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Wednesday, October 31, 2012

The Obama/Christie Money Pit: FEMA as QE4 For Shore Rebuild

The New Jersey shoreline has been radically altered by Hurricane* Sandy. (* -- Let's see how the National Hurricane Center classifies this storm once it does its off-season storm analysis.)  Many beach towns have lost their boardwalks, and oceanfront homes and businesses have been wiped out.  Insurance will help -- but to varying degrees -- so homeowners and businessowners will still bear significant losses; no one will be made whole status quo ante.

While people are still recovering from a serious natural disaster, to which the Northeast (unlike those in the Gulf states or Carolinas) is unaccustomed, we must ask whether a mega-billion, fourteen-figure rebuild ($50 billion? $100 billion?) is the best use of our money to rebuild beaches, residences and businesses in areas where -- for decades -- scientists have warned of a geography-altering, life-threatening storm like this?

Why are we considering a bailout of the reckless?  Why, to rebuild in areas not meant for human habitation?

Let colonial history be our guide. In those times, people were forced to act rationally. They often perished if they did not. Historically, in colonial times, towns that got wiped out in flood zones or shorelines simply rebuilt...on higher ground!  You didn't have towns built in swamps, where inhabitants were endangered by floods, malaria, yellow fever and other mosquito-borne diseases.  Ports were built in harbors where ships were considered the safest from the ravages of the ocean tide and fierce storms. Buildings were constructed on solid bedrock so they couldn't be washed away by floods which would often leave the structure intact but wash away the soil under its foundation. Survivors rebuilt where they could, and chose new locations much more likely to survive. Earlier generations did not place themselves in harm's way, because they bore the entire risk of and responsibility for their losses in the next calamity.

People in the pre-altruistic age (before the 20th Century) grew up with a rugged self-reliance and concept of responsibility, rooted in a raw survival instinct and belief that others would neither be able nor inclined to come to their rescue. In those earlier times, survival of the fittest had a literal meaning far different from the current meaning that evokes the Ironman Triathlon. Reckless or stupid behavior was not often imitated, because its practitioners did not survive long enough to be emulated.

Today's generations have a religious faith in insurance, and failing that, in a government bailout if they are connected or favored enough. Then again, today's generations include the stubborn or the stupid, who believe that they can call first responders for aid in evacuating during the height of a hurricane -- i.e., putting others in life-threatening situations to escape one's life-threatening situation often of one's own making. 

So, as I type, President Obama is on his way to the New Jersey Shore to meet with Governor Chris Christie of New Jersey.  We assuredly will hear promises later today that the federal government will help rebuild, on the locations just obliterated, to restore the childhood memories of our youth.

But an update...Check out the comments from one old-time resident of Sayreville, NJ, which lies at the mouth of the Raritan River and which received a direct shot of the storm surge coming directly west from the Atlantic Ocean and into the funnel of Raritan Bay:
 "I think, Governor, we need to level this whole area," said Cody Buck, whose foundation was ripped out by the storm. "Turn it into soccer fields, we can't keep rebuilding.
The storm damage is not just on the Jersey Shore.  North of Sayreville lies Perth Amboy, whose waterfront neighborhood was decimated.  Across from Perth Amboy lies Staten Island, whose south shore likely will look considerably different in future maps. And directly across from Staten Island, across the Lower Bay of New York Harbor, are Coney Island and, to its east, the barrier peninsula of the Rockaways, all overrun by the Atlantic Ocean.

Our President, and perhaps the man who plans on being our Next Inevitable President, will have us indulge in the fantasy of the Time Machine, to take us back in time.  Naturally, they will use Other People's Money, billions of dollars borrowed from future generations.  The prudent, those of us who built safely inland, will pay the price for the recklessness of others who have -- for decades -- ignored scientists' warnings of The Big One, of how the Jersey Shore was grossly overbuilt with far too few evacuation routes and far too much building on sites situated barely above sea level and built on little more than quicksand and a prayer.  Therefore, we will have a new, mammoth government reconstruction, with new buildings, ports, dunes, levees, seawalls and windmills (can't leave out the green energy, can we!), which taxpayers will be forced (or resigned) to subsidize, all so our elected officials can get re-elected, favored businesses can reap windfalls, the reckless can indulge themselves in their daydreams of yesteryear, and others can be duped into believing we have an uptick in economic activity. The rest of us realize that Superstorm Sandy is going to be merely the next, latest and greatest excuse for redistributing wealth.  Taxes will go up.  Bond ratings will suffer.  Government budget deficits will skyrocket. Our insurance rates will continue to go up, courtesy of an industry that thrives by spreading the risk around so the responsible pay for the irresponsible, while those same insurance companies curtail their coverage and increasingly compel policyholders to go to court to seek enforcement of insurance policy contracts. When we have a $16 trillion national debt, what's a few hundred billion more, right?

Eric Dixon is a business and corporate attorney in New York and New Jersey. 

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