NCPA - National Center for Policy Analysis

Bailouts When Waters Rise

April 27, 2001

The scenario has once again been repeated: the Mississippi floods, towns along it scramble to keep the waters out -- then apply for federal disaster insurance. But this time, the director of the Federal Emergency Management Agency, Joe Allbaugh, wondered publicly how often taxpayers would be forced to foot the bill for the bailout.

That angered Mayor Phil Yerington of Davenport, Iowa -- a town which hasn't built a permanent flood wall because it doesn't want to spoil its views of the mighty Mississippi. The exchange between the two men once again highlighted the issue of just how much responsibility federal taxpayers should shoulder in such disaster incidents.

  • Davenport, for example, has received federal disaster assistance eight times in the past four decades -- mainly for damage caused by floods.
  • The town's mayor claims that flood damage this time will be minimal -- but even so, flood protection and cleanup for Davenport could cost at least $1.2 million dollars, not including damage costs.
  • Some residents of flood-prone areas across the country would rather stay put than move -- as demonstrated by the fact that just 2 percent of properties covered by the federal flood-insurance program account for almost 40 percent of its outlays.
  • Repeat flood-insurance applicants have cost taxpayers $2 billion over the years.

President Bush's budget calls for denying flood-damage claims to people who repeatedly make them on the same property.

Sources: Editorial, "Mississippi Floods Again and Taxpayers Get Soaked," USA Today; Douglas Jehl, "Mississippi Floods Revive Debate on What Government Should Do," and John W. Fountain, "Iowa City Fights Its River and Awaits Word on U.S. Help," both in New York Times; all three appeared on April 27, 2001.

For USA Today text


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