Some Americans are outraged at the federal government for reasons other than the recent government shutdown.

No, they are not outraged because the National Science Foundation is funding the development of card games, videos and other educational programs “to engage adult learners and inform public understanding and response to climate change” through the $5.7 million Polar Learning and Responding (PoLAR) project. No, they are not outraged because the National Institutes of Health gave $1.5 million to Brigham and Women’s Hospital in Boston to “study biological and social factors for why ‘three-quarters’ of lesbians are obese and why gay males are not.” And no, they are not outraged because of any of the top 100 “wasteful and low priority government spending” documented in Senator Tom Coburn’s “Wastebook.”

Some Americans are outraged because their flood insurance premiums are going up.

But why would this cause anyone to be angry with the federal government? If the price of postage stamps goes up, then it is understandable that some Americans might get upset with the federal government. But if the price of car insurance increases, no one blames the federal government. So what does flood insurance have to do with the federal government?


Floods have been part of American history since before the beginning of the Republic. Until the devastating flooding caused by Hurricane Katrina in New Orleans in 2005 and by Hurricane Sandy along the east coast of the United States in 2012, the Johnstown Flood of 1885 in Pennsylvania was probably the most famous flood in American history.

Up until the 1960s, Americans who lived in flood-prone areas could purchase flood insurance as part of their homeowner’s insurance or as a standalone flood insurance policy. Property owners who didn’t were expected to bear the cost of flood damage.

Because only property owners in flood-prone areas tended to purchase flood insurance, this led to what is called adverse selection; that is, the demand for insurance was positively correlated with the risk of loss. Since the insurance premiums collected end up being insufficient to cover payouts after flood losses, this is not profitable for insurance companies. As a consequence, flood insurance became more expensive and less available.

But instead of letting the free market work, the U.S. government added to the flood of intervention it had already unleashed on the American economy.

Although Congress had provided for the establishment of a federal flood insurance program, a federal flood reinsurance program, and a federal loan contract program covering flood losses in the Federal Flood Insurance Act of 1956, nothing was ever implemented and the programs were deemed unworkable.

In 1966, the Department of Housing and Urban Development (HUD) undertook an extensive study of insurance and other programs for financial assistance to victims of floods and related disasters. The HUD report, “Insurance and Other Programs for Financial Assistance to Flood Victims,” led to the passage of the National Flood Insurance Act of 1968 (Title XII of the Housing and Urban Development Act of 1968). This set up the National Flood Insurance Program (NFIP), which was administered within HUD by the newly created Federal Insurance Administration. The original Act was amended by the Flood Disaster Protection Act of 1973, the Coastal Barrier Resources Act of 1982, the National Flood Insurance Reform Act of 1994, the Flood Insurance Reform Act of 2004, and, most recently, by the Flood Insurance Reform Act of 2012. The NFIP is now administered by the Federal Emergency Management Agency (FEMA).

The NFIP “offers flood insurance to homeowners, renters, and business owners if their community participates in the NFIP. Participating communities agree to adopt and enforce ordinances that meet or exceed FEMA requirements to reduce the risk of flooding.”

The NFIP “offers flood insurance, which can be purchased through property and casualty insurance agents. Rates are set and do not differ from company to company or agent to agent. These rates depend on many factors, which include the date and type of construction of your home, along with your buildings level of risk.”

The Biggert-Waters Flood Insurance Reform Act of 2012, Division F, Title II, Subtitle A of the Surface Transportation Bill (H.R.4348), reauthorized the flood insurance program for five years, set a strategy for updating flood zone maps across the U.S., and removed federal subsidies from properties in flood zones. According to FEMA: “Key provisions of the legislation will require the NFIP to raise rates to reflect true flood risk, make the program more financially stable, and change how Flood Insurance Rate Map (FIRM) updates impact policyholders. The changes will mean premium rate increases for some—but not all—policyholders over time.”

Property owners along America’s Gulf Coast are naturally outraged about the rate increases. The Mississippi Department of Insurance filed a lawsuit against the Department of Homeland Security and FEMA to try to block the rate increases. A bill was also introduced in Congress to delay the implementation of the Biggert-Waters Act for one year.

Advocates of the Constitution, federalism, and limited government are likewise outraged, but not over the flood insurance rate increases.

What is the federal government doing providing or subsidizing flood insurance?

If a specific power is not enumerated in article I, section 8, of the Constitution, the federal government is not permitted to exercise it. There were no exceptions provided in the Constitution, not even for crises or extenuating circumstances. And not only is flood insurance not mentioned in the Constitution, there are no references to floods or insurance either. Members of Congress who recite the current congressional oath of office, enacted in 1884, swear that they will “support and defend the Constitution of the United States” and “bear true faith and allegiance to the same.” This means that every member of Congress since 1968 that has voted for any bill related in any way to flood insurance is violating the very Constitution he swore to uphold. Republicans who preach limited government at election time are merely giving lip service to the idea since if they had a philosophical problem with the Federal Flood Insurance Program they could have abolished it when they had an absolute majority in both Houses of Congress under the Republican president George W. Bush.

In our federal system of government, it is only the states that can conceivably have flood insurance programs. This doesn’t mean that the states should have such things, only that whatever is not granted by the Constitution to the federal government is reserved to the states, as it clearly states in the Tenth Amendment.

The only limited government worthy of the name is a government limited to the protection of life, liberty, and property. That precludes such a government offering “services” that the private sector is perfectly capable of providing.

If the federal government can offer Americans flood insurance, then no legitimate argument can possibly be made against the federal government offering Americans fire insurance, health insurance, homeowners insurance, renters insurance, liability insurance, or life insurance.

And if the federal government can offer Americans flood insurance, then no legitimate argument can possibly be made against the federal government offering Americans any other service.

The problem with FEMA overseeing the nation’s flood insurance program is just the tip of a very deeply submerged iceberg. Not only should FEMA not be offering flood insurance, it should not be providing flood hazard data, maps of flood prone areas, or disaster assistance. FEMA, like the vast majority of the other agencies of the federal government, shouldn’t even exist in the first place.

NOTE: This article was originally published at the Future of Freedom Foundation

Laurence M. Vance