Last month I got a letter from the National Flood Insurance Processing Center, which informed me that, according to the Homeowner Flood Insurance Affordability Act of 2014, next year I will … have to pay a $25 surcharge on my flood insurance policy (and only because I actually live in my house – otherwise it would have been $250). Wait, affordability assumes that this act should be saving me money — but no such luck.
So what happened? You see, a flood is not covered by regular insurance, so the government is offering flood insurance through the National Flood Insurance Program (NFIP). But a government institution is not your normal insurance company, which is supposed to make money; this government insurance company does not really care about its accounting books. So as a result, it ended deep in red and was heavily sponsored by the taxpayers (to the level of billions of dollars, with a “b,” if someone is wondering).
Evidently the reason for that problem was that this insurance charged rates significantly lower than were required to cover the costs of restoring expensive properties along the East Coast that are subject to frequent flooding caused by hurricanes. (Of course, private flood insurance cannot compete with the government flood insurance that charges artificially reduced rates so that is really not an option.) So in 2012, Congress passed a law requiring the NFIP to charge the actuarial rates (determined by math and statistics rather than the old low ones) which would have, naturally, resulted in much higher premiums for high risk properties.
An ironic surcharge
But the government would not be the government if it did not try to interfere with economics, the market, common sense, and itself, so in 2014 it adopted a new law (with the Orwellian title mentioned above) delaying the rate increases. But in order to do that, this bill required me and other people in areas of low risk to pay a surcharge to cover the expenses associated with high risk areas. Of course, the irony here is that the values of most of the properties that will have a surcharge levied on them are much lower than the values of the properties along the coast that they are effectively subsidizing. So “affordability” in the name will apply to those enjoying the view of the Atlantic Ocean, not to me.
The case described above is just another example of what happens when government ventures into the market. And common sense dictates that it cannot be otherwise because government officials use other people’s money and, as a result, many of them do not care how that money is spent since it has no bearing on their own well-being. Sure, the government always claims that it takes care of the people (in the form of, preferably, “little guy,” “middle class” or “poor”), but those claims are irrelevant since the government cannot operate efficiently by its very nature.
All of the above does not mean that we do not need government (for sure, security shall be its top priority and obligation, even if achieved inefficiently, since there is no alternative) or that we do not need any government regulations. But we should all recognize that if we let government do something, we will have to pay for that more than necessary, the benefits may go to the wrong people, and it is quite possible that there are other (and better) ways of doing that. (By the way, contrary to any logic, liberals trust government with everything but national security even though that is the only area where we, the people, cannot really make our own opinions since we are not familiar with all classified information.)
Politics exacerbates problems
Unfortunately, politics makes the problems mentioned above much worse. Republicans accuse Democrats of giving people “free stuff,” and Democrats really do not try to counter that — arguing that rich people have to pay for that out of fairness. Sadly, Democratic slogans sound much more appealing than Republican ones since people like free stuff (and generally don’t mind when others get free stuff either so long as they do not have to pay for that). Increase the minimum wage because the business owners will pay for that. Give more in welfare/food stamps/SSI benefits because the rich will pay for that. Let everyone come to America because those people are taking jobs Americans don’t want (I wonder how many illegal immigrants made legal will still be doing that?) and businesses will pay for that. Provide subsidized health care to people because … no one will pay for that?
But I do not know of any parental advice book advocating giving kids stuff and not asking for anything in return because free stuff spoils them (most kids will like a teacher giving free B’s (pun intended) over the one requiring hard work to earn an A). Adults are not much different and many will prefer getting free stuff and having their minimal needs met by the government to working hard to get more. Self-reliance and hard work are the only way to advance, but Democratic policies, while sounding very appealing and drawing votes, are ruining the country. The “give a man a fish …” proverb is a true reflection of reality and human nature and those ignoring it do it at their (and our) peril. And a positive feedback of the cycle (people get free stuff and vote for those who will give more free stuff) is truly frightening.
When economics and human nature are disregarded
History shows how economics and human nature take revenge when disregarded. The Soviet Union (and other socialist countries) is an easy example: envy and taking money from the rich to give to the poor were the driving force of the revolution. Everyone ended up equally poor (except the party bosses), but the government could not provide even basic necessities (including toilet paper, which is also a rarity in today’s Venezuela) and “it’s better to do nothing for 100 rubles than to do something for 200 rubles” was a cornerstone of the approach to life for too many people.
On the other hand, France had to reduce the overbearing high tax rate after the economy suffered, and every Western European country relies on America for defense, thus saving money for welfare (and even in this form it falters — Greece and many other countries could not sustain themselves, and even Sweden is having problems now). And here in America, the labor participation rate is at its lowest in decades and the poverty level has not gotten lower since the mid-’60s (and, by the way, there is no correlation between poverty level and minimum wage).
So let’s be honest: Government serves an important purpose, but it has many shortcomings and is not designed to do certain things. And giving government responsibility and power to do a lot of those things will eventually backfire because most people are better served when they are left alone. Sure, that means that some people will have more (sometimes, much more) than others, but that is better than everyone having nothing. Yes, wealthy people should pay more for defense and police (some may argue that they have more to lose), but they should not pay to provide “free stuff” to those who can but don’t want to work. That is just not fair.
Ilya Gutman is an immigrant from the Soviet Union who now lives and works in Marshall, Minnesota.
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