Tuesday, May 13, 2014

NFIP here's a good bi-partisan issue

Hell and High Water
@MikeGrunwald 




Two years ago, lawmakers fixed our broken flood insurance system. Then they broke it all over again.

Here’s a rainy-season parable about cooperation in American politics: In July 2012, Republicans and Democrats came together during a bitter campaign season to enact sweeping reforms to the National Flood Insurance Program, phasing out subsidies for hundreds of thousands of property owners in flood-prone areas, dragging a debt-ridden program toward fiscal and ecological sustainability. The reforms attracted a genuine bipartisan coalition, with groups like the Heritage Foundation on the right and the Nature Conservancy on the left joining forces with Realtors, bankers and insurers. The simple notion that insurance rates should reflect risk was so compelling that the usually polarized House passed the reforms by a 406-to-22 vote. “Everyone was like, Wow,” says David Conrad, a consultant for the Association of State Floodplain Managers. “We had been talking about reform for 15 years, and rationality finally caught up to Congress.”
It was a rare moment of unity, and in March 2014, the two parties came together for another festival of bipartisanship. This time, they gutted the reforms they had passed less than two years before.Representative Maxine Waters, a liberal California Democrat who co-sponsored the original bill, worked with House majority leader Eric Cantor, a conservative Virginia Republican, to make sure most subsidized homeowners in floodplains could keep their taxpayer subsidies. Beneficiaries whose premiums had increased because of the reforms were promised refunds. And now, even after a storm swamped northern Florida and southern Alabama with 22 inches of rain in April, Congress no longer has a plan to address the program’s escalating debt.
This is the story of a dysfunctional federal program, Washington’s unlikely efforts to cross party lines to fix it and Capitol Hill’s mad scramble to undo the fix after homeowners started griping. Ultimately, the notion that insurance rates should reflect real risk proved less compelling than the notion that squeaky wheels should get grease. The story is a reminder that it’s easier for politicians to attack government subsidies in the abstract than to take them away in real life. Given the inability of Congress to stand behind its bipartisan reforms to a program just about everyone agreed was broken, it’s hard to imagine our leaders’ ever making progress on much tougher tax or entitlement reforms.
“We had an amazing coalition to improve the program. Too bad it wasn’t sustainable,” says Mark Calabria, who pushed for reform as a senior aide to Republican Senator Richard Shelby and is now at the libertarian Cato Institute. “Once the politics got ugly, people lost their religion.”
“It’s Plain Ridiculous”
Congress created the National Flood Insurance Program (NFIP) in 1968, a few years after America’s first billion-dollar storm, Hurricane Betsy, clobbered New Orleans. Private insurers weren’t writing policies in areas vulnerable to floods, so the program offered taxpayer-assisted protection for existing structures. At the same time, it aimed to limit construction in floodplains by charging risk-based rates for new homes and by requiring some buildings to be constructed in more resilient ways to qualify for insurance.
Robert Hunter, the program’s first administrator, says it worked well for a while. But over time, it became less rigorous about risk and more generous about rates. For example, the Federal Emergency Management Agency drew its flood maps after discarding “outliers,” which meant the most damaging storms were omitted from its calculations. “It was a fantastic idea, but it’s plain ridiculous to have a program that just encourages people to live in high-risk areas,” says Hunter, who is now 77 and oversees insurance issues for the Consumer Federation of America.


Reform did not come right away. The program’s normal five-year funding did not expire until 2008. Although its supporters in coastal and riverine communities no longer had the votes for another long-term renewal without major changes, over the next four years they pushed 18 short-term funding renewals through Congress. But it wasn’t as easy as it used to be, and the program temporarily lapsed several times, wreaking havoc on real estate markets in waterfront communities. The National Association of Realtors calculated that the lapses delayed or scuttled 1,300 home closings per day, because flood insurance is required for mortgages in the 100-year floodplain.
The program’s critics on the right (who hated the taxpayer subsidies) and left (who hated its incentives for building in floodplains) formed a coalition called Americans for Smart Natural Catastrophe Policy to push reform, and lawmakers like Senator Shelby threatened to let the program die unless it shifted toward actuarially sound rates. The NFIP’s defenders–especially the powerful National Association of Realtors, which had members in every congressional district–were so desperate for a long-term solution that they eventually agreed to go along.
In 2012 the stars aligned for a reform bill sponsored by Judy Biggert, a suburban Illinois Republican, and Representative Waters of South Central Los Angeles, the ranking Democrat. Biggert-Waters renewed the NFIP for five years but slowly phased out subsidies for second homes, commercial buildings and properties with repetitive losses. It launched a much faster phaseout for properties where updated maps showed more-severe risks, and it modernized the flood maps so that damaging storms could no longer be ignored. And it immediately ended subsidies for properties once they were sold. Overall, it pushed a broken program toward its original goal–providing insurance in communities that private firms avoided while minimizing costly subsidies that created perverse incentives for dangerous development.
Not everyone liked the new austerity. Senator Mary Landrieu, a Louisiana Democrat, warned that it would punish her coastal constituents in the fishing and drilling industries. But the measure was tucked into a must-pass transportation bill, along with a must-pass provision for Louisiana that steered fines from the BP oil spill to the Gulf Coast states. In a letter, the Realtors urged lawmakers to “SUPPORT the Conference Report and OPPOSE any point of order to strike flood reform, in part or whole.” They did. Landrieu thought the reforms were too harsh–”I am certain we will be back here after the elections, fixing some provisions that should have been fixed,” she said on the Senate floor–but even she voted yes.
After President Obama signed the bill in July, the reform coalition gathered for a happy hour at a rooftop bar near the Capitol. It was a very happy hour. Over margaritas and beer, the budget hawks and eco-activists brainstormed about a follow-up campaign to reform disaster aid. “Everyone was thrilled with what we achieved,” recalls Conrad, the consultant for the floodplain managers. “We didn’t see the political tsunami coming.”
Coastal Erosion
Michael Hecht, the CEO of the economic-development group Greater New Orleans Inc., got a text from a board member last spring, warning that the NFIP changes would be a problem for coastal Louisiana. “I didn’t even know what NFIP stood for,” Hecht recalls. But he soon spoke to a Plaquemines Parish insurance agent whose premiums on his own home were about to soar from $633 a year to nearly $18,000. A Belle Chasse hotel owned by a state legislator was in line for a 7,000% rate increase. Hecht soon organized a Washington trip for 14 parish presidents, who lobbied Louisiana’s congressional delegation to undo the reforms. “They were done with the best of intentions,” Hecht said. “But the rate increases were just brutal. They were going to destroy communities.”
Landrieu began pushing an amendment briefly delaying some reforms. Republican Congressman Bill Cassidy, who was running for Landrieu’s Senate seat, pushed a similar amendment in the House. Superstorm Sandy had driven the NFIP’s debt up to $24 billion, but the steep rate increases–for ordinary homeowners, including many Sandy victims, not just millionaires with beachfront mansions–were killing any enthusiasm for addressing that shortfall.
A new Coalition for Sustainable Flood Insurance quickly brought together 250 groups in 35 states to attack the reforms as an assault on middle-class pocketbooks. The Realtors, whose support had been vital to passing the reforms, now began clamoring to repeal them or weaken them, warning that they would paralyze the market in affected communities. “It doesn’t matter if you’re a Democrat or a Republican–nobody wants a big increase in their insurance rates,” says National Association of Realtors president Steve Brown. “This was a threat to the American Dream.”
Initially, it looked as if the new lower-the-rates “flood caucus” would face an uphill battle in the Republican-controlled House. Speaker John Boehner suggested publicly that he saw no need to revisit the reforms. And Jeb Hensarling, the Tea Party–friendly chairman of the House Financial Services Committee, thought the push to restore subsidies smacked of Big Government liberalism. “Finally we had gotten something done,” says one Republican congressional aide. “It made no sense to undo it.”
But if it made no sense on the merits, it made plenty of political sense for lawmakers with angry constituents. Landrieu began pushing to delay reform for four years, almost tantamount to repeal, since the program would have to be renewed before then. She told Senate majority leader Harry Reid the bill was vital to her re-election in 2014, and Reid told the Democratic caucus that Landrieu’s re-election was vital to keeping the Senate majority. After the Senate approved the delay, Waters and Congressman Michael Grimm, a Republican whose Staten Island, N.Y., district was battered by Sandy, rounded up enough co-sponsors to pass a similar bill in the House.
The House Republican leadership didn’t want to pass a “Landrieu bill” that would boost her campaign at Congressman Cassidy’s expense. But it didn’t want to ignore the clamor for relief from homeowners and Realtors, either. On a campaign trip to Florida, Cantor saw that Democrat Alex Sink was attacking Republican David Jolly over flood-insurance premiums in their special election for a House seat. A local Chamber of Commerce, for example, was facing a rate increase of more than 600%. “We were ground zero for the flood-insurance crisis,” Jolly says. “I told the majority leader, If you’re going to provide relief, do it now!”
Neither party wanted to pay the political price of reform. Republicans had hailed the initial reforms as a victory for fiscal conservatism, but at a contentious Republicans-only meeting, Cantor sided with the flood caucus, rejecting Hensarling’s limited-government arguments. Geography trumped ideology; Louisiana Congressman Steve Scalise, head of the GOP’s conservative caucus, was a leading voice for restoring the subsidies. With March approaching, Cantor and Waters then negotiated a final deal that repealed the key Biggert-Waters reforms, preserving subsidies for properties that were remapped or sold. The negotiations were so pleasant that Cantor told Waters his wife wanted to know if she still considered him a “demon,” as she had said in a stemwinder at her state convention; Waters said no, that was just politics. Most Republican committee chairmen voted against the deal, a rare protest against the House leadership for rolling Hensarling, but it still received almost as much support as the original reforms.
The White House initially warned that eroding the Biggert-Waters reforms would endanger the entire flood-insurance program, but it caved to politics as well. Landrieu confronted President Obama at a Senate Democratic retreat, and he promised he wouldn’t veto a bipartisan fix. Not only did he sign the final measure worked out by Cantor and Waters, but the White House gave Landrieu an early heads-up so she could announce the news.
Former Congressman Barney Frank, who helped pass the reforms as the ranking Democrat on the Financial Services Committee, says it’s too easy to blame finger-in-the-wind politicians for their repeal. He argues that voters like reform better in theory than in reality. That’s why he doubts Washington can pass bipartisan tax reform. Americans complain about Big Government but recoil when their benefits are threatened. Frank recalls a chat he had long ago with Freddie Langone, a cigar-smoking Boston city councilor. Langone’s constituents had demanded a swimming pool–and once it was being built, they were demanding relief from the construction noise. “Hey, kid, ain’t ya heard the news?” Langone told Frank. “Everyone wants to go to heaven, but nobody wants to die.”
Everyone wants a stable flood-insurance program too, but nobody wants to pay for it. In fact, Jolly, who won his special election in March and is now a freshman House Republican, is now pushing to repeal most of what’s left of the Biggert-Waters reforms, the slow phaseout of subsidies for second homes and commercial buildings. He says he’s normally a free-market guy but many snowbirds who winter in his district are facing unaffordable rate increases.
Which means in an era of steadily rising seas and increasing coastal development, reformers are more or less back where they started. “It breaks my heart,” says Congressman Earl Blumenauer of Oregon, a liberal Democrat who has pushed to fix the NFIP for over a decade. “We’ll keep trying, but I don’t know if we’ll have another opportunity like this.”


13 comments:

  1. National Flood insurance. Now William don't mistake this for disaster relief which I see as a necessary evil.
    But we have a program in America that subsidizes those who can afford a beach house etc premiums on flood insurance paid by all taxpayers. This program is 17 billion dollars in debt due to the mounting costs from storms like Sandy.

    Some of these homes have experienced 5,6 up to 15 damage claims but they continue to be covered with these subsidized premiums. Do you think that your private insurance would keep you around after multiple claims? One Miami resident buys his flood insurance at less then half of what he pays for his wind and fire insurance coverage.
    Now to bring this more personal for me I received a letter recently from my insurance company that because of the cost of doing business(read excessive claims) in North Carolina, they were asking my permission by signature to raise my rates to 30% above the state maximum of $795 a year. I really hope that no one really falls for this scam. Of course I didn't build my house on stilts in the ocean and I am not paying for the idiot who did. NFIP needs to go away. If you build in a known flood plain then you should assume the risk. This is only a free market concept. The government should be uninvolved.
    Republicans hate the program because obviously it subsidizes someone. Democrats hate the program because it encourages building in low lying areas. Hey we love our seashores to be natural.
    But neither party together or alone wants to step up to the plate and do something about it.
    So William there is your long battle. So many things ingrained in American society are near and dear to the electorate. No one has the courage to take things away that we have grown accustomed to and those who do will be out the door first chance the electorate gets, replaced by whomever will give the stuff back. ALL politicians know we live in a subsidized world and he who taketh away, well he loses next time.

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  2. Flood insurance should be privatized. I suggest phasing out the NFIP over a ten year period so those who live near in low areas have time to adjust.

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    1. yeah William that was the plan but the constituency threw a fit so everything has been undone

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    2. William as usual in your little narrow mind you have missed the whole point. There are many things that your tea party people want to get done and much of it has to do with stripping goodies from the American people. It ain't gonna happen for long.

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    3. Surprise! We believe in limited government.

      Surprise! You and Max want to spend us into serfdom.

      Surprise! Your belief is a bad business model.

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    4. surprise you miss the point again. The people won't let you change things that give them stuff. That William is what this article is about but you just don't get it. I am against this program also. So the surprise is on you.

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    5. "The people" as in the Democrats in Congress?

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    6. The people William as in most of the residents of these United States. You T's think you have everyone in the palm of your hand. You have about a 22% following. That leaves 78% of America happy with the status quo.

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    7. The people won't let you change things that give them stuff.
      as in most of the residents of these United States.

      Sorry Rick, Most of the people in the US are not in flood zones. Think about it, why would the US dump billions into a city that is below sea level and insure the entire area again for the disaster waiting to happen again.

      Why would the US insure homes built on the ocean when it's a matter of time before the disaster happens again.

      78% of America is unaware of the cost that is why they care less. Why doesn't the MSM make it an issue by reporting it in an unbiased fashion?

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    8. "78% of America is unaware of the cost that is why they care less. Why doesn't the MSM make it an issue by reporting it in an unbiased fashion?"

      Um, by design, the MSM can't report anything in an unbiased manner, right? In general, I have to agree that American's won't give up something they benefit from, this is known as many names, one of which is "Don't break my rice bowl." That said, I do believe cuts can be made if you are realistic about it. In dogmatic terms, Democrats allegedly want so just tax the shit out of rich people and Republicans just want to cut social programs. Neither is entirely true, but those simple descriptions suck the oxygen out of the room and kill any other discussion from happening. There is a ginormous amount of corporate welfare out there that both Democrats and TP's should find plenty of room to agree on. My take though is that we are instead having these ridiculous "hill we are going to die on" battles over stuff that either isn't going to happen (high taxes on the rich or repeal of Obamacare) or on cutting shit that won't improve the debt and will take money out of the economy (food stamps, head start, etc).

      I don't want to spend the country into oblivion. but I also don't want these endless tantrums that are backed by a belief that if some party is militant enough, they can completely get their way and fix everything by just passing a one sided agenda.

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    9. Sorry Louman it just takes the few who need to subsidy to start their bitching and they brought it right back. Open your mind to the big picture Lou. Any goodie that is given is 3 times as hard to take away successfully. I doesn't have to include me or you or 75% of America. When votes are on the line it just takes the squeaky wheel to get the grease. Why are you guys all so little view dudes. Look at the wider picture for once. Lou it's not about subsidized flood insurance. That example by your own comment is small potatoes to some programs. But the congress couldn't get it done. It's about the difficulty in ending age old programs and keeping you seat in the Congress. Always has been always will be. The teas may someday gain a majority and end a bunch of shit. But two years later they will be gone, replaced by the very people who's seats they won because the old guy gives shit away. We are a pussified country it's not going to change.

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    10. Louman how much have we sunk into the City of New Orleans? Billions? and it's all going to happen again in 20-30 years. Why would we? I can't answer that question but the fact is we do.

      As for the MSM Lou I didn't see any mention of the NFIP on any of your hallowed sites. Did you? So who's out front on this one Lou? Regardless of how you think they covered it, they covered it Lou. has your hallowed people mentioned it? No they have not.

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