With Some Bad Ideas, it is Hard to Know Where to Begin...

The Christian Science Monitor notes:

"Rather than allow market signals of higher insurance rates to force changes in where and how people live in hurricane-prone areas, the state recently put taxpayers on the hook by promising to be the insurer of last resort. Government is now the largest insurer in Florida. Another major storm could overwhelm its revenues.

"Now, having recognized that Floridians face an unbearable financial hit, state officials are desperately pressuring Congress to set up a subsidized, national 'catastrophe fund' that would bail out homeowners who choose to live in disaster-prone areas. A bill is moving quickly on Capitol Hill."

What is the worst here? Is it that Floridians endorse the dubious assumption that Government belongs in the insurance business? Is it that -- having willfully put its own resources at risk -- Florida expects the rest of the country to pay its bills after the next catastrophe? Is it the pure irresponsibility of politicians who have -- in effect -- earmarked money for future spending which hasn't even been picked from taxpayers' pockets yet?

It is hard to know where to begin. No matter where you start, this is all bad money.

Bad money happens when goods are lost. Florida's next major storm will destroy many homes. In the instant after the storm subsides, the totality of Florida money will be the same as before, but the totality of Florida goods will be less. And in that moment some part of Floridian's money will be worthless, because there will be no place to spend it and nothing to buy.

The moment won't last long. In the very next, Floridians will find ways to begin rebuilding.

Markets, however, distribute losses equally as gains. All of us will eventually be affected by the naturally-occurring bad money of Florida's next storm. Prosaically, we may see the effect as higher prices for oranges, or having to cancel a Disney vacation, or by contributing to a disaster relief charity, or by any of a thousand other means. The bad money will eventually belong to everyone, as it should.

Which is exactly the problem. Any expense of money or effort above the cost of the storm itself is simply a piling on of bad money.

Here, for example, the state of Florida chooses to operate as an insurance agency. It cannot do so for free. It must pay employees to run the program, it must pay for offices where they may work, and so on. The expense is a pure loss that can never be recovered, because it produces nothing.

Think about it. No houses are built, unless they are first destroyed. How productive is that?

Ever the optimist, I cannot believe that Floridians -- one by one -- truly want the rest of us to bear this expense for them. It's like putting up a sign that says, "We're weak and needy; we can't take care of ourselves!" Floridians I have known would recoil.

As for the politicians, it's hard to know where to begin...