If you like big government, you ought to love federal flood insurance. Eli Lehrer explains why in an article for the Weekly Standard.

By almost any analysis, the National Flood Insurance Program (NFIP)—the recipient of a $9.7 billion bailout in the wake of Hurricane Sandy—doesn’t work. It is poorly conceived, it’s terribly mismanaged, and it encourages harmful behavior.

Of course, the same can be said for dozens of other federal efforts. What sets the NFIP apart is that, in looking to address what was at the time a clear market failure, Congress created a program that has so influenced the course of society these past four and a half decades that getting rid of it would be nearly impossible.

Before Congress set up the NFIP in 1968, only a handful of very small insurance companies wrote flood coverage as part of conventional homeowners’ policies. Although a demand for flood insurance clearly existed, nobody would sell it. This was a market failure as almost any economist would describe it. …

… Government policy made things worse. Since the 1920s, nearly all states have passed laws to regulate how much insurers are allowed to charge. Although these laws have eased slightly since the 1960s—and vanished entirely in Illinois—they still make insurers very reluctant to take on new types of risks. They have a legitimate fear that state governments may not let them charge enough to cover their costs and, thus, face the no-win choice of either “nonrenewing” their customers or losing money.

Even worse, from the standpoint of any insurer contemplating entering the flood insurance business, Sen. Prescott Bush (father and grandfather of the Presidents Bush) succeeded in convincing his colleagues in Congress to pass a law creating a flood insurance program in 1956. While the program was never funded, its very existence in statute provided a powerful reminder that the federal government planned to nationalize flood insurance and thus was a disincentive for anyone who might otherwise have thought of investing in the market.