Everyone has been there: Times are good for a while and it starts to seem reasonable to buy – or agree to – things you want but don’t need. Later on, when money gets a little tighter, you start prioritizing and realize you really didn’t need the leased Mercedes or the McMansion with all those empty rooms.
With luck you figure this out before being crushed by the weight of your bad decisions. But for a lot of people the return to financial sanity comes too late.
That, alas, is the near-certain fate of most major countries these days. Between cradle-to-grave entitlement systems, global military empires, inflated public sector pensions and myriad lesser but still in the aggregate ruinous commitments, the fiat currency era will go out in a blaze of regret, broken promises, and political chaos.
A good example of something that in retrospect will seem off-the-charts crazy is the US government’s Federal Flood Insurance program, which – wait for it – pays people to live in places where their homes get flooded every few years. From yesterday’s New York Times:
When a deadly rainstorm unloaded on Houston in 2016, Sharobin White’s apartment complex flooded in up to six feet of water. She sent her toddler and 6-year-old to safety on an air mattress, but her family lost nearly everything, including their car.
When Hurricane Harvey hit the next year, it happened all over again: Families rushed to evacuate, and Ms. White’s car, a used Chevrolet she bought after the last flood, was destroyed.
“It’s not safe,” said Ms. White, now 29. “Everybody gets to panicking when it rains. You can’t live like that.”
But Ms. White and many of her neighbors cannot afford to leave. They are among hundreds of thousands of Americans — from New York to Miami to Phoenix — who live in government-subsidized housing that is at serious risk of flooding, a danger that is becoming increasingly urgent in the era of climate change.
Nowhere is that tension more acute than in Houston, where residents of the nation’s fourth-largest city have been pounded by severe storms in recent years — and where HUD is facing a lawsuit brought by Ms. White and a dozen of her neighbors. The residents say they are trapped in a dangerous area because their housing vouchers can be used only at that apartment complex, which sits in a particularly flood-prone area next to a bayou.
The complex, Arbor Court Apartments, which is run by a private landlord that contracts with HUD, has been in a flood plain since 1985 and under HUD’s oversight since at least 1991, according to the lawsuit, filed in federal court last year.
After the 2016 flood, HUD renewed its contract with the owner, for about $1.6 million a year. Only a year later, Hurricane Harvey wiped out the first floor, leaving many families displaced and others complaining of major problems, including mold.
HUD, citing the dire shortage of rental homes for extremely low-income families, says its goal is to preserve affordable housing whenever possible. So while the agency takes flood risk into account for new and substantially rehabilitated housing, it continues to fund existing properties in flood plains.
450,000 households in flood zones, sponsored by the government Nationwide, about 450,000 government-subsidized households — about 8 to 9 percent — are in flood plains, according to a 2017 report by the Furman Center at New York University.
Many of those, including traditional public housing, low-income housing for older people and Section 8 properties like the one in Houston, are financed by HUD. There are also properties in flood plains that receive tax credits to rent to low-income tenants, which are subsidized with other federal money allocated to states.
In a free market, mistakes like the above get fixed fairly quickly.
Two big floods in as many years, and a community empties out as residents move to less stressful places. But add a benevolent social insurance program designed to help with “unpredictable” natural fluctuations, and those same residents are locked in place. They can’t sell because no one in their right mind would move to such a disaster-prone neighborhood, and with the government rebuilding their homes as needed it makes no sense to cut their losses and flee. So they stay put and taxpayers foot the bill.
Or more accurately holders of the currency foot the bill as rising government debt leads to rising inflation and, eventually, massive devaluation.