The whole country is suffering from what David Dayen, writing recently in The New Republic, is calling “Flood Denialism.” We in Dallas happen to be a poster child in the making.
And, of course, Cruz does make a terrific target, because his own behavior and voting record on flood policy, juxtaposed with his supposed worship of small government, does make him a wonderful, gigantic, horse-galloping hypocrite. But for people who are just people, the real problem is way beyond hypocrisy.
The real problem is Harvey next time. Our inability to prepare for that next Harvey may even be a form of societal madness, a thing the reinsurance industry is trying to quantify as “Faktor K.” Roughly translated from the German, Faktor K means, “What if the whole country is just nuts?”
Being a hypocrite on flood safety hardly makes Cruz the Lone Ranger. In 2012, Rep. Maxine Waters, Democrat of California, and Rep. Judy Biggert, Republican of Illinois, introduced what became the Biggert-Waters Act to reform the National Flood Insurance Program, then some $19 billion in the hole, today $24.6 billion in the hole. Why is the NFIP so deeply in the hole? Because it’s not an insurance program.
If the NFIP were a true insurance program, those of us who buy insurance from it would have to pay premiums as much as five times more expensive than what the NFIP charges people. The NFIP insures a high percentage of Americans who own houses in coastal, riverine and flood-prone areas like Houston. The real cost to insure a flood-prone house against flooding is much higher than the NFIP’s rates.
When the government hands out cheap insurance and then must pay off big claims, the taxpayers must write a check to cover the delta. That’s where the current $24.6 in red ink came from. It’s not insurance. It’s a direct tax subsidy to allow and encourage people to build and buy structures in flood-prone areas.
For all you anti-climate-change, red-blooded, free enterprise, market-believers out there, that’s what we’re talking about. The market would say, “If you want to build your house in a swamp and then buy flood insurance from me to protect it, you’re going to have to pay a steep rate.” Under the NFIP, which provides the vast majority of all flood insurance in this country, you don’t have to pay a steep rate. The taxpayer pays it for you.
The whole purpose of the Biggert-Waters Act was to jack the rates up closer to what they should have been all along. But when the new higher rates were published barely a year after the law went into effect, Waters, one of the act’s authors, began screaming that the new rates were too high.
Waters said she was “outraged by the increased costs of flood insurance premiums that have resulted from the Biggert-Waters Act.” She said, “I certainly did not intend for these types of outrageous premiums to occur for any homeowner.”
There was much hay to be made on all sides politically in that period by opposing higher flood insurance rates, and guess who got in on the hay-making. Oh, you got it right with only one guess, didn’t you! Yes, it was our own Texas senator, the government-killer and ultra-libertarian Mr. Cruz.
On March 13, 2014, Cruz hailed passage of a bill that forbade the NFIP from raising its rates. Cruz proclaimed in an official statement: “Today's flood relief bill provides meaningful relief to the millions who faced dramatically high premiums that jeopardize their homes and their businesses.”
Yup. He did that. He wasn’t lying. The so-called Homeowner Flood Insurance Affordability Act of 2014 stalled the rate hikes for three years, keeping rates way low for everybody with a house prone to flooding. What it also did was guarantee that the taxpayers would continue to be on the hook for the difference.
And much more. The NFIP is a national subsidy program that does more than merely deform market-rate insurance premiums. The NFIP guides national land-use policy and development. Left in its present form, the NFIP will help guarantee that Houston, for example, will do nothing to prepare itself for the next Harvey.
To rebuild, some significant number of people in Houston will have to borrow money. Houston itself and the surrounding affected municipalities will have to borrow immense sums in the bond markets.
If we were operating under market rules, the market would refuse to invest in a new Houston unless the market’s investment were insured. The insurance industry would check its risk algorithm and offer only very high rates unless the redevelopment were way more flood-safe than what was there before, because … Harvey. So it wouldn’t be market-feasible to redevelop back to the old flood-prone swamp-town footprint. The market would say no dice.
But the NFIP as presently constituted says yes dice. Go ahead. No problem. Don’t worry about it. If Harvey comes back and you’re right in the path again, if you have done nothing to protect yourself in any sane way, the taxpayers will pick up the tab. What’s worse, the NFIP is only one symptom of a much larger societal syndrome, and that’s the part we can speak to here in Dallas.
After Katrina blew out the New Orleans levees in 2005, our own congressional delegation in Dallas helped lead the way to a national reassessment of levee systems. But, oops: In 2009 when the results of the nationwide study came out, they showed that the Trinity River flood protection system in Dallas, 23 miles of earthen levees 29 to 32 feet in height, was next to useless.
The Dallas levees, according to the U.S. Army Corps of Engineers, could no longer be counted on to protect property from even the minimum so-called 100-year flood event. Therefore vast reaches of real estate in Dallas — residential, commercial and industrial and institutional — were at risk.
So how did we react in Dallas? We’re a conservative town. We believe in markets and hard-nosed realism. Right? Right? Wrong. Dallas reacted to the bad news by joining a national consortium of cities with bad levees using their combined congressional might to force the Corps of Engineers to back off.
But back off how? The Corps already had said they had learned from scientific and physical examination that the levees here and elsewhere were at risk. So what were they going to do, tell the public they found out they had a bunch of drunk people working on the study?
More clever, perhaps even fiendishly so, the Corps announced that they were redefining risk. The levees had only been risky under the old definition of risky. Under the new definition of risky, the levees were now incredibly safe, up to and including a 1,000-year flood or more. Presto!
Here is where we come to Faktor K, sometimes called the “God Factor.” You and I, we’re not dumbbells, right? We see what happened there, both in the NFIP debate nationally and here in Dallas about the levees.
Some kind of reality wonks must have talked the politicians into doing something serious and realistic about flood control. The politicians did it, not knowing what the blow-back would be. The blow-back was terrible, so they changed their minds. They said the insurance could still be cheap and the levees were safe as heck.
Here’s the scary part. We believed them. And now, because of Harvey and because of the timing on the insurance rates law, we are coming to a major new test of our credulousness.
The Trinity River in Dallas in 2015, knocking on our door.
Nicholas Henderson
Enormous economic and political pressure will be brought to bear from Houston — already from Ted Cruz, we see — because developers and politicians in Houston will want subsidized insurance rates to help them rebuild existing structures and communities.
Perhaps an even greater pressure on politicians will come from us. We, the public, may feel that the people of Houston have suffered enough. How can we cause them new suffering by making it more difficult for them to rebuild their lives?
But the cheap insurance rates and the magically restored levee system are drugs. They are not the truth. The truth is Harvey. Harvey is coming back. Maybe Harvey only knocked on our door this time. Where is the humanity or kindness in putting men, women and children back in the path of the next Harvey?
The market wants to tell us something important. It wants us to know that we cannot forever afford the societal cost of heedless development. It is telling us that tax subsidies that prolong cycles of disaster are not a kindness. Environmentalism, free enterprise and the market are one thing.
