NCPA - National Center for Policy Analysis

Government Encourages Risky Behavior by Insuring Against Disasters

July 24, 2000

Those who contend government intervention often only makes things worse are citing the growth in federal disaster relief. In the 50 years since Washington got into the business of bailing out homeowners who built too near the ocean, it has encouraged -- rather than discouraged -- such risky behavior.

  • In 1950, the first year of the Federal Disaster Relief Act, Congress approved just $5 million in aid.
  • That amount has now grown to $5 billion a year -- and experts expect the sum to reach $50 billion a year by 2030, unless something is done about it.
  • The Disaster Relief Act has already siphoned off $150 billion in taxpayer money for emergencies ranging from earthquakes to mudslides -- with 90 percent of funds going for flood-related disasters.
  • Through the years other programs have followed: disaster loans handed out by the Small Business Administration, beach reconstruction through the U.S. Army Corps of Engineers, the National Flood Insurance program and the Federal Emergency Management Agency.

Few property owners are held financially responsible for risky decisions. The Coastal Barrier Resources Act of 1982 designated 186 strips of undeveloped land and made them ineligible for federal subsidies because of their high vulnerability to erosion or storm damage.

However, the law doesn't apply to other high-risk segments of coastal land on which development has begun. So when communities along the water's edge are flattened by storms, Congress repeatedly provides them money to rebuild.

Source: Owen Ullmann, "High-Risk Life, High Expense to Taxpayers," USA Today, July 24, 2000.


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