Ron Paul: The Economics of Disaster

By Ron Paul:

Hurricane Sandy was one of the worst natural disasters the east coast has ever seen.  Clean-up and recovery will take months, if not years and estimates run in the tens of billions of dollars.  Parts of New York and New Jersey will never be the same.  Entire seashore communities have been wiped out, but the determination to rebuild has been lauded as courageous and admirable. Yet as with all natural disasters, Sandy raises uncomfortable questions about the extent to which taxpayers should fund the cleanup and the extent to which government programs create moral hazards.  The greatest compassion brings results, not just good intentions.

From Paul.House.Gov

For example, FEMA and the National Flood Insurance Program (NFIP) are expected to pick up the tab for much of the flood damage caused by the hurricane.  Of course this will mean more federal debt and inflation for the rest of us, since the program only has about $4 billion to work with and is already $18 billion in debt from hurricanes Katrina and Rita.  Many think there is a need for the government to provide flood insurance of this kind.  After all, the market would never provide insurance in flood prone areas at an affordable price.  But shouldn’t that tell us something?

Shouldn’t that tell us that it is a losing proposition to insure homes in coastal areas and flood plains often threatened by severe and destructive weather patterns? And if it’s a losing proposition, should taxpayers subsidize the inevitable losses arising from federal flood insurance?

The NFIP disguises the real cost of flood insurance in flood prone areas, which influences home-building and sales in such areas.  Recklessly taking unwise risks when risk is under-priced is known as moral hazard.  When politicians decide that private insurance premiums are too high, as with houses built in flood plains, the solution is to under price the risk through federal subsidies.  The obvious and expected outcome is more danger to life and limb when disaster strikes.

Even NFIP has been forced to raise rates significantly in coastal areas, and is now dropping second homes from coverage altogether,

Many assume it is compassionate to entrust government central planners with disaster recovery.  However, the greatest compassion brings results, not just good intentions.  And we’ve seen how bureaucratic organizations like FEMA mismanaged recovery and relief in the wake of hurricanes Katrina and Ike.  Organizations such as the Red Cross and private companies like Home Depot and Duracell have already stepped in admirably to help those in need, and we can only hope FEMA has learned this time not to impede and frustrate private efforts as they have in the past.

Above all, my thoughts and prayers are with the victims of Hurricane Sandy in this tremendously difficult time and hope they can get their lives put back together as quickly and seamlessly as possible.

Comments

  1. Where you want to live is your own choice and no one should expect others to pay for that choice. But Sadly They Do
    It’s A Screwed up mess.

    • Anyone that chooses to live in NY city should expect bad things to happen and felt the risk was worth it, for some reason, that evades me.

    • It’s amazing that New York is the highest priced real estate in the country and that market is still going strong even today. Go Figure. Lol

    • But if you live in an apartment and then a person burns down the whole building including your apartment, then the person who did that should be guilty and should pay all the damages and the fines because it’s his fault. Other than that, you’re right!

  2. My heart goes out to those who were adversely affected by Sandy.  As for taxpayers footing the bill for anyone’s choice where they live–and sustain losses–is just not gonna happen on January 20, 2013 should Romney prevail.  Multimillion dollar homes that were either flooded or burned (completely destroyed) are between the owner/bank and the insurance company.  My tax dollars are not designed for that purpose. 

    • That’s true because why should we taxpayers get involved with a problem that wasn’t caused by us and that didn’t happened to us. The government thinks that our tax dollars are created out of nothing just like the dollars getting printed out of nothing.

  3. Nature dictates that all life forms will ultimately act in their own best interest. This includes bankers, government, plants, animals, police and humans. I ordered these from the bottom up.

    I live in NC and we have a saying that corruption in state politics is indirectly proportional to sea level. I live close to the mountains now, lived on the Outer Banks for awhile and found it to be a valid assumption.

  4. What happened to Ron Paul?  It appears he gave up and joined the Republicans.  Very disappointing.

    • He did no such thing. He never endorsed Romney, nor would he.

      He was BLACKBALLED by the controlled MSM in 2008 and 2012. This “election” is a total and complete farce.

    • Yes he did give up, particularly when he had the chance to advance the Libertarian movement and reboot and Constitution on the world stage, leading up to Tampa. He choked and now is spitting out platitudes on internet blogs that he should have advanced to the nation through the gathering media snowball that was developing. He is still a registered Republican and a sitting member of Congress and has been for decades and ran as a Republican in the race to nomination.
      Very frustrating and a cop out 

    • I think he is trying and doing the best he can. You can only do so much when the world is against you. He paid his dues and has done a lot to promote the cause of liberty, but even an old man tires of trying to turn crap into gold. More than you can say about the ones that do nothing but complain.

    • He isn’t in favor with the Republicans and the only reason why he joined this party is because he wants more people to pay more attention to him so that they could wake up and face the truth. He wouldn’t do that if the two-party system wasn’t there.

  5. “Natural”

  6. Ron Paul has been a Republican for many years.  Notice the (R) after his name as he ran for congress?  Unlike so many RINOs out there Ron Paul is a REAL Republican who espouses a smaller constitutional government and honest money.  It’s just that most Repubs do not measure up to his high standards.  

    As I have said before and will continue to say, Ron Paul will never be president… but Rand Paul will… and THAT is when we will have constitutional government.  Rand’s recent moves, much derided by the usual libertarian crowd, is merely some much needed political stealth coverage.  He will do what’s necessary when the time comes.  Too bad that this is necessary but that’s the way the 24/7 whine-a-thon game is played in the media.
     

  7. I feel sorry for the poor who lost everything. The rich who took risk and built on barrier islands that should have been left undisturbed to soak up storm surges like nature intended I have no sympathy for. You had to have your McMansion on the beach so deal with the loss without the rest of us paying for it.
     
    They shouldn’t allow anyone to rebuild there either. After the 1997 Minnesota River 100 year+ flood the government made people move off the flood plain and turned it back to nature. Same thing should happen there.

  8. The US’s semi-secret H.A.A.R.P. installations around the glove could have prevented the disaster, which means they are at best responsible for having failed to do so.

    • Are you kidding?  Can you type that with a straight face?  Grab a cup of coffee (decaf) and leave your other hand ALONE!

    • It’s not nice to fool Mother Nature.

    • Unless if the government did wanted the disaster to happen. The original hurricane track wasn’t supposed to hit the East coast but the US’s semi-secret H.A.A.R.P. installations changed the path and now, it has hit the East coast. I’ve never seen a hurricane’s path getting curved like Sandy.

  9. That conspiracy theory went waaay over the top.  H.A.A.R.P. didn’t cause Hurricane.  Here is what caused it:
    Mbloke-Mbumbo, in Nigeria, was supposed to spend his day as usual – stomping butterflies.  However, a cousin offered him $50 to come to Lagos and write SPAM emails to trick stupid people out of their hard-earned money. 

    Anyway, one of those butterflies which Mbloke-Mbumbo was meant to stomp that day, it continued to live, and the minute air disturbance generated by its fluttering wings snowballed into a larger air disturbance.  This movement of air penetrated all the way into the atmosphere and spawned Hurricane Sandy. 

  10. Almost nothing is free in life and these damages caused by the hurricane Sandy need to be fixed so it is the taxpayers who are going to pay for all of them and if that’s not enough, then the Federal Reserve will print more dollars which will steal the purchasing power from the others holding US dollars by inflation.
     

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