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Commentary: Beacon Spend wisely now to prepare for next New Madrid quake

This article first appeared in the St. Louis Beacon, March 2, 2012 - Two hundred years ago, a massive fault that runs through Missouri rumbled to life and unleashed the last in the most serious sequence of earthquakes in United States history.

The quake, which was twice as large as the more famous 1906 San Francisco quake, killed hundreds and did enormous damage. Rivers changed course, new lakes formed, and the town of New Madrid, Mo., was left a total ruin. The event gave the name to the New Madrid Seismic Zone that spreads over 120,000 square miles of Missouri, Illinois, Kentucky, Tennessee and Arkansas.

While no one knows for certain what the future will bring, the country doesn’t need to wait 200 years for a lesson in risk management. In the past two years alone, massive quakes hit Japan, Chile, New Zealand and Haiti. Thus, the best advice for political and business leaders considering the area’s earthquake risk is this: Focus on policies that will do good no matter what rather than giving in to the demands of any self-interested group.

Some background on what various groups want first.

  • Insurance companies and disaster mitigation experts want to have buildings built to better resist quakes.
  • Police and fire departments want lots of new equipment to deal with earthquake-related rescues.
  • Insurance agents want to sell more earthquake coverage.
  • Builders and realtors, fixated on housing costs, want to avoid new standards.
  • Some insurers even argue that the federal government should set up a special “catastrophe fund” to pay the bills following a major earthquake.

Since nobody knows what will happen for sure, the best policies are those that will do good even if the New Madrid fault never again rumbles to life.
Efforts to strengthen bridges, roads, schools, hospitals and other public infrastructure against nature’s worst are a sterling example of a “no regrets” policy. With the proper engineering work, a bridge designed to resist earthquakes will also stand up better against windstorms, bear heavy loads more easily and require less maintenance over its life. Thus, designing earthquake resistance into bridges throughout the New Madrid Zone makes a lot of sense even if no earthquake ever strikes.

The same goes for efforts to give police and fire agencies better equipment; the same apparatus useful for pulling people out of earth subsidences can also rescue them from burning buildings.

On the other hand, the suggestion to create a federally run, taxpayer subsidized catastrophe fund could produce enormous regrets. By concentrating risk in the United States rather than spreading it around the world the way a private insurer would, such a fund is almost guaranteed to lose money in the long term and leave taxpayers holding the bill.

The one existing federal home insurance program, the National Flood Insurance Program, has already borrowed more than $17 billion from taxpayers and has no practical way to ever pay it back. Moreover, such a national fund won’t be of any value to the region whether or not there’s an earthquake. Any subsidies will almost certainly end up being lavished on areas like Florida where hurricanes strike far more frequently than earthquakes shake the ground elsewhere in the country.

Not every issue, of course, has an answer quite as simple. Some major questions, for example, about exactly who should buy earthquake insurance and how much they should purchase are probably best left to individuals. Overall though, political and business leaders here in Missouri and around the country should prepare for another potential New Madrid earthquake by pursuing policies they’ll be sure they will never regret.

Eli Lehrer is National Director of the Center on Finance, Insurance, and Real Estate at the Heartland Institute.