News - Build it, and we will pay
It’s already Christmas in Washington
Hey, step right up.
Come and get it.
The biggest agri- business subsidy program in history? You got it. Tariffs that block imported steel? No problem. Giveaway of public lands to timber companies? Fine. More energy subsidies? Sure. A bailout to the airline industry? Why not?
The Congress that adjourned earlier this month has joined with the Bush administration in giving big business almost every handout it’s asked for. And in the final minutes of said Congress, as the Christmas holiday looms, insurers and commercial property owners are getting a really big gift: $100 billion of taxpayer money to cover private property that’s damaged in the event of a terrorist attack.
The White House says this will stimulate the economy, but it’s a bit hard to see how. Yes, the world is riskier than it was since 9-11. And if you happen to own a major skyscraper in a major city, there’s an ever-so-slightly higher probability that it will be destroyed in a terrorist attack. But we’re talking tiny probabilities here — probabilities that can’t even be measured. A fire, earthquake, tornado, hurricane, flood or an accidental gas explosion are much more likely to destroy your building than a terrorist attack.
Still, it’s possible. And here’s the so-called problem: If you want to buy insurance against your skyscraper being destroyed by terrorists, you have to pay a whopper of a premium. The attack on the World Trade Center cost the insurance industry about $50 billion in claims. Since then, insurers have jacked up premiums to cover terrorism, partly in order to recover some of this huge outlay. Many commercial property owners can’t afford these increases, so they’re doing without the insurance. Which means, if terrorists destroy their buildings, they’re out of luck.
But why is this something the federal government should worry about? OK, maybe — just maybe — a few skyscrapers won’t get built because a few potential owners or lenders don’t want to take on the risk of their building being destroyed by terrorists, or don’t want to pay the premiums that shift the risk to insurance companies.
That’s the way the market works, folks. Investors and lenders take into consideration all sorts of risks, all the time. There’s no good reason why you and I and every other taxpayer should bear part of the cost of this particular risk. And it’s plain silly to suppose that this is an important way to stimulate the economy. More commercial real estate will be built only when investors and lenders think there’s a growing demand for commercial real estate. Period.
It’s a bailout, plain and simple. You and I pick up the tab, so premiums go down, insurers sell more insurance and commercial developers pay a bit less to finance their projects. In other words, a transfer of money from you and me to them.
War is supposed to mean sacrifice, right? Patriotism requires that we pull in our belts, do without. But for certain industries, this war means the opposite: more handouts from Uncle Sam.
Robert B. Reich served as U.S. Secretary
of Labor during former President Bill Clinton’s first term and most recently made a failed bid to gain the Democratic nomination for governor of Massachusetts. He’s authored a number of books, including The Future of Success: Working and Living in the New Economy and I’ll Be Short: Essential Ideas for Getting America to Work.??