New Orleans is Unisurable, Part 1

The Bush Administration is doing the a right thing in the Gulf Coast in denying a $350 million aid request from energy firm, Entergy.

"We believe that transferring federal tax dollars to the bondholders and shareholders of a private firm is inappropriate," said Allan Hubbard,President George W. Bush's top economic adviser who also chairs a White House council on rebuilding the Gulf Coast following Hurricane Katrina

Do tell? Since when? As a puzzled Entergy P.R. flack plaintively pointed out, the U.S. has "made money available to ConEd (the New York utility) after (the attacks of September 11, 2001), the airlines and other private business." I doubt that this move is based upon any sound economic principles but rather the administration knows it would be political suicide to render a third of a billion dollars to an energy company. Especially an energy company that made $963 million in net profit last year.

What is certain is that whatever the administration's motives in snubbing one of its core constituencies and no doubt thereby dooming hundreds of thousands of Louisiana residents to several more months of darkness it is surely not a response to global climate change. But what the administration has done is something that environmental economists and Viridian Greens have been advocating for years.

The principle is essentially this: The world is becoming uninsurable. It is a profound waste of public (and private) money to continue to subsidize a very dense population infrastructure in a region that, even in the best of times, carries a high risk of catastrophic weather. But with the changes in the regional climate of the gulf region the risk index is very high.

Climate change means a more disturbed atmosphere and sea. This means more frequent and stronger storms. With 96 million of the United States' 288 citizens living along the coasts, a tremendous amount of capital is at risk from storms. This fall's hurricane season was merely a harbringer of years to come. While no one is saying that double-hits like Katrina-Wilma on the Gulf will be the norm, the consensus is that tropical storms will be more numerous and stronger such that the likelihood of major storms is much higher.

The insurance industry is taking note. Regional insurers took a big hit after Katrina-Wilma. In the aftermath, stories like this one of the Mississippi Farm Bureau transferring its Katrina claims and refusing to write new storm policies south of Highway 10 became more frequent. The assessment of coastal risk has made its way up the Atlantic coast toeven in Massachusetts, where local insurers are dropping policies on Cape Cod. Finally , this month the call has come from state and local officials to the insurance industry to do a drastic re-think of risk assessment along the coasts. They are worried about their state pension funds going broke in the wake of more huge storms forcing insurance companies into bankruptcy.

The bottom line is that old Mama Nature is going to re-assert her control over the coastlines. It will become economically impossible for people to maintain a presence along those coasts unless they fall into one of the following buckets: A) Individuals or companies wealthy enough to rebuild frequently. B) Performing work or conducting business that is profitable enough to place them in Bucket A. C) Performing work or conducting business that is unable to be done elsewhere and pass the costs of rebuilding on to customers. D) Building one's structures in the mode of Hitler's Atlantic Wall.