Paying for Risky Behavior; Economists Questioning Disaster Bailout Policies
Byline: Patrice Hill, THE WASHINGTON TIMES
The huge costs of devastating storms such as Ivan and Katrina have done little to slow a rush to build and buy homes on the hurricane-prone Gulf and Atlantic coasts in recent years.
Despite suffering through a record four hurricanes last year, Florida coastal property remains the hottest second-home market in the United States.
Since last year's devastation, Florida home prices have soared 33 percent, and the building boom has intensified. Currently in Miami, eight times more condominiums are planned or under construction than were built there in the previous decade.
Not far behind are such popular beach resorts as Myrtle Beach, S.C.; Gulf Shores, Ala.; the Outer Banks of North Carolina; and Ocean City, where property values have been soaring despite regular visits or near misses by dangerous hurricanes.
Gulf Shores was ground zero when the eye of Hurricane Ivan came ashore last September, wiping out apartment buildings and knocking out critical infrastructure while submerging the entire resort.
But a condo investor who visited with an eye toward picking up a bargain a few months later reported that prices had not dropped at all. Beachfront condos that had hurricane damage and no water or sewer service were still selling for a half-million dollars.
Economists say a major reason Americans and foreigners flock to the beach towns despite the obvious risks is because much of the cost for cleaning up and recovering from hurricane disasters is borne by the federal government.
Congress makes an annual ritual out of bailing out storm-struck communities. And despite much finger-pointing and large and escalating price tags, lawmakers benefit politically from the lavish distribution of aid to grateful constituents.
The generous federal bailout of Florida a year ago is credited with helping President Bush win that critical state in the fall election.
Congressional leaders say the cost to the federal government for rescuing and rebuilding after Katrina will be the largest ever - between $100 billion to $200 billion - eclipsing even the cost of responding to the September 11 terrorist attacks four years ago.
While no one would dispute the federal government needed to become involved to ease traumas caused by Katrina, some economists and budget analysts are alarmed at the trend toward ever-larger bailouts with taxpayers picking up the tab for risky decisions made by private homeowners, businesses and investors.
"We are subsidizing risky behavior and should not be surprised at the result," said Massachusetts Institute of Technology hurricane researcher Kerry Emanuel.
"The most important hurricane problem we face is demographic and political," he said. "Katrina, as horrible as it was, was by no means unprecedented, meteorologically speaking. More intense storms have struck the U.S. coastline long ago.
"The big problem is the headlong rush to tropical coastlines, coupled with federal and state policies that subsidize the risk incurred by coastal development," he said. …