Tag Archives: government

Flint Water – A Catastrophic Failure of Government


Since it seems that everyone else is piling on to the dialogue regarding the Flint (Michigan) water situation, I suppose it’s my turn.  It is not my intent to light a political brush fire here, but given the current election season and the emotional charge of this catastrophe, that may be easier said than done.  My guess is that I will tweak someone’s political sensibilities before I’m done here even if that is not my intent.  So here goes.

The lead-poisoned water in Flint is a result of failure in so many ways that it’s difficult to catalog all of the failures.  Moreover, I think the fact that the failure spans so many levels and departments of government is the heart of the problem.  Infrastructure is one of the most basic and primary of all duties of government.  As a society, we elect officials to be good stewards over our collective taxes and hire good people to administer the basic needs of society: roads, defense, courts, and other basic infrastructure.  Honestly, all the rest of the activities of government (e.g., social programs, public education, etc.) are “add-ons” that have become a distraction and resource drain on the fundamental duties of government.

The situation in Flint is disturbing, and that’s putting in mildly.  Even more disturbing to me is the race to the bottom on full display among the political class and ideologues.  Everyone is blaming someone else, covering their own backsides, seeking political advantage in what amounts to a sickening display of political gamesmanship.  All while Flint residents continue to rely on bottled water and filters when what they really need is world-class emergency infrastructure project to replace the water pipes – something that a properly incentivized private sector contracting firm could pull off if the political class would just shut up and recognize this.

The political left is hanging this all on Michigan Republicans.  The political right is blaming Michigan bureaucrats and the Obama-led Environmental Protection Agency.  The fact is, every level of government has failed Flint here.  Democratic and Republican politicians along with unaffiliated bureaucrats working in a flawed administrative state all bear responsibility.  Government fails because it’s incentives to manage such complex systems are all screwed up.  There is no accountability, and that’s by design.  It’s the EPA Animas River fiasco all over again.  Same screwed up results, different year.  Government fails.  Big government fails big.  Then the political class rushes in to assign blame, capture a political public relations advantage, and convince us that even bigger government is the only solution.

The late Harry Browne (Libertarian presidential candidate in 1996 and 2000) used to say, “Government is good at one thing: It knows how to break your legs, hand you a crutch, and say, ‘See, if it weren’t for the government, you wouldn’t be able to walk.'”  The Flint water catastrophe is a failure of government risk management, administrative management, oversight, and more.  I don’t believe that any one person set out to poison the people of Flint, but that’s not what Michael Moore would have you believe.  Then again, Michael Moore wants Governor Rick Snyder arrested so that he can sensationalize the entire disaster to help his leftist political causes which will only serve to give us larger and more incompetent government.

Why do we continue to trust and put our faith in behemoth government bureaucracies at the state and federal level when they have so often and so spectacularly failed?  Seems to me that this catastrophic failure of government at all levels and of all political stripes should be enough to convince us that maybe, just maybe, we should try downsizing the behemoths and trust ourselves at the local level just a bit more.  We’ve tried everything else and I don’t see how it can get any worse.



Insurance and the Government – An ugly dance

For many consumers and citizens, the mention of insurance and government elicits fear and loathing.  Looking beyond the initial reactions and the stereotypes, we realize that both are necessary components of an orderly, prosperous economy and society.  Insurance and government are necessarily intertwined, ranging from social insurance to regulation to market support.  There are currently two prime examples of this relationship and the ongoing dance between the private insurance industry and government.

First, the National Flood Insurance Program (NFIP) is in bad shape, $24 billion in debt.  In a rare demonstration of fiscal responsibility, the US Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012.  The reform would have phased in premium rates that were more reflective of the flood risk and updating the flood maps on which premium rates are based.  I say “would have” because the politics of Biggert-Waters has led to its unraveling through subsequent legislation that basically undoes much of the original reform.  Politicians’ knees became weak when flood-prone property owners and the realtors who sell such properties were inflamed by the eventual rise in flood insurance premiums.  So the government’s fiscal train-wreck that is the NFIP is off the track once again.

The second example is the imminent expiration of Terrorism Risk Insurance Act (TRIA) later this year.  After the September 11 attacks, it was apparent that the private insurance industry could not insure the losses connected with a major act of terrorism.  In order to stabilize the insurance market and the terrorism exposures of our post-9/11 world, the government stepped in with TRIA which provided a government “backstop” to cover up to 90% of terrorism losses above certain thresholds.  The looming expiration of TRIA has rattled the insurance marketplace because of the uncertainty over the future of the government’s terrorism backstop and its structure if it is renewed.  There are some credible arguments against renewing TRIA altogether.  Insurers are already hedging by writing policies that expire at the same time as the current TRIA law so that they can write new policies with different terrorism coverage provisions in response to a possible world without TRIA, or a radically different TRIA.  The point is, once again the government and the insurance industry are very much intertwined, for better or worse.

There are many, many finer points in both the NFIP reforms and the TRIA expiration/renewal that I do not have time to explore here.  The larger point that led me to raise these two issues today is the ongoing and unavoidable interaction between the insurance industry and government.  Although these examples both originate at the federal government level, there are countless issues at the state government level – Michigan no-fault auto insurance reforms being a prime example.  The libertarian in me prefers government to get out of the way of private insurance and let the markets sort it out, but the pragmatic economist in me knows that there has to be a government role in insurance.  I just wish the dance between these two giants wasn’t so darn ugly.