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Here’s a letter that I sent to U.S. Senator Robert Menendez (D-NJ):

Dear Sen. Menendez:

NPR reported yesterday on your opposition to eliminating subsidies for flood-insurance premiums.* You correctly note that eliminating these subsidies will cause insurance premiums to rise for residents of flood-prone locations. But you incorrectly predict that this rise in premiums will be a “man-made disaster.” The reality is the very opposite of what you predict.

Man-made disasters are created by the artificially low premiums that you advocate. Subsidized premiums encourage the over-population of flood-prone regions, as well as discourage residents of those areas from taking appropriate care to protect their properties from flood damage.

Allowing these premiums to rise to unsubsidized levels would – by encouraging people to make more prudent decisions regarding where to live and about how to protect their properties – reduce both the property damage and the number of fatalities caused in the future by storms, heavy rains, and swelling rivers.

There are few better sources of man-made disasters than subsidized insurance rates.

Sincerely,

Donald J. Boudreaux

Professor of Economics

and

Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center

George Mason University

Fairfax, VA 22030

* “In Sandy’s Wake, Flood Zones And Insurance Rates Re-Examined,” Christopher Joyce reporting.