Friday, September 01, 2017

Financial Bailouts for the Improvident

Lots of people in Houston are suffering after the last storm.  Some of them need and deserve help.  Some need the help but should not be entitled to it.

When you build or buy a home in the flood plain, you know without a doubt that you are taking a risk.  This is especially true when you buy or build in a coastal city such as Houston.   So you have the option of buying flood insurance.  Like all insurance programs, flood insurance spreads catastrophic individual costs among a larger pool of people, so that no one person gets wiped out.

Now, many people lost their homes due to the flooding in (of all places) the flood plain.  The government offers to use our money to provide financial assistance, as if the government were a huge insurance company that you don't have to sign up for.  You get flooded, the government will help you.  You don't have to pay premiums or anything.  Maybe you don't even pay much or any taxes.

Buying a home in the flood plain and electing not to purchase insurance in the knowledge that the government (i.e. all the rest of us in the US) will chip in and buy you a new home.  Makes it a lot easier to buy the house when you don't have to pay for insurance.  You are ENTITLED to help you didn't pay for and didn't sign up for, so what is the risk for you?  Not much.  If you had to take a share in the risk you might think twice, but you don't even have to think once.

Our representatives in the government feel the same way about banks.  We will bail them out, too, if they make unwise investments and take high risks, because we can't afford for them to fail.  So what holds them back from taking such risks?  Nothing, of course.  Lots to gain, little to lose.  We got you, buddy.  Do we get to share in the profits?  Ummm... no.

The degree of risk in an endeavor should be factored into the costs of the endeavor, otherwise there is nothing to limit risky behavior.  When the risks could not be anticipated or avoided, we can and should help.  But when people gamble, it should be with their own money, not ours.