In the most recent issue of Business Insurance, Competitive Enterprise Institute senior fellow Eli Lehrer offers his thoughts on why exactly a federal natural catastrophe backstop would be a very, very bad idea. The CEI has been carpet bombing trade and mainstream media outlets in a nonstop campaign to tell anybody who will listen that the only thing worse than a hurricane wiping out coastal property is for the federal government to pick up the tab for it.
While Lehrer’s BI interview is well-reasoned and even worded, not all of the CEI’s efforts in the arena have been. Earlier this year, the CEI launched NoBeachHouseBailouts.org, which appears to promote itself on the specious notion that a national catastrophe defense fund, such as the one outlined in the Homeowner’s Defense Act of 2008, would primarily benefit the likes of super-rich celebrities seeking government bailout funds for their beach-front mansions. It’s the kind of cynical sloganeering we’d expect in a nasty political campaign (Lehrer himself was a speechwriter for Bill Frist, R-TN), especially since it goes for a gut reaction instead of considering the facts.
When we study poverty rates along all coastal counties subject to Atlantic hurricanes (figures provided by the United States Department of Agriculture’s Economic Data Service, 2007) we find that 10 of the 19 states with coastal risk exposures to Atlantic hurricanes have higher poverty rates on the coast than the statewide average. And across all coastal states subject to hurricanes, the average county poverty rate in 2007 is 12.4%, only 0.6% below the national rate.
More to the point, if we look at regional data, an even more interesting picture emerges. Coastal poverty rates are lower than the national average almost across the board in states from Virginia through Maine — those northeastern states that have a much milder hurricane history than their more southern counterparts.
Coastal poverty rates from North Carolina through Texas — the states where hurricanes make landfall most frequently — were almost entirely above state averages. And this, in states where the statewide averages themselves were universally several points higher than the national poverty average.
Bottom line: a national catastrophe defense fund is meant to provide for those who cannot afford to rebound from a hurricane strike with the means to do so.
The states that would benefit from this the most are poorer southern states that already have higher-than-average rates of poverty compared to the rest of the nation, and whose coasts are even more poverty-stricken. To suggest that a national catastrophe defense fund would primarily bailout celebrities such as Donald Trump, Tiger Woods and John Travolta, as the CEI does, displays a certain ignorance of the wider economic reality of coastal risk.
It is tempting indeed to suggest that if people do not wish to deal with coastal risk, they should simply move away from the coast. However, such wishful thinking flies in the face of global human behavior, which is showing more movement toward coastal areas than at any other time in the history of our species.
Coastal risk cannot be dismissed with a wave of the hand, nor is it primarily borne by those with more than enough personal resources to cope with the risks.
If the CEI is so bothered by the thought of millionaires benefiting from a catastrophe defense fund, then a more reasoned approach would be to lobby for a condition exempting homeowners with single property values over a certain amount, on the basis that such property owners already have enough to afford proper levels of insurance, or can finance their risk independently, rather than argue to deny our nation’s coastal poor the benefit of government relief when the next major hurricane strikes them.