Art of the terrible, horrible, no good, very bad deal
It was, instead, largely a regional dispute, as Republicans from Louisiana and Mississippi, and Democrats from New York and New Jersey, and Republicans and Democrats from Florida traditionally have made common cause to keep the spigot of federal subsidies for flood-prone properties open and flowing, while taxpayers in non-coastal regions picked up the tab.
On the other side long have been arrayed a strange bedfellows coalition of ideologues. Environmentalists like the National Wildlife Federation and Rep. Earl Blumenauer, D-Ore., have championed reforms to cease these federal incentives to build in environmentally sensitive coastal wetlands and barrier islands. Fiscal hawks like Sen. Richard Shelby, R-Ala., and Taxpayers for Common Sense have pointed to the unsustainable nature of the program, as evidenced by its massive debt to the American taxpayer.
My organization, the R Street Institute, is one that takes both sets of concerns very seriously.
But this year, for the first time in a long time and for reasons that perhaps relate to the increasing polarization and dysfunction of Congress generally, the legislation to reauthorize the NFIP is not being pursued as a bipartisan affair.
Which is not to say there is no bipartisan consensus. Of the five flood insurance bills the House Financial Services Committee passed back in June, three cleared the panel by unanimous votes. One of those, the Flood Insurance Market Parity and Modernization Act, previously passed the entire House of Representatives by a unanimous vote in April 2016. It also has bipartisan sponsors this year in both the House (Florida Republican Dennis Ross and Florida Democrat Kathy Castor) and in the Senate, where it is carried by Sens. Dean Heller, R-Nev., and Jon Tester, D-Mont.
Yet despite that broad support, an effort to include that measure—really, just a modest technical correction providing clarity to mortgage lenders about which private flood insurance policies satisfy the federal mandate—as an attachment to recent legislation to reauthorize the Federal Aviation Administration was dead on arrival in the Senate. Nominally, the hang-up was that the measure needed to pass under a unanimous suspension-of-the-rules procedure, and Louisiana’s two Republican senators had raised concern. In fact, the reason the legislation has failed to progress at all in the upper chamber is that Senate Minority Leader Chuck Schumer, D-N.Y., would prefer to keep this uncontroversial measure as a chip to be traded in negotiations as we move toward the Dec. 8 expiration of the NFIP.
There’s nothing inherently wrong with dealmaking in Congress. Negotiation is baked into the system of lawmaking, which is as it should be. For their part, Democrats like Schumer, Sen. Bob Menendez, D-N.J., and Financial Services Ranking Member Maxine Waters, D-Calif., have signaled that the primary item on their “ask” list is to forgive the National Flood Insurance Program’s debt, which stood at $25 billion before this year’s storms and is likely to rise to more than $40 billion, given the impact of Hurricanes Harvey, Irma, Maria and Nate.
In that sense, one could look at the recent intervention of the White House, with its dealmaker-in-chief, as an attempt to break an impasse. In an Oct. 4 letter to Vice President Mike Pence, White House Budget Director Mick Mulvaney laid out a series of NFIP proposed reforms that largely mirror, and in some cases go beyond, those that passed the Financial Services Committee in June. He also proposed forgiving $16 billion of the program’s debt, or roughly the amount the Federal Emergency Management Agency expects the 2017 hurricanes to cost in terms of new flood claims(excluding Nate, which struck subsequent to Mulvaney’s letter).
If everything in Mulvaney’s letter were taken as a proposed grand bargain, and it spurred negotiators from both sides of the aisle to come together, then all the better. The risk, of course, is that placing debt forgiveness on the table risks moving a debt forgiveness bill that doesn’t include reforms. Such a move would, in essence, mean wiping clean the program’s debts while doing nothing to address the structural problems that caused those debts in the first place – such as the fact that 85 percent of coastal policyholders have their premiums subsidized by taxpayers.
Well, it sure didn’t take long for that to happen. Disaster aid legislation just introduced by House Appropriations Committee Chairman Rodney Frelinghuysen, R-N.J., (Frelinghuysen’s panel cleared the measure Oct. 10 and it’s set to be voted on by the full House as early as the next few days) includes the White House’s call for $16 billion in NFIP debt relief. What it does not include is any NFIP reforms whatsoever.
Because it’s a straight appropriation, it can bypass entirely the committees of jurisdiction who have been working to reform the program. Because it’s a must-pass disaster aid bill, members will be under tremendous pressure to vote for it. And because it would alleviate the threat that the NFIP could hit its current borrowing cap of $30.4 billion, it also removes one of the primary incentives driving the reform effort. In fact, it sets a terrible new precedent that could render the borrowing cap irrelevant, as Congress could just erase any new debts the program takes on.
In other words, the Republican White House, Republican Senate and Republican House of Representatives appear likely to give the Democrats’ their number one priority goal in flood insurance, without asking for a single concession in return.
Ain’t bipartisanship grand?
Image by MDay Photography