My latest example of Republicans doing the wrong thing come from Florida, where GOP politicians decided that free markets should not be allowed to function and that all taxpayers should be put at risk to subsidize hurricane insurance (primarily benefiting upper-income people).
The Wall Street Journal opined today on why this is a mistake.
…evidence continues to build that the state’s taxpayers will get walloped sooner or later. The state’s own hurricane reinsurer now admits its 12-month funding shortfall for claims is $3.2 billion. That estimate is based on the taxpayer-backed Florida Hurricane Catastrophic Fund’s cash on hand, its investment income and the amount banks estimate the fund could raise in municipal bond markets, if needed. Uh-oh. The Cat Fund was supposed to be a reinsurer of last resort but was expanded far beyond a prudent size in 2007, thanks to former Governor Charlie Crist. …Florida consumers will ultimately pay the bill. If the Cat Fund must issue bonds, it levies “assessments”—a code name for a tax—on the state’s property and casualty insurance holders to pay interest and repay principal. Only workers’ compensation and medical malpractice insurance holders are exempt—Mr. Crist’s nod to the tort bar. Lest you think $14 billion is enough, consider that Category 5 Hurricane Andrew caused $26.5 billion in damage in 1992, according to the National Hurricane Center. Wilma, which hit in 2005 as a Category 3, cost $21 billion. If the fund couldn’t pay its claims, some of the state’s insurers would likely go bust. The Cat Fund’s chief operating officer, Jack Nicholson, characterizes that problem as potentially “significant.” He is promoting legislation to reduce the fund’s size and shore up its finances. The time to do that is before the next big one hits, but Florida’s ruling Republicans continue to behave as if this is someone else’s problem.
I’ll go one step farther than Mr. Nicholson. Florida politicians shouldn’t just “shore up” the Fund. They should abolish it.
Private markets should determine the cost of insuring beach houses, resort hotels, and other properties susceptible to hurricane damage.
Yes, small subsidies don’t do as much damage as big subsidies, but you wouldn’t want a doctor to remove only 50 percent of a tumor during a cancer operation. That would be a big mistake, creating a much bigger risk that the growth would return to its original size.
The same principle exists with government interventions. Once politicians decide that it is okay to provide special favors for one group of people (usually big campaign contributors), it is very difficult to limit the size of the handouts.
But the moral of the story is that big government is a mistake – even when (or especially when) bad policy is being imposed by Republicans.