A Nation of Moochers (13 page)

Despite all of this cash, the programs do not appear to achieve many of the goals claimed for the programs. Some of the subsidies are designed to raise farmer income by propping up the prices of their crops; in reality, they often depress those prices by encouraging overproduction.
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They also have the unintended consequence of driving legitimate farmers off the land, after landowners discover they can make more by doing nothing than by growing things.

The
Post
reported that landlords “have evicted the tenants from land they had farmed for years. Then the landowners can collect the checks themselves, even if they do not farm.”

“As soon as they figured they could take the payments, they said, ‘I don’t need you anymore,’” one farmer told the
Post.
“They were renting me land for $40 an acre, but they could get $125 an acre from the government.”
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Perhaps not surprisingly, the billions of dollars in corporate welfare have failed to slow the exodus of Americans from farms. Indeed, the counties most dependent on the subsidies had the weakest job growth and worst population losses. A study by the Federal Reserve Bank of Kansas City concluded, “Farm payments appear to create dependency on even more payments, not new engines of economic growth.”

The EWG notes this one signal of success: “One thing government subsidies reliably produce, other than ingratitude and a sense of entitlement among their recipients, is a demand for more subsidies.”

Sure enough, the resulting 2007 energy bill mandated American drivers to put 15 billion gallons of corn ethanol in their tanks every year by 2015, with accompanying tax breaks to gasoline blenders that already approach the $5 billion spent each year on automatic direct payments. Since not even those government props have been sufficient to maintain profitability, the corn ethanol industry has been laying siege to Capitol Hill and the White House to increase the mix of ethanol in gasoline by 50 percent. Next will come a demand to expand the 15 billion gallon annual mandate to 20 billion gallons or more of corn ethanol.
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Because, of course, whatever the government does for you—it is never enough.

Flood of Money

Middle- and upper-class welfare is not limited to farm subsidies. Perhaps the most dramatic transfer payments go to the owners of pricey beachfront properties. If the definition of
insanity
is doing the same thing over and over again and expecting a different outcome, the National Flood Insurance Program would be Exhibit A.
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Consider Alabama’s Dauphin Island: From 1979 through 2005, the island was hammered six times by hurricanes, which destroyed about five hundred pricey vacation home and rental properties. Yet, as
The Washington Post
noted, “owners keep building back.… And the island has received more than $21 million in federal flood payments to help spur development.”
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Not surprisingly, the federal program is broke, looking for a $19 billion federal bailout. One could easily argue that the flood program is designed to fail: it pays virtually every claim, doesn’t raise premiums after multiple claims, and promises to keep covering homes that have been destroyed over and over again. It can also be argued that the program is designed precisely to reward irresponsible behavior, like providing a subsidy for pyromaniacs to buy matches.

When
USA Today
examined the program, it found that more than 19,600 owners of houses and commercial property had actually pocketed more in federal insurance payments than the total actual value of their properties. For example, the program paid one Alabama homeowner $2.3 million in claims, even though the house was worth only $153,000; a Houston home worth just $116,000 generated $1.6 million in claims. Meanwhile, homeowners continue to rebuild over and over again, benefiting from big discounts in insurance rates—insurance that would either never be written by a private company or would cost dramatically more to reflect the actual risk and claims history. The cost of the discounts: at least $1 billion a year—the taxpayer’s gift to improvident beach dwellers.
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In all, 5.5 million properties are covered by the program, which provides flood protection up to $350,000 for single-family homes and $1 million for commercial properties. The Institute for Policy Integrity, affiliated with New York University’s law school, notes that the “insurance subsidies are a direct transfer, through the program, from taxpayers to the holders of these policies.”
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The beneficiaries of all this largesse? Rich areas, like Longboat Keys, Florida, and Hilton Head Island, South Carolina, which
USA Today
found had “some of the largest numbers of second homes and rentals getting the discounts.”
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In other words, it is taxpayer-subsidized insurance for the beautiful people … or at least the fortunate few who have managed to get other people to bankroll their affluent lifestyles.

The Institute for Policy Integrity notes that there are occasional claims that the program primarily benefits poor regions of the country. But the institute reports that more careful analysis calls those claims into question. Hurricanes Rita and Katrina in 2005 skew the historic numbers dramatically. The institute’s researchers found that if 2005 is excluded from the decade 1998–2008, “the wealthiest counties in the country filed 3.5 times more claims and received over a billion dollars more in claim payments than the poorest counties.” Their conclusion: “Taxpayer-subsidized [flood] claims thus represent a significant wealth transfer from middle-income counties to relatively wealthy and poor counties.”
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Nationwide, the median value of a single-family home is roughly $160,000. But the Congressional Budget Office (CBO) says that more than 40 percent of the coastal properties benefiting from subsidies of their insurance rates because they were grandfathered into the federal insurance program are worth more than a half million dollars; 12 percent are worth more than a million dollars. Nearly a quarter of the homes in the CBO analysis were vacation homes. “While the CBO analysis is not exhaustive,” the institute notes, “it strongly suggests that the benefits of subsidized flood insurance provided by the NFIP accrue primarily to wealthy households.”
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This, of course, makes perfect sense. Who, after all, is most likely able to afford oceanfront properties? As the institute points out, “The most expensive homes are those directly on the beach, followed by homes with a view of the ocean, then those within walking distance of the ocean, and finally those homes without easy access to the water.” The only thing that ruins the view from the deck is the prospect of being flooded out, the financial cost of which ocean-viewing property owners, mai tai in hand, do not have to worry about, thanks to taxpayers who likely have to make do with more prosaic views.

Many of the subsidized rich could, of course, afford this lifestyle themselves. Others might think twice about building in floodplains or in coastal areas where their investments would be swept away if they had to do it on their own dime. If they were forced to pay full price for their insurance or bear the financial risk of their decisions, presumably, many of the subsidized ocean dwellers would choose different, more prudent venues. But as long as the federal government offers the cut-rate policies, why not take them? The lure of government cash is as powerful for a celebrity building a dream home on the Florida coast as it is for the farmer pocketing disaster aid for losses he didn’t suffer, or Aunt Zeituni taking advantage of government handouts.
If they are giving away money, who am I to say no?

In the case of flood insurance, there is an additional wrinkle: Like farmers and other corporate moochers, the owners of beach homes tend to have the sort of political juice needed to keep a boondoggle of this size and scope afloat. Thus, despite the ongoing transfer of wealth from middle-income taxpayers to wealthy beach communities, recipients can still count on defenders to justify the payments on “compassionate” grounds.

But does “compassion” really describe why a Mississippi home worth just $69,900 could be flooded thirty-four times and generate $663,000 in insurance payments?
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Wouldn’t “delusional” be more appropriate? Federal taxpayers are subsidizing both the homeowner’s lifestyle and his refusal to acknowledge the realities. But the subsidies keep on rolling in with the tide.

For the beneficiaries of the cut-rate insurance—who can afford to have repairmen on speed dial after every flooding—this is a sweet deal. But it spells financial disaster for the taxpayers. “The program, as currently structured,” says the Institute for Policy Integrity, “will never repay its debt.”
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Translation: The taxpayers will get to bail them out as well.