Saturday, September 2, 2017

Congress, money and Hurricane Harvey

Insurance is gambling.  When you buy insurance (if it is voluntary), you are betting that you will receive more than the company will pay, or at least that you might receive far more than you pay in case of a disaster.  The company, if they are voluntarily selling you a policy, is betting that you will pay more than they will.  This gets screwed up with regulations.  So, for example, Obamacare regulations make it so that insurance companies can't deny coverage for pre-existing conditions.  If you have a heart condition, the insurance company knows it will have to pay more than you do, so you are a bad financial deal.  They're just fucked, though.  That's the law now.  They just have to hope they get enough from the healthy people now required to buy insurance on the other end to cover you (see the other part of the "voluntary" thing).  The gambling model works better when you look at things like life insurance.  You know you are going to die, but it is a question of when.  If you buy it when you are relatively young, the insurance company is looking at your life expectancy and recognizing that you are probably a chump.

Then, there is stuff like flood insurance.  If you live in a flood-prone area, you can't get it.  Why not?  Because floods happen in flood-prone areas.  Hurricanes happen on the Gulf Coast.  It's sort of like a pre-existing condition.  In the absence of that insurance, we've got government financial transfers.

We can think of financial transfers in terms of how concentrated or disbursed the costs are, and how concentrated or disbursed the benefits are.  Disaster money disburses the costs and concentrates the benefits.  Normally, that kind of policy goes through easily.  But, normally that kind of thing slips through the process through earmarks, or through the tax code, and that's why the tax code is bloated. Disaster relief money tends to be complicated, though, by regional conflicts, the fact that it is all done in the open, and current tensions within the GOP.

It will happen, but like everything else in the current Republican Congress, it will be unnecessarily dramatic.

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