Catastrophic Rudy - The American Spectator

In pursuit of a needed victory in Florida, Rudy Giuliani continues to tout the fact that he is the only candidate to support a national catastrophic fund for natural disasters. His campaign is hammering home the point that John McCain is opposed to it, and Mitt Romney has failed to take a firm position. I am writing from Sarasota, Florida now, but I haven’t spoken to enough voters in the state to know how much this will resonate politically. However, from a pure policy perspective, I remain firmly opposed to the idea, and still am having trouble seeing how supporting such a fund can be reconciled with a belief in free market economics.

Here were Giuliani’s remarks on the matter on Tuesday, as provided by the campaign (emphasis mine):

MAYOR GIULIANI: I think the questions and the introduction, rather, that I got illustrates the importance of the National Catastrophic Fund here in Florida, and the main reason it’s so important is that people are finding it impossible to get insurance. And the reality is if there is a catastrophe, once in a generation, once in a lifetime, once in a century kind of catastrophe the federal government clearly is always there and is there with large amounts of money. The idea is to be there with a backstop that will allow a private market to work so that people who have risk will pay more but at least they’ll have insurance that [isn’t] excessive. Now this is necessary for Florida, but if you think about it it’s necessary for a lot of the rest of the country because in California we’re looking at the risk of earthquakes, up and down the east coast — hurricanes, middle of the country — tornados, northern part of the country — ice storms. So the idea of this is to try and see if we can help each other nationally, so that people can get insurance and this can be done in a sensible way. And I think it’s an important thing for Florida but I do think it’s an important thing for the rest of the country including the general areas that I’ve mentioned. And it is an area in which I am the strongest supporter of it of the candidates that are running on the Republican side.

But actually, the private market is working quite perfectly. Homeowners are having trouble finding insurance at reasonable rates because they are living in areas that are at greater risk of being hit by natural disasters. Should government intercede to artificially lower insurance rates, it will only provide an incentive for more people to move to natural disaster prone areas, and thus increase the costs associated with disasters in the future. There are advantages to living in Florida–from warm weather to beautiful beaches–but one of the drawbacks is that it’s in prime position to be hit by hurricanes. Anybody who chooses to benefit from living here, should bear the full costs.

Giuliani is right that at the end of the day, the federal government jumps in with a relief package in the event of a disaster. But two wrongs still don’t make a right.

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