Editor's note: John Stossel? The corporate PR flak masquerading as a journalist?!  That was my first reaction when a reader sent us this article as a suggested "editor's pick." After reading it, we've got to credit Stossel for openly admitting his participation in one of our country's lesser-known tax scams.

Ronald Reagan memorably complained about "welfare queens," but he never told us that the biggest welfare queens are the already wealthy. Their lobbyists fawn over politicians, giving them little bits of money -- campaign contributions, plane trips, dinners, golf outings -- in exchange for huge chunks of taxpayers' money. Millionaires who own your favorite sports teams get subsidies, as do millionaire farmers, corporations, and well-connected plutocrats of every variety. Even successful, wealthy TV journalists.

That's right, I got some of your money too.

In 1980 I built a wonderful beach house. Four bedrooms -- every room with a view of the Atlantic Ocean.

It was an absurd place to build, right on the edge of the ocean. All that stood between my house and ruin was a hundred feet of sand. My father told me: "Don't do it; it's too risky. No one should build so close to an ocean."

But I built anyway.

Why? As my eager-for-the-business architect said, "Why not? If the ocean destroys your house, the government will pay for a new one."

What? Why would the government do that? Why would it encourage people to build in such risky places? That would be insane.

But the architect was right. If the ocean took my house, Uncle Sam would pay to replace it under the National Flood Insurance Program. Since private insurers weren't dumb enough to sell cheap insurance to people who built on the edges of oceans or rivers, Congress decided the government should step in and do it. So if the ocean ate what I built, I could rebuild and rebuild again and again -- there was no limit to the number of claims on the same property in the same location -- up to a maximum of $250,000 per house per flood. And you taxpayers would pay for it.

Thanks.

I did have to pay insurance premiums, but they were dirt cheap -- mine never exceeded a few hundred dollars a year.

Why does Uncle Sam offer me cheap insurance? "It saves federal dollars," replied James Lee Witt, head of the Federal Emergency Management Agency (FEMA), when I did a 20/20 report on this boondoggle. "If this insurance wasn't here," he said, "then people would be building in those areas anyway. Then it would cost the American taxpayers more [in relief funds] if a disaster hit."

That's government logic: Since we always mindlessly use taxpayer money to bail out every idiot who takes an expensive risk, let's get some money up front by selling them insurance first.

The insurance, of course, has encouraged more people to build on the edges of rivers and oceans. The National Flood Insurance Program is currently the biggest property insurance writer in the United States, putting taxpayers on the hook for more than $640 billion in property. Subsidized insurance goes to movie stars in Malibu, to rich people in Kennebunkport (where the Bush family has its vacation compound), to rich people in Hyannis (where the Kennedy family has its), and to all sorts of people like me who ought to be paying our own way.

When my crew was working on the 20/20 story on this indefensible insurance subsidy, producer David Sloan was shooting on the elegant Outer Banks of North Carolina. A man who saw our camera invited Sloan to videotape inside a luxurious beach mansion he was renting. Sloan accepted and was surprised to see, taped to the refrigerator, a picture of presidential hopeful (then House majority whip) Richard Gephardt.

"Why is his picture here?" Sloan asked.

"He's an owner of the house," answered the renter.

Aha, a surprise twist to our story: A Missouri congressman owns expensive beachfront property insured by taxpayers. We called Rep. Gephardt's office and asked to interview him about flood insurance. I was excited. He and I had something in common: We were both welfare queens. I thought he might say something like: "Yes, it's disgraceful -- we shouldn't get special protection because we are rich enough to build on beaches. I'm trying to end this boondoggle." But when I interviewed him, he just smiled blandly and kept saying Congress would "look into the program."

Why subsidize affluent people like Gephardt and me? Why not let us sink or swim on our own? If my house erodes away, it should be my tough luck. FEMA chief Witt at least attempted an answer: "The American people are pretty compassionate toward their neighbors."

Government flood insurance is so "compassionate" that the program didn't even raise my premiums when, just four years after I built my house, a two-day northeaster swept away my first floor. I could still use the place, since the kitchen and bedrooms were on upper floors, though some guests were unnerved when a wave sloshed through the bottom of the house. After the water receded, the government bought me a new first floor.

Federal flood insurance payments are like buying drunken drivers new cars after they wreck theirs. I never invited you taxpayers to my home. You shouldn't have to pay for my ocean view.

Actually, I don't have such a great view anymore. On New Year's Day, 1995, I got a call from a friend. "Happy New Year," he said. "Your house is gone." He'd seen it on the local news. (Or rather, he saw the houses that had been next to mine, and nothing but sand next to them.) The ocean had knocked down my government-approved flood-resistant pilings and eaten my house.

It was an upsetting loss for me, but financially I made out just fine. You paid for the house -- and its contents. I'm not proud that I took your money, but if the government is foolish enough to offer me a special deal, I'd be foolish not to take it.

© 2004 Reason Magazine

The above is excerpted from a longer feature, which is available in its entirety at Reason.com

More on the National Flood Insurance Program:
Official government site     *    A critical assessment

Go to Home Page