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Wednesday, September 14, 2005

Federal Relief makes For Moral Hazard

In discussing the federal relief being proposed for Katrina victims and the rebuilding of the damage, John Tamny provides historical perspective on federal responses to disasters. He focuses on the Mississippi flood of 1927 where the attitude of politicians and the public was that it was up to individuals and charity to work through recovery. He writes:

Massive aid has never worked to do more than temporarily patch an injured economy, and it won’t work this time. More important, it has to be asked whether or not today’s federal bidding wars between the political parties are examples of “moral hazard” at its worst.

This is not meant to minimize the truly awful impact of Hurricane Katrina on Louisiana and Mississippi. But if U.S. taxpayers are going to pay each time a natural disaster strikes within our borders, won’t there be less incentive on the part of states, municipalities, and builders to plan and construct cities and housing developments with local hazards in mind?

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