In the News

How Congress recently handled disaster relief shows why things need to change. Louisiana’s U.S. senators didn't distinguish themselves in the process.

A bill funding the Federal Aviation Administration’s activities also included tax credits for victims of this year’s hurricanes. But the new law provides no relief for last year's Louisiana flood victims, an omission that caused House members representing the hardest hit areas — Reps. Ralph Abraham, Garret Graves, Mike Johnson and Cedric Richmond — to vote against it. U.S. Reps. Clay Higgins and Steve Scalise voted for it, while in the Senate, U.S.  Sens. Bill Cassidy and John Kennedy participated in a voice vote that passed it.

Resistance came not only from the dissenting Louisianans but also from northeastern House members who wanted similar tax credits for victims of Superstorm Sandy in 2012. This standing depending on where one sits shows how inadequate disaster relief policy is.

In effect, the federal government promotes a schizophrenic approach. It makes available flood insurance through the National Flood Insurance Program that has only relatively minor rate variations, but for most property owners it ends up as optional, since only those with federally backed mortgages must buy it. Not many do. Then disasters happen that overwhelm the undercapitalized system because too few pay in at rates often kept well below actuarial values. And besides having to compensate for that deficit, the federal government authorizes separate relief for those uninsured, discouraging participation in the flood insurance program that could shore it up.

As the latest action in Congress demonstrates, politics also interferes. When lawmakers formulate relief mechanisms, where to draw the line? If not distinguishing between 2017 hurricanes and all other years — adding in, for example, 2016 floods and 2012 storms — the cost goes up dramatically. Politics thus takes greater prominence than assessments of needs in determining who benefits.

A disaster relief system requires as much impartiality as possible to ensure fairness. And the best way to achieve that goal takes a cue from the ability of Congress, as first employed in the Patient Protection and Affordable Care Act, to make people buy insurance. Requiring every property owner to buy flood insurance — with rates next to nothing for areas that appear incredibly unlikely to endure ravaging waters and ones much higher, but not excessively so that precludes ownership, for areas much more flood prone — can create a pool able to meet payouts without Congress getting involved.

That’s the direction Congress should head, but Cassidy and Kennedy took it a step backward when Cassidy got the Senate without objection to strike a legislative provision that opened up further the sale of private flood insurance. Political expedience now shapes the NFIP's pricing, which lowballs riskier properties, which in turn encourages development of flood-prone areas. A more market-drive approach through private flood insurance would force the federal government to make NFIP rates more actuarially sound and improve its bottom line.

The NFIP came into existence over concerns that private markets couldn’t adequately price flood risk and might cause exorbitant rates for some. But data collection has improved dramatically since then, making sound pricing possible. Further, mandating flood insurance universally would allow the large number of essentially zero-risk ratepayers to cheaply subsidize owners in high-risk areas, who still would pay significantly higher rates.

Substituting universal private flood insurance for the NFIP would work best, but facilitating greater private underwriting is a good first step.