According to an article in the Wall Street Journal, taxpayers across the nation will foot the bill for federally-backed hurricane insurance.

Democrats in Congress, with the backing of insurance industry giants Allstate and State Farm, want to nationalize “reinsurance”, or insurance bought by insurance companies. This reinsurance would protect the insurance companies from “catastrophic losses” in the event of a natural disaster.

The legislation passed the House with a bipartisan vote of 258-155.

While it could save Florida homeowners as much as $500 annually in insurance premiums, the cost for the proposed legislation would be born by all taxpayers, even ones in states that are far from hurricane, earthquake, mudslide, and wildfire zones.

The end result of such legislation has two consequences:

1. With the lowered insurance premiums, people are more likely to do stupid things like build in hurricane zones and flood zones. For example, New Orleans bears witness to the catastrophic results of the National Flood Insurance Program. Such programs increase the likelihood that when a natural disaster occurs, there will be loss of property and life.
2. People far removed from the disaster zone, having already paid for federal agencies like FEMA with their tax dollars, are now getting taxed further to fund this kind of legislation. As a result they have less disposable income, which means in the event of  natural disaster they’re less likely to donate money to charities like the Red Cross and the Salvation Army.

Capitalism works. We need to remember this. Capitalism keeps people from doing stupid things because it makes the cost proportional to the risk. People are less likely to engage in risky behavior if there’s no one there to help pick up the pieces in the event something bad happens. This saves money, and in the case of natural disasters, it saves lives.

If people want to build in hurricane and flood zones, they should have the liberty to do so. No one should prevent them from it. But they should also bear the burden of financial responsibility on their own shoulders, not on ours.

Action to take: use The Mailbox to write your representatives. Tell them to vote no on  H.R.3355, the Homeowners’ Defense Act of 2007.