The Invisible Hand of Ayn Rand, er, The Market

“Trust me, girl, I’m a funny guy.”

Hey guys, remember in this morning’s Not Normal we talked about re-newing the flood insurance thingie? Tiger Beat on the Potomac (thanks Charlie!) gives us some more details:

LOUISIANA — Coastal state Republicans are bucking members of their own party and teaming up with Democrats as lawmakers struggle to salvage an agreement to keep the National Flood Insurance Program alive.

Dozens of Republicans from New York to Mississippi have fought proposals by the House Financial Services Committee that they say would make flood insurance unaffordable. A member of the House leadership, Rep. Steve Scalise of Louisiana, is among those uneasy with the panel’s plans. And in the Senate, Republicans are joining with Democrats to find a deal before the program lapses at the end of next month.

Gee, you mean when Republicans go back to their underwater districts to NOT hold town hall Meeting (per tradition!) and notice cars floating down the streets, suddenly they are concerned for the damp residents of Possum Hollar?

The political tug-of-war is spilling into the open as lawmakers spend time at home during the congressional recess. In Louisiana, where policyholders have received more than $19 billion in payments from the program since 1978, members of the state’s delegation are conveying the message that they’re unified and fighting to rescue it.

But the invisible hand of Ayn Rand! What about that? CATO tells us…

The NFIP has serious design flaws. Premiums are not priced to be actuarially sound, meaning they do not reflect covered risk. About 15-20 percent of policyholders receive an explicit subsidy, saving them 60-65 percent on the cost of their premium. Such subsidies are not based on need. The remaining “full-risk” policies are not actuarially priced either, as they do not include a “loading charge”—something private insurers use to build up reserves for especially costly years… Privatization would not disproportionately hurt the working class. A fully private flood insurance market coupled with a targeted, means-tested subsidy would be much less regressive than the status quo. Short of full privatization, Congress should ensure that private insurers can compete on an even playing field with the NFIP.

So Ayn Rand Republican, what say you?

To illustrate, [Rep. Garret Graves (R-La.)] took aim at a proposal coming out of the Republican-led Financial Services Committee. The panel has drafted a package of bills that would reauthorize the flood insurance program for five years, shrink its footprint, ramp up what policyholders pay and make it easier for private companies to compete.

One proposal included in the legislation and pitched as a way to protect affordability would cap annual premiums at $10,000 per year.

“How many of you can afford that?” Graves asked the group. “It’s outrageous.”

So free-markets except when it hurts Republicans and their re-election prospects. Got it.

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