It certainly is a good thing that we have a pro-capitalist Republican
president in office. I can just imagine what a socialist-leaning Democrat
would have done after the terrorist attacks on September 11.
For example, I can just bet that a Democratic president would have pushed
for government terrorism insurance. It would probably be called something
like the Terrorism Risk Insurance Act. This president would call such a
measure absolutely critical because in the wake of 9/11 enterprises were
having to suspend building projects for lack of insurance.
It would be just like a Democrat to have the government jump in, claiming it
was necessary to get the economy “moving.” Since Democrats have no
conception of how entrepreneurial markets respond to people’s needs, they
can imagine no other solution than a big bureaucrat program.
I can almost picture the Democratic president’s proposal. First, his
legislation would force commercial building insurers to provide coverage for
the damage done by foreign-sponsored terrorism. Insurance companies did this
until they were frightened out of that market by the 9/11 attacks, which
caused $40 billion in losses. Some have returned, but, unsurprisingly, they
charge a lot. Nevertheless, the Democrat’s first resort would be to threaten
violence against companies that didn’t offer coverage. Democrats love to
threaten violence against people and businesses. They call it fines and
penalties.
But that wouldn’t be all. This president would also propose to have the
taxpayers pay a good part of the losses in the event of another terrorist
attack. He (or she) would probably have the taxpayers pay a portion of the
damages up to $10 billion, but 90 percent of the damages above that amount,
up to $100 billion. Democrats like to appear to be pulling money out of a
magic hat. But of course it has to come from the taxpayers. Who else is
there?
We can be thankful that we have a Republican president who would never think
to expose the taxpayers to such a liability. His commitment to individual
rights, the free market, and personal responsibility simply would not let
him embrace the kind of ideas that thrill the hearts of Democrats, such as
government terrorism insurance.
A Democratic president would not realize that the concerns about vanishing
insurance were exaggerated, as reports in the Wall Street Journal and
elsewhere have made clear. Sure, coverage is more expensive than it was
before 9/11. That’s a response to new conditions. But it is not so expensive
as to cause major projects to be permanently scrapped. And lenders are not
requiring terrorism insurance in all cases.
What we are seeing is what we should have expected: market participants are
coping by applying ingenuity to new problems. That’s what people do if the
burdens of government aren’t too great.
What a Democratic president couldn’t be counted on to understand is that
market prices, including insurance premiums, communicate vital information,
and when government intervenes those signals inevitably become garbled and
misleading. No good can come of that. Market participants need good
information.
Nor would a Democrat understand that the best way to “help” the insurance
industry is to deregulate it. It’s already the most regulated industry in
America.
The last point we couldn’t expect a Democratic president to realize is that
the best way to lower terrorism-insurance costs is to cut the chances of
terrorism. And the best way to do that is to stop meddling in other people’s
affairs in the Middle East. The only thing that could make people over there
want to knock down our buildings is revenge. For the past 50 years the U.S.
government has been acquiring enemies in the Middle East by backing brutal
monarchs and presidents, overthrowing ones it doesn’t like, and supporting
Israel’s violence against the Palestinians. In the last 10 years it has
stationed troops near Islamic sites in Saudi Arabia and enforced an embargo
of needed goods against the Iraqis. Those policies were not calculated to
keep the chances of terrorism low.
So terrorism will be with us for a while. At least there’s no Democrat in
the White House to respond by disrupting the private market economy.
Sheldon Richman is senior fellow at The Future of Freedom Foundation in Fairfax, Va., and
editor of Ideas on Liberty magazine and author of “‘Ancient History’: U.S. Conduct in the Middle East since World War II and the Folly of Intervention.”.
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