NU Online News Service, Feb. 3, 3:04 p.m. EST

A Michigan congressman is asking fellow members of Congress to support legislation that would phase out the National Flood Insurance Program.

In a “Dear Colleague” letter, Rep. Candice Miller, R-Mich., asked, “Why in the world is the federal government involved in the flood insurance business?”

She continued, “If we really are serious about reducing the size of government, cutting unnecessary spending, and returning power to the states, please join me in supporting this legislation.”

She said in her letter that the NFIP is $19 billion in debt, and that the Federal Emergency Management Agency, which administers the program, will soon have to ask for an increase in the program’s debt limit.

FEMA officials were working to determine the accuracy of this statement.

The NFIP has been on life support since its current authorization expired in Sept. 2008.

It is now on its fifth extension since that time. The extension expires Sept. 30, the end of the current government fiscal year.


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In her request for other members of Congress to join her in sponsoring the legislation, Rep. Miller said the “NFIP is not actuarially sound and because of this one out of every four property owners in the program received subsidized rates and others in less flood-prone areas are forced to pay significantly higher rates than they should based upon risk.

“These subsidized rates charged by the NFIP create a moral hazard and provide an incentive for development in flood-prone areas, putting other rate payers and all taxpayers at great risk.”

Rep. Miller, a fifth-term congressperson, added, “The example of Obamacare illustrates the problem of the federal government becoming too involved in insurance matters.

“The federal government is simply not suited to manage such a program when political forces lead to the setting of rates instead of risk.”

Eli Lehrer, a senior fellow at the Heartland Institute in Washington, said, “Rep. Miller’s bill does do a good job sending a message that the National Flood Insurance Program is broken beyond repair and, in time, needs to be privatized.”

But, Mr. Lehrer cautioned, “Simply doing away with the program in the short term without developing an phase-out strategy, however, would cause chaos in real estate markets and leave millions of Americans without needed insurance.”

He said the program needs to be fixed before there’s a real chance of having the private sector take over responsibility for providing flood insurance. “Like many other big government programs, it’s not possible or wise to end NFIP overnight,” he said.