The House Financial Services Committee long has been a coveted assignment for freshmen lawmakers of both parties, in no small measure because of the opportunities it affords to build a fundraising war chest. Needless to say, that is probably not the top priority for the panel’s most notable freshly minted member: rising star and ardent Wall Street critic Rep. Alexandria Ocasio-Cortez (D-N.Y.).
Ocasio-Cortez already has sketched out some topics she’d like to tackle on the committee, including postal banking, student loans and reimposing the Glass-Steagal Act’s separation of commercial and investment banks. But there is another pressing item high on the panel’s 2019 agenda, one that touches on her interests in both climate change and income inequality, where Ocasio-Cortez could help to break what has been a yearslong stalemate – reform of the troubled National Flood Insurance Program.
Created in 1968, the NFIP has served over the past 50 years as the nation’s primary source of flood insurance coverage. Extension of the program, which is set to expire May 31, is a major piece of unfinished business from the 115th Congress. The House passed a longtime extension in November 2017, with a set of reforms that looked to address such issues as mitigation, mapping, encouraging development of the private market and dealing with repetitive loss properties, which account for just 1 percent of policies but between 25 and 30 percent of all claims.
Reform was a major priority of former Chairman Jeb Hensarling, R-Texas, who made no secret of his desire to see the program completely privatized. But one need not go as far as Hensarling to see that the NFIP, which has been on the Government Accountability Office’s list of high-risk programs since 2006, is unsustainable as currently constructed. Over the past 15 years, it has borrowed nearly $40 billion from the federal Treasury to pay storm claims, but repaid less than $3 billion of that total. The nonpartisan Congressional Budget Office projects it will lose, on average, $1.4 billion annually for the foreseeable future.
Hensarling’s proposed reforms faced pushback in the Senate, including from members of his own party. For her part, new Chairwoman Maxine Waters, D-Calif., shares some of the same priorities, particularly on the need to invest in mitigation and more accurate flood maps. She’s more skeptical on steps to help the private market grow and she’s likely to ask that the program’s remaining $20.5 billion of debt be erased, a proposal that was a nonstarter for Hensarling. Moreover, Waters has declared that her priority is to “responsibly help homeowners, businesses, and renters, who all need access to affordable flood insurance, by taking sensible steps to stabilize flood insurance premiums.”
And this is the first area where Ocasio-Cortez could help to shine a light on the inequities inherent in the current NFIP. It has long been a goal of reformers revamp the various subsidies built into the program so that they explicitly help those most in need. The reality is, as currently structured, those subsidies flow mostly to the rich and the upper middle class.
As of June 2012, GAO found that 29 percent of subsidized NFIP policies were in counties in the top decile of median household income, compared with 4 percent in the bottom decile; 65 percent were in counties among the top three deciles, compared with 10 percent in the bottom three deciles; and 86 percent were in counties in the top half of the income distribution, compared with just 14 percent in the bottom half.
The 2017 reform bill made some modest efforts to introduce an affordability component, but a more radical rethinking – one that raised rates for those who can afford them to finance help for those who might otherwise be priced out of their homes – could well be in order. In any case, the cause of affordability must no longer be used as a pretext to protect the interests of the NFIP’s primary beneficiary: big developers and other real estate interests who want to keep building in drained wetlands, on coastal barrier islands and in other flood-prone regions, all while sticking the American people with the bill.
And this is where Ocasio-Cortez could propose one simple, transparent and revolutionary reform that would remake entirely how the NFIP operates. In short, the NFIP should be barred from writing any policies for new construction in 100-year floodplains. This wouldn’t harm any existing policyholders. It wouldn’t invite “cherry picking” of the private insurance industry. It would simply apply the Hippocratic Oath – first, do no harm.
The recently published Fourth National Climate Assessment projects sea level rise of one to four feet by the end of the century, enough to force the relocation of hundreds of thousands, potentially millions, of Americans to higher ground. The first step toward adaptation and resilience is to cease making that problem worse, to end government policies that explicitly encourage more risk. The congresswoman from New York’s 14th district will face an early test in shaping how we prepare for that future.