Tuesday, January 17, 2006

TRIA: If It Weren't So Serious, It'd Be Funny

Government insurance of terrorism damage sounds like an economic no brainer, but it is really treacherous quicksand. Proof of that is that lobbyists have made a profession of pushing for it. The mistaken assumption is that there will never be any private coverage for such losses; however, if the industry were left to itself there would be, and there might also be a change in the way property is configured to minimize the risks as much as possible, and in the way insurance companies function.

As it stands, the government has now said, in sum, "We will pay for most of the damages from terrorism." This essentially sanctions business as usual and subsidizes the insurance industry. Here is how David J. Theroux of the Independent Institute describes the problem:

"Free federal reinsurance, as former Texas Insurance Commissioner J. Robert Hunter has noted, crowds out private reinsurance and encourages primary insurers to take greater risks. Furthermore, the extension of the act 'illustrates perfectly how crises operate as ratchets in the growth of government,' writes [Professor Robert] Higgs." The Lighthouse, Independent Institute, 01/17/06. Read Professor Higgs's article in full, here.

Government attempts to please the public would be funny if they weren't so serious.

[Thanks to icaramba.com, whoever you are, for this drawing.]

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