If passed, the law would be an "implicit subsidy [making] it practical for developers to build in currently wild or lightly developed coastal areas where conventional private companies won't write policies." As Heritage's David John and Matt Mayer conclude, the legislation is:
nothing less than a blatant attempt to have the taxpayers assume much of the risk for property losses caused by hurricanes and similar disasters. In essence, under the HDA taxpayers across the country would be subsidizing the owners of large beach houses.The bill was introduced by Democrat Florida Congressman Ron Klein. In an amazing coincidence, his district covers coastal areas from Palm Beach to Boca Raton. Another irrelevant fact is that the sole qualifying state catastrophic insurance programs are in Florida and California.
We've seen this movie before--starring Fannie Mae and Freddie Mac, which bombed at at least $400 billion of taxpayer expense. Implicit Federal backing has a way of becoming explicit.
Closer yet is the National Flood Insurance Program (NFIP), with losses often exceeding revenues, necessitating repeated Federal bailouts. Because hurricanes and earthquakes re-occur, the Federal program encouraged developing risky land. So, one problem with NFIP was:
many "repetitive-loss properties," which are properties that had claims in excess of $1,000 twice over a 10-year period. These properties represent almost 30 percent of all claims.Why not rebuild when you've got nothing to lose?
In the current recession, more Federal debt is crazy. Passage of this bill would prove that our government is too stupid to learn.