# Bush's plan to rebuild: Whats this puppy gona cost us? **URL:** \ **Category:** Great Debates\ **Created:** [September 16, 2005, 1:22am UTC](https://boards.straightdope.com/t/bushs-plan-to-rebuild-whats-this-puppy-gona-cost-us/321896 "2005-09-16T01:22:13Z")\ **Posts on this page:** 12\ **Page:** 4
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [September 18, 2005, 3:59am UTC](https://boards.straightdope.com/t/bushs-plan-to-rebuild-whats-this-puppy-gona-cost-us/321896/61 "2005-09-18T03:59:11Z")
I’m using the word ‘subsidize’ as in, "provide a good or service at a lower price than the market would dictate. Lower prices means increased demand. Lower the cost of building a house on a flood plain, and you will have more houses built on floodplains. The opposite is also true - you can decrease demand by pushing the price higher with taxes. We are trying to do that with gasoline. If federal flood insurance is no longer available to new construction in flood zones, then those people will have to negotiate with insurance companies, who will in term make the most accurate calculation of the real risk that they possibly can, and set their premiums accordingly. Now the cost of insurance more accurately reflects the various area risks of a housing project. Better decisions can be made. That doesn’t mean there will be no construction. It just means it will be smarter. Perhaps we’d avoid building in the most dangerous of areas, and focus more resources on areas that are safer but perhaps slightly more inconvenient. With the correct price for risk, we can make the most logical choice. Subsidize or tax the risk, and our decisions are distorted. We become too risk-prone or risk-averse, depending on the political whim of the day. ---
**Author:** ![Netbrian](https://avatars.discourse-cdn.com/v4/letter/n/71e660/32.png) [@Netbrian](https://boards.straightdope.com/u/Netbrian)\ **Post date:** [September 18, 2005, 6:13am UTC](https://boards.straightdope.com/t/bushs-plan-to-rebuild-whats-this-puppy-gona-cost-us/321896/62 "2005-09-18T06:13:09Z")
> [@Malodorous](#): > > The article didn’t really suggest an alternative solution however, and it’s hard to belive that we’d leave these people to fend for themselves when it came to rebuilding. But should we factor in the cost of the public effectivly subsuming the risk for private citizens of building in dangerous areas as part of the cost of the plan to rebuild NO. I read the same article, and it seemed to me like the plan they were most positive about would be a mandatory disaster insurance plan through the private sector, with the government as the insurer of last resort in some capacity. Phase it in, possibly offer relocation assistance to those in need, and it honestly doesn’t sound like that bad an option. ---
**Author:** ![lorinada](https://avatars.discourse-cdn.com/v4/letter/l/b5e925/32.png) [@lorinada](https://boards.straightdope.com/u/lorinada)\ **Post date:** [September 18, 2005, 6:19am UTC](https://boards.straightdope.com/t/bushs-plan-to-rebuild-whats-this-puppy-gona-cost-us/321896/63 "2005-09-18T06:19:46Z")
Unless things have changed in the 15 or so years since I was in the insurance business, there was no law requiring anyone to have flood insurance. Like was said upthread, if you wanted to mortgage property you were required by lenders to have it, just like you’re required to have regular fire insurance. But if you didn’t have a mortgage, no one forced you to have it, just like no one is forced to have fire insurance. It was also mentioned upthread that you needed it to obtain building permits, which is probably also true. So, evidently, only 60% of the property on the Gulf Coast is mortgaged. ---
**Author:** ![Malodorous](https://avatars.discourse-cdn.com/v4/letter/m/e47774/32.png) [@Malodorous](https://boards.straightdope.com/u/Malodorous)\ **Post date:** [September 18, 2005, 1:18pm UTC](https://boards.straightdope.com/t/bushs-plan-to-rebuild-whats-this-puppy-gona-cost-us/321896/64 "2005-09-18T13:18:51Z")
> [@Sam Stone](#): > > I’m using the word ‘subsidize’ as in, "provide a good or service at a lower price than the market would dictate. Fair enough, but the OED definition is: “To support by grants of money: now esp. of the government or some central authority contributing to the upkeep of an institution, etc.” Since in this case the gov’t seeks to break even and not furnish any money to support the insurance, I don’t think it’s technically a subsidy. > [@](#): > > Lower prices means increased demand. Lower the cost of building a house on a flood plain, and you will have more houses built on floodplains. I agree, which is why making them buy insurance seems like a good idea. > [@](#): > > Subsidize or tax the risk, and our decisions are distorted. We become too risk-prone or risk-averse, depending on the political whim of the day. But NO has shown that, at the end of the day, we _will_ subsidize the risk. The political reality is that the US will finance reconstruction of the uninsured because a large enough segment of the public doesn’t want to sit by while people loose their homes, even if those people set themselves up for it. Compassion, sadly, rarely makes economic sense. The solution, then, is to require that no one be uninsured. > [@Lorinda](#): > > So, evidently, only 60% of the property on the Gulf Coast is mortgaged. 40% were insured actually, 60% were uninsured. But isn’t that really low? Every house I’ve ever lived in or that my families ever owned has had a mortgage or two on it. I don’t know much about such things though, but that number seems really low to me. > [@Netbrian](#): > > I read the same article, and it seemed to me like the plan they were most positive about would be a mandatory disaster insurance plan through the private sector, with the government as the insurer of last resort in some capacity. Phase it in, possibly offer relocation assistance to those in need, and it honestly doesn’t sound like that bad an option. Sounds like a good plan to me (I read the article in a waiting room, must’ve missed this part). ---
**Author:** ![Ms2001](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ms2001/32/18463_2.png) [@Ms2001](https://boards.straightdope.com/u/Ms2001)\ **Post date:** [September 18, 2005, 1:58pm UTC](https://boards.straightdope.com/t/bushs-plan-to-rebuild-whats-this-puppy-gona-cost-us/321896/65 "2005-09-18T13:58:46Z")
> [@John Mace](#): > > Has Bush actually appointed Rove to run the rebuilding? I was listening to the New Hour on PBS yesterday and they were speculating on who would be the best person to oversea things. THey never mentioned Rove. Did I miss something? [This NYT article](http://www.nytimes.com/2005/09/15/politics/15bush.html) has the quote that **DoctorJ** mentioned on page 1: _“Republicans said Karl Rove, the White House deputy chief of staff and Mr. Bush’s chief political adviser, was in charge of the reconstruction effort, which reaches across many agencies of government and includes the direct involvement of Alphonso R. Jackson, secretary of housing and urban development.”_ ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [September 18, 2005, 5:48pm UTC](https://boards.straightdope.com/t/bushs-plan-to-rebuild-whats-this-puppy-gona-cost-us/321896/66 "2005-09-18T17:48:18Z")
> [@Malodorous](#): > > Fair enough, but the OED definition is: “To support by grants of money: now esp. of the government or some central authority contributing to the upkeep of an institution, etc.” Since in this case the gov’t seeks to break even and not furnish any money to support the insurance, I don’t think it’s technically a subsidy. It’s common for government to claim that these programs are revenue-neutral, but you have to ask yourself - if they are really revenue neutral, why did the government need to step in in the first place? ---
**Author:** ![Malodorous](https://avatars.discourse-cdn.com/v4/letter/m/e47774/32.png) [@Malodorous](https://boards.straightdope.com/u/Malodorous)\ **Post date:** [September 18, 2005, 10:33pm UTC](https://boards.straightdope.com/t/bushs-plan-to-rebuild-whats-this-puppy-gona-cost-us/321896/67 "2005-09-18T22:33:03Z")
> [@Sam Stone](#): > > It’s common for government to claim that these programs are revenue-neutral, but you have to ask yourself - if they are really revenue neutral, why did the government need to step in in the first place? Two reasons, the first is that if we’re going to force people to buy insurance, it seems more fair to give them the cheapest rate possible. I gave reasons why non-subsidized gov’t offered insurance would be cheaper then private insurance companies above (they can get cheap loans from the treasury and they don’t have to turn a profit). The second is that some already existing homes may be uninsurable, due to already being built in stupid locations (much of rebuilt NO may fall in this category). We can’t leave them uninsured, but forcing them to move out of their homes because they can’t get the required insurance will probably not be tolerable to voters. ---
**Author:** ![Netbrian](https://avatars.discourse-cdn.com/v4/letter/n/71e660/32.png) [@Netbrian](https://boards.straightdope.com/u/Netbrian)\ **Post date:** [September 18, 2005, 11:14pm UTC](https://boards.straightdope.com/t/bushs-plan-to-rebuild-whats-this-puppy-gona-cost-us/321896/68 "2005-09-18T23:14:33Z")
> [@Malodorous](#): > > The second is that some already existing homes may be uninsurable, due to already being built in stupid locations (much of rebuilt NO may fall in this category). We can’t leave them uninsured, but forcing them to move out of their homes because they can’t get the required insurance will probably not be tolerable to voters. Do you have any reccomended alternatives at this point? I think we can all come up with some fair inducements to move people out (government buys the land, offers ultra-low interest loans to assist them in moving elsewhere, backs up insurance companies to a certain extent, etc), but I have no clue how effective they will be in actually getting people to move. Perhaps a slow phasing in of insurance costs? ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [September 18, 2005, 11:22pm UTC](https://boards.straightdope.com/t/bushs-plan-to-rebuild-whats-this-puppy-gona-cost-us/321896/69 "2005-09-18T23:22:18Z")
> [@Malodorous](#): > > Two reasons, the first is that if we’re going to force people to buy insurance, it seems more fair to give them the cheapest rate possible. I gave reasons why non-subsidized gov’t offered insurance would be cheaper then private insurance companies above (they can get cheap loans from the treasury and they don’t have to turn a profit). I don’t buy this. First of all, it’s a rare government program that operates more efficiently than the private market. Second, ‘getting cheap loans from the treasury’ is financial mumbo-jumbo that smacks of a free lunch. Resources are resources. If the government borrows cheaply from the treasury, it’s incurring an opportunity cost by crowding out private capital. Third, ‘not having to turn a profit’ amounts to a difference of a few percentage points, which I’m willing to bet is more than wiped out by the inefficiencies built into these kinds of government programs. My guess is that that the reason federal insurance is cheaper is because the federal government is under-pricing the risk of rare catastrophes such as the New Orleans flood. Insurance companies can’t do that, because a large but rare disaster can wipe them out (as almost happened with Lloyds of London after Hurricane Andrew). > [@](#): > > The second is that some already existing homes may be uninsurable, due to already being built in stupid locations (much of rebuilt NO may fall in this category). We can’t leave them uninsured, but forcing them to move out of their homes because they can’t get the required insurance will probably not be tolerable to voters. Existing homes are a problem, and I can see leaving federal flood insurance in place for them. But how about new construction? Of which there is going to be a lot of in the New Orleans area. Why not start now by saying, "We’ll pay for your reconstruction, but if you choose to build in an area we have designated as being high risk, we will no longer provide federal flood insurance. The best time to plant an oak tree was years ago. The second-best time is right now. We can’t fix the over-supply of property in flood-plain areas due to subsidized insurance, but we can make sure it doesn’t happen again with new construction. ---
**Author:** ![Apos](https://avatars.discourse-cdn.com/v4/letter/a/838e76/32.png) [@Apos](https://boards.straightdope.com/u/Apos)\ **Post date:** [September 19, 2005, 12:42am UTC](https://boards.straightdope.com/t/bushs-plan-to-rebuild-whats-this-puppy-gona-cost-us/321896/70 "2005-09-19T00:42:28Z")
I have to agree with Sam Stone: the government is almost certainly underpricing the insurance… and if there is ANYTHING price-signal you should never, ever under-price, it’s insurance. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [September 21, 2005, 6:48pm UTC](https://boards.straightdope.com/t/bushs-plan-to-rebuild-whats-this-puppy-gona-cost-us/321896/71 "2005-09-21T18:48:07Z")
House Minority Leader Nancy Pelosi (D)-CA [has offered to return $70 billion of the $129 billion](http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2005/09/21/MNGDMER7HE1.DTL) from the recently passed highway bill, if other states will do the same: > [@](#): > > House Minority Leader Rep. Nancy Pelosi of San Francisco said Tuesday she was willing to return to the federal Treasury $70 million designated for San Francisco projects in the new highway and transportation bill and use the money to help pay for Hurricane Katrina recovery efforts. House Majority Leader Tom DeLay says he’ll think about it: > [@](#): > > DeLay told reporters "I’ll take a look’’ at returning the members’ individual transportation projects to pay for Katrina. But he sounded deeply unenthusiastic. > > "My earmarks are pretty important to that region,’’ the Republican leader said. "The bill creates hundreds of thousands of jobs. It’s an economic engine.’’ House Speaker Dennis Hastert was even less enthusiastic. When ask if he would joiun Pelosi in giving back highway funds, he just grimbled something like, “That was very generous of her” but refused to answer. _On line cite not available yet._ Looks like the GOP is the party of big government, big spenders now. ---
**Author:** ![rjung](https://avatars.discourse-cdn.com/v4/letter/r/45deac/32.png) [@rjung](https://boards.straightdope.com/u/rjung)\ **Post date:** [September 21, 2005, 11:18pm UTC](https://boards.straightdope.com/t/bushs-plan-to-rebuild-whats-this-puppy-gona-cost-us/321896/72 "2005-09-21T23:18:31Z")
And [Don Young](http://www.adn.com/news/alaska/story/6988027p-6889112c.html) (R-Alaska) was even less charitable: > [@](#): > > “They can kiss my ear!” Young boomed when Sam Bishop, Washington correspondent for the Fairbanks Daily News-Miner, asked him about the many pleas to redirect the bridge money. > > “That is the dumbest thing I’ve ever heard,” Young went on, noting that Louisiana did quite well in his highway bill. … “I raised enough money to give back to them voluntarily,” he said, “and that’s it!” [Previous page](https://boards.straightdope.com/t/bushs-plan-to-rebuild-whats-this-puppy-gona-cost-us/321896.md?page=3)