7 ms·

I find it insane how the US govt constantly subsidizes certain activities without many people realizing. NFIP, the implicit guarantees on FHLBs, and a bunch of

I find it insane how the US govt constantly subsidizes certain activities without many people realizing. NFIP, the implicit guarantees on FHLBs, and a bunch of others just lead to misaligned incentives all over the place :/

chiefalchemist 4y ago
And yet we're told Uncle Sam believes in the free market? We don't have Capitalism. We have Crony Capitalism. The latter has little to do with the former.
- krapp 4y ago
  >We don't have Capitalism. We have Crony Capitalism. The latter has little to do with the former. As any true Scotsman knows.
- codyb 4y ago
  There's also the fact that if we don't subsidize places where natural disasters occur millions of people are going to start moving rather quickly. Everywhere's a disaster zone now, we need to account for that, do our best to warn people, and do our best to help people get back to it. This is true here, and around the globe. Mass migrations are _destabilizing_. It's not crony capitalism, it's common sense for stability. And there are certainly places that are absolutely irredeemable and shouldn't have insurance. But this idea that letting people whose homes are destroyed in natural disasters need to be hung out to dry won't be worse than helping them get back onto their feet both for them and most likely for you is a bit odd.
  - FartyMcFarter 4y ago
    There is a middle ground though. If a specific area floods very frequently, it seems silly to keep bailing it out. At some point we have to cut our losses and face reality and just stop investing there.
    - plasticchris 4y ago
      Agreed, and the regular insurance companies figured out the solution a long time ago: raise premiums until their expected value exceeds the payouts over the average duration of this type of policy.
    - aperson_hello 4y ago
      And most of the places that have major recurring flooding issues are hyper local (for now at least). We're talking neighborhoods or parts of neighborhoods, not full cities (yet). The number of affected properties is relatively small, but they make up a large portion of overall claims. Stop covering those locations (even if it's a coordinated buyout program of sorts) and the problem sorts itself out... Edit: and then install retaining infrastructure in place of those houses and you stop future issues too for neighbors
      - astura 4y ago
        >The number of affected properties is relatively small, but they make up a large portion of overall claims. Specifically, 1% of properties make up 25% of all claims.
    - codyb 4y ago
      Yea... but... wouldn't the Fort Myers area count as part of the middle ground that's fine? They don't get hit hard consistently. Should we say that NYC should be abandoned cause Sandy hit 10 years ago and another might hit again one day? And also I actually said in my post "there are areas we shouldn't".
      - NickC25 4y ago
        Ft. Myers has been hit a few times, but you're right - it's not constant. But Florida in general gets hit pretty hard every year - it's just that it happens to different parts of Florida. The Keys get battered every few years, so does Miami, so does Tampa. Even Orlando is not safe. However, Ft Myers is different from NYC in that sea level rises affect South Florida a hell of a lot more than Manhattan. A 10 foot sea level rise would only affect a small (but definitely not insignificant) part of Manhattan. That same rise would render all of Florida's coastlines (on both sides) uninhabitable. See link below: https://coast.noaa.gov/slr/ https://coast.noaa.gov/slr/ NYC doesn't get hit anywhere close to as often as Florida's coasts do. It's not even comparable. The insurers are leaving Florida in droves because their risk assessment teams understand that sea level rises and climate change is a significant financial risk to their operations in Florida, no matter how much Governor DeSantis wants to pretend otherwise. It makes zero sense to insure areas that are going to be uninhabitable in our lifetimes, much less spend billions rebuilding them time and time again. Disclaimer: I live in South Florida.
  - causi 4y ago
    Mass migrations are _destabilizing_. Then do it over a period of time. Reduce it to zero over, say, thirty years.
  - themitigating 4y ago
    What about people with 2nd homes? Why just flood insurance?
  - nerdponx 4y ago
    I'll believe it when there's an income-based phase-out, exceptions for multiple homeowners, and tapering with a firm expiration date built into the legislation. Just because something superficially resembles a good idea, doesn't make it a good idea. See also: corn subsidies.
  - chiefalchemist 4y ago
    > Mass migrations are _destabilizing_. It's not crony capitalism, it's common sense for stability. Insanity is not stability. It's one thing to maintain some status quo (e.g., a small town / neighborhood is already established). It's another to encourage and reward bad decisions. There's no reasonable justification for maintaining a pattern that is destined to fail. Again and again and again. Is this what we considered smart and effective government?
  - Slava_Propanei 4y ago
- daniel-cussen 4y ago
  [dead]
- pyrale 4y ago
  I would say they're deeply related: the former is the fable we use to justify that we keep letting the latter happen.
- refurb 4y ago
  Calling it crony capitalism is kind of silly. Do you expect the US to just abandon vast swaths of the country that are at risk of natural disasters? No homes along the Gulf coast, no homes in tornado alley, no homes along the earthquake faults along the West coast?
  - kasey_junk 4y ago
    There is no equivalent to NFIP for tornado or earth quake insurance. We leave that to private insurers (and sometimes the states have programs). That is one of the biggest arguments against the NFIP. It’s a specific subsidy that benefits some areas more than others (it’s also a deeply regressive policy).
    - refurb 4y ago
      If an massive earthquake levels SF the government will most certainly come in and rescue homeowners. So it’s either subsidy upfront or on the backend?
      - kasey_junk 4y ago
        They didn’t in 1989. The relief bill was entirely for repairing damaged infrastructure. FEMA specifically mentions that you can’t expect replacement housing costs to be paid in many of their documents: https://www.fema.gov/fact-sheet/earthquake-survivors-apply-fema-disaster-assistance-may-31 https://www.fema.gov/fact-sheet/earthquake-survivors-apply-f...
        refurb 4y ago
        ‘89 saw minimal damage save for a few neighborhoods like the Marina. If SF sees 50% of houses uninhabitable and 12% have earthquake insurance you think the govt will shrug and say “too bad”?
        kasey_junk 4y ago
        In 2020 the house passed a supplemental bill to enable funds that can go to home replacement for Puerto Rican earthquake victims because the existing law doesn’t allow it. The Senate never passed it and the President promised to veto it. I have no crystal ball to know what might happen in the future but right now there is no earthquake equivalent to national flood insurance and recent history suggests the federal government doesn’t have the appetite to add it.
- iwillbenice 4y ago
  Ah there it is. The usual doomer mentality that is so common I want to vomit when I see it. A mixed-market economy is not "Crony Capitalism". Stop exaggerating for upvotes.
  - freen 4y ago
    50 cents of every dollar earned by farmers in the US is paid by tax dollars buying excess food at fixed, over market prices. Lookup the strategic cheese reserve. Does the government pay half your salary? They take half of mine.
    - iwillbenice 4y ago
      Nothing of what you said changes my original point: We live in a mixed-market economy. The government manages some buffers (food, oil). And I'd really like to understand how the government "takes half" of your salary. Either you're super rich (probably not), or you're exaggerating.
      - chiefalchemist 4y ago
        At first, half sounds like hyperbole, I'll give you that. But then think about all the various taxes we pay directly (e.g., gasoline, internet and phone services, etc.). Then add on the taxes that are embedded in the costs of any of the other goods we buy. It adds up. Finally, if you consider The Fed a government agency, any time The Fed devalues your money (i.e., "prints" money and creates inflation) that's also all but a tax. That is, we have less to spend. It might not be half, but it's certainly significantly more than your income tax rate.
        freen 4y ago
        Exactly. If you live in a major metropolitan area, or own a home that has rapidly appreciated, well, it all adds up quickly. Also consider: import taxes raise the price of goods, and thus are a wealth transfer from consumers to producers. Sugar is the classic example: import tariffs increase the effective tax burden of the lowest income quartile substantially, as they spend a larger percentage of their income on food. Anything with high fructose corn syrup, sweetener, or sugar is more expensive. And the corn farmers get that money.
JustSomeNobody 4y ago
Homeowners insurance in FL is a mess. The number 2 insurer is the state of FL (Citizens Property Insurance Corporation). I have no doubt they'll be the largest (and possibly only) in the years ahead.
- FuriouslyAdrift 4y ago
  The Florida CPIC is backed by re-insurance companies and they are bailing on Florida due to the high risk. https://www.insurancejournal.com/news/southeast/2022/10/25/691475.htm https://www.insurancejournal.com/news/southeast/2022/10/25/6...
- lotsofpulp 4y ago
  I read that this was not due to flood losses, but rather excessive fraud that the state is not policing causing untenable losses. https://www.nbcnews.com/news/us-news/roofing-scams-florida-property-insurance-hurricane-rcna29649 https://www.nbcnews.com/news/us-news/roofing-scams-florida-p...
FuriouslyAdrift 4y ago
Congress passed a bill seting the rates to be risk-adjusted in 2012, causing a 10x increase in rates in some areas. Congress then passed another bill in 2013 bringing back the 1968 rates under Obama. https://en.wikipedia.org/wiki/Homeowner_Flood_Insurance_Affordability_Act_of_2013 https://en.wikipedia.org/wiki/Homeowner_Flood_Insurance_Affo...
eloff 4y ago
Yup, government coming in and distorting the free market in all kinds of ways is very wasteful. However, there are cases where the benefits outweigh the drawbacks. For example, it's nice to get your energy, metals, computers, industrial machines domestically instead of being at the mercy of a foreign country. Especially if the foreign country isn't ideologically aligned with yours.
- LeanderK 4y ago
  in this example it is wasteful but it also decreases risks in the long term. The free market does not have to produce the most efficient solution, it just often does.
  - Sakos 4y ago
    The free market is only able to optimize towards local maxima. That maxima might have plenty of downsides that don't affect its performance, but have negative effects on human beings and society that aren't captured by market mechanisms.
bcrl 4y ago
Privatize the profits, have the government cover the loses. Looks just like corporate welfare.

chiefalchemist 4y ago

And yet we're told Uncle Sam believes in the free market? We don't have Capitalism. We have Crony Capitalism. The latter has little to do with the former.

krapp 4y ago
>We don't have Capitalism. We have Crony Capitalism. The latter has little to do with the former. As any true Scotsman knows.
codyb 4y ago
There's also the fact that if we don't subsidize places where natural disasters occur millions of people are going to start moving rather quickly. Everywhere's a disaster zone now, we need to account for that, do our best to warn people, and do our best to help people get back to it. This is true here, and around the globe. Mass migrations are _destabilizing_. It's not crony capitalism, it's common sense for stability. And there are certainly places that are absolutely irredeemable and shouldn't have insurance. But this idea that letting people whose homes are destroyed in natural disasters need to be hung out to dry won't be worse than helping them get back onto their feet both for them and most likely for you is a bit odd.
- FartyMcFarter 4y ago
  There is a middle ground though. If a specific area floods very frequently, it seems silly to keep bailing it out. At some point we have to cut our losses and face reality and just stop investing there.
  - plasticchris 4y ago
    Agreed, and the regular insurance companies figured out the solution a long time ago: raise premiums until their expected value exceeds the payouts over the average duration of this type of policy.
  - aperson_hello 4y ago
    And most of the places that have major recurring flooding issues are hyper local (for now at least). We're talking neighborhoods or parts of neighborhoods, not full cities (yet). The number of affected properties is relatively small, but they make up a large portion of overall claims. Stop covering those locations (even if it's a coordinated buyout program of sorts) and the problem sorts itself out... Edit: and then install retaining infrastructure in place of those houses and you stop future issues too for neighbors
    - astura 4y ago
      >The number of affected properties is relatively small, but they make up a large portion of overall claims. Specifically, 1% of properties make up 25% of all claims.
  - codyb 4y ago
    Yea... but... wouldn't the Fort Myers area count as part of the middle ground that's fine? They don't get hit hard consistently. Should we say that NYC should be abandoned cause Sandy hit 10 years ago and another might hit again one day? And also I actually said in my post "there are areas we shouldn't".
    - NickC25 4y ago
      Ft. Myers has been hit a few times, but you're right - it's not constant. But Florida in general gets hit pretty hard every year - it's just that it happens to different parts of Florida. The Keys get battered every few years, so does Miami, so does Tampa. Even Orlando is not safe. However, Ft Myers is different from NYC in that sea level rises affect South Florida a hell of a lot more than Manhattan. A 10 foot sea level rise would only affect a small (but definitely not insignificant) part of Manhattan. That same rise would render all of Florida's coastlines (on both sides) uninhabitable. See link below: https://coast.noaa.gov/slr/ https://coast.noaa.gov/slr/ NYC doesn't get hit anywhere close to as often as Florida's coasts do. It's not even comparable. The insurers are leaving Florida in droves because their risk assessment teams understand that sea level rises and climate change is a significant financial risk to their operations in Florida, no matter how much Governor DeSantis wants to pretend otherwise. It makes zero sense to insure areas that are going to be uninhabitable in our lifetimes, much less spend billions rebuilding them time and time again. Disclaimer: I live in South Florida.
- causi 4y ago
  Mass migrations are _destabilizing_. Then do it over a period of time. Reduce it to zero over, say, thirty years.
- themitigating 4y ago
  What about people with 2nd homes? Why just flood insurance?
- nerdponx 4y ago
  I'll believe it when there's an income-based phase-out, exceptions for multiple homeowners, and tapering with a firm expiration date built into the legislation. Just because something superficially resembles a good idea, doesn't make it a good idea. See also: corn subsidies.
- chiefalchemist 4y ago
  > Mass migrations are _destabilizing_. It's not crony capitalism, it's common sense for stability. Insanity is not stability. It's one thing to maintain some status quo (e.g., a small town / neighborhood is already established). It's another to encourage and reward bad decisions. There's no reasonable justification for maintaining a pattern that is destined to fail. Again and again and again. Is this what we considered smart and effective government?
- Slava_Propanei 4y ago
daniel-cussen 4y ago
[dead]
pyrale 4y ago
I would say they're deeply related: the former is the fable we use to justify that we keep letting the latter happen.
refurb 4y ago
Calling it crony capitalism is kind of silly. Do you expect the US to just abandon vast swaths of the country that are at risk of natural disasters? No homes along the Gulf coast, no homes in tornado alley, no homes along the earthquake faults along the West coast?
- kasey_junk 4y ago
  There is no equivalent to NFIP for tornado or earth quake insurance. We leave that to private insurers (and sometimes the states have programs). That is one of the biggest arguments against the NFIP. It’s a specific subsidy that benefits some areas more than others (it’s also a deeply regressive policy).
  - refurb 4y ago
    If an massive earthquake levels SF the government will most certainly come in and rescue homeowners. So it’s either subsidy upfront or on the backend?
    - kasey_junk 4y ago
      They didn’t in 1989. The relief bill was entirely for repairing damaged infrastructure. FEMA specifically mentions that you can’t expect replacement housing costs to be paid in many of their documents: https://www.fema.gov/fact-sheet/earthquake-survivors-apply-fema-disaster-assistance-may-31 https://www.fema.gov/fact-sheet/earthquake-survivors-apply-f...
      - refurb 4y ago
        ‘89 saw minimal damage save for a few neighborhoods like the Marina. If SF sees 50% of houses uninhabitable and 12% have earthquake insurance you think the govt will shrug and say “too bad”?
        kasey_junk 4y ago
        In 2020 the house passed a supplemental bill to enable funds that can go to home replacement for Puerto Rican earthquake victims because the existing law doesn’t allow it. The Senate never passed it and the President promised to veto it. I have no crystal ball to know what might happen in the future but right now there is no earthquake equivalent to national flood insurance and recent history suggests the federal government doesn’t have the appetite to add it.
iwillbenice 4y ago
Ah there it is. The usual doomer mentality that is so common I want to vomit when I see it. A mixed-market economy is not "Crony Capitalism". Stop exaggerating for upvotes.
- freen 4y ago
  50 cents of every dollar earned by farmers in the US is paid by tax dollars buying excess food at fixed, over market prices. Lookup the strategic cheese reserve. Does the government pay half your salary? They take half of mine.
  - iwillbenice 4y ago
    Nothing of what you said changes my original point: We live in a mixed-market economy. The government manages some buffers (food, oil). And I'd really like to understand how the government "takes half" of your salary. Either you're super rich (probably not), or you're exaggerating.
    - chiefalchemist 4y ago
      At first, half sounds like hyperbole, I'll give you that. But then think about all the various taxes we pay directly (e.g., gasoline, internet and phone services, etc.). Then add on the taxes that are embedded in the costs of any of the other goods we buy. It adds up. Finally, if you consider The Fed a government agency, any time The Fed devalues your money (i.e., "prints" money and creates inflation) that's also all but a tax. That is, we have less to spend. It might not be half, but it's certainly significantly more than your income tax rate.
      - freen 4y ago
        Exactly. If you live in a major metropolitan area, or own a home that has rapidly appreciated, well, it all adds up quickly. Also consider: import taxes raise the price of goods, and thus are a wealth transfer from consumers to producers. Sugar is the classic example: import tariffs increase the effective tax burden of the lowest income quartile substantially, as they spend a larger percentage of their income on food. Anything with high fructose corn syrup, sweetener, or sugar is more expensive. And the corn farmers get that money.

JustSomeNobody 4y ago

Homeowners insurance in FL is a mess. The number 2 insurer is the state of FL (Citizens Property Insurance Corporation). I have no doubt they'll be the largest (and possibly only) in the years ahead.

FuriouslyAdrift 4y ago
The Florida CPIC is backed by re-insurance companies and they are bailing on Florida due to the high risk. https://www.insurancejournal.com/news/southeast/2022/10/25/691475.htm https://www.insurancejournal.com/news/southeast/2022/10/25/6...
lotsofpulp 4y ago
I read that this was not due to flood losses, but rather excessive fraud that the state is not policing causing untenable losses. https://www.nbcnews.com/news/us-news/roofing-scams-florida-property-insurance-hurricane-rcna29649 https://www.nbcnews.com/news/us-news/roofing-scams-florida-p...

FuriouslyAdrift 4y ago

Congress passed a bill seting the rates to be risk-adjusted in 2012, causing a 10x increase in rates in some areas. Congress then passed another bill in 2013 bringing back the 1968 rates under Obama. https://en.wikipedia.org/wiki/Homeowner_Flood_Insurance_Affordability_Act_of_2013 https://en.wikipedia.org/wiki/Homeowner_Flood_Insurance_Affo...

eloff 4y ago

Yup, government coming in and distorting the free market in all kinds of ways is very wasteful. However, there are cases where the benefits outweigh the drawbacks. For example, it's nice to get your energy, metals, computers, industrial machines domestically instead of being at the mercy of a foreign country. Especially if the foreign country isn't ideologically aligned with yours.

LeanderK 4y ago
in this example it is wasteful but it also decreases risks in the long term. The free market does not have to produce the most efficient solution, it just often does.
- Sakos 4y ago
  The free market is only able to optimize towards local maxima. That maxima might have plenty of downsides that don't affect its performance, but have negative effects on human beings and society that aren't captured by market mechanisms.

bcrl 4y ago

Privatize the profits, have the government cover the loses. Looks just like corporate welfare.