the money paid out annually by the NFIP. But why should they care? There's little chance they'll lose their insurance or see premiums go up.

FEMA is reluctant to punish communities that ignore federal guidelines for building in flood-prone areas by canceling flood insurance. And good old Uncle Sam is quick to replace flood-damaged roads and restore washed-away beaches. Is it any wonder that government statistics show that America's coastal areas have grown in population by seven million over the past five years?

Experts across the political spectrum say it's time to make the system more like a private insurance program. Even Robert Hunter, a former director of the NFIP, has called the current program "a danger to the nation" and says it is "just unbelievable" that Congress has taken no action to fix it.

One approach is to raise premiums. About one in four policyholders is paying a premium that's less than 40 percent of what a private insurance company would likely charge, according to David Conrad, a researcher at the National Wildlife Federation. The government could also use an income test to determine eligibility for federal insurance—so the rest of us wouldn't have to pay to protect swank summer homes. As Eli Lehrer of the conservative Competitive Enterprise Institute says, "If it's well-off people in their oceanfront mansions … well, tough!"

There are those in Congress who want to rein in this crazy program, but their efforts have failed, thanks in part to business and real estate lobbyists. Meanwhile, Washington being Washington, some have decided that the solution is to expand the NFIP—by covering wind damage, an idea that the Government Accountability Office says could be a fiscal disaster.

And then there's this: After Katrina clobbered the Gulf Coast, one congressman introduced a "Buy-In Act" that would have let people buy flood insurance retroactively. Kind of defeats the point of insurance, doesn't it? The bill went nowhere, but that's the kind of brilliant thinking that got us here in the first place. You might even say it's all wet.

DO MORE

• Visit the National Flood Insurance Program at floodsmart.gov (yes, that's really its name).
• Worried about government waste? Visit the Action Center of Taxpayers for Common Sense (taxpayer.net), or report wasteful spending at the Citizens Against Government Waste website (cagw.org; click on Get Involved).
• Concerned about natural resources? Visit the National Wildlife Federation (nwf.org) to adopt a wildlife acre, or find local offices of the Conservation Fund (conservationfund.org) to see what you can do in your community.

From Reader's Digest - November 2008

• Michael Crowley
• • Your Tax Dollars
• Better America

• Flood Insurance Provides Best Protection to Homeowners
• A FEMA administrator responds to Michael Crowley's "Drowning in Dollars" column.
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• Be Prepared for Emergencies
• These 11 websites will help you plan ahead for natural or man-made disasters.
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