Cato Daily Dispatch for November 15, 2002
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Terrorism Insurance Bill Passes in House of RepresentativesFlorida Jury Finds Gun Distributor 5% Liable for Teacher's Murder
Bush Administration to Place Federal Jobs up for Competition
Terrorism Insurance Bill Passes in House of Representatives
The Los Angeles Times reports that the House of Representatives late Thursday approved a long-delayed bill to provide federal backup insurance against damage caused by terrorism. President Bush and other proponents have said the bill will provide the economy a needed boost by stimulating stalled construction projects.
The Senate is expected to pass the bill within a few days.
The Cato Institute's Tom Miller issued the following statement Friday in response to the bill:
"The bill was not needed earlier this year, and it's needed even less today.
"Most of the temporary shortage in insurance capacity has been self-correcting. Since last September, insurers and reinsurers have raised over $30 billion in new capital with at least $10 billion in new issues pending. Through a combination of higher premiums, coverage exclusions (which the new legislation will preempt, by the way), and the growth of separate stand-alone terrorism insurance, insurance markets have adjusted to the post-September 11 world. A handful of high-value 'trophy' properties in several large cities may no longer be fully insurable, but there is no evidence of widespread problems in the financing of commercial property around the country due to terrorism risk. As one lender observed earlier this year, 'Why would a bank want to be stuck with a half-finished building by calling in a loan?'
"Per usual, the main political fight has been about symbolic, secondary issues, rather than the main one. House Republicans apparently don't mind opening up the vault to the Treasury -- they just want to provide the combination to a more exclusive club: insurers and real estate interests can come inside and shop around, but trial lawyers are not welcome.
"Government involvement in offering insurance ensures that risks will be mispriced and mismanaged. Its cross-subsidies will distort behavior and crowd out more efficient private insurance mechanisms.
"Excessive taxpayer subsidies simply are not needed and are likely to increase the meddlesome role of the federal government in private insurance market operations."
In "Government Terrorism Insurance: Deja Vu(Doo)?", Cato scholars Peter VanDoren, John Samples, and Miller note that "markets work best if they include all costs and benefits to market participants. No one likes the added costs and anxieties created by the Sept. 11 attacks, but we can't pretend they don't exist or that the government can magically make them disappear."
Florida Jury Finds Gun Distributor 5% Liable for Teacher's Murder
A jury ordered a gun distributor yesterday to pay $1.2 million to the widow of a teacher gunned down by a 13-year-old student, largely sparing the company from blame in a landmark case targeting inexpensive handguns, reports Newsday. Pam Grunow sued Valor, Inc., claiming that the type of pistol used in the slaying often falls into the hands of juveniles and criminals because of its small size and low cost, about $75. It was the first case to address both the absence of a gun lock and the flaws associated with a cheap, easily concealable weapon.
The $24-million verdict placed 95 percent of the blame on the Palm Beach County School Board and the gun's owner. Neither was named as a defendant because the school board had earlier settled with Grunow and her children, 7-year-old Samuel and 3-year-old Lee-Anne.
In a Cato Institute policy analysis, "Pistol Whipped: Baseless Lawsuits, Foolish Laws", Senior Fellow in Constitutional Studies Robert Levy examines the phenomenon of frivolous lawsuits against the firearms industry. Levy says that "the American public, especially voters and jurors, must be warned that our tort system is rapidly becoming a tool for extortion by a coterie of politicians and trial lawyers. Courts are the final bulwark in safeguarding our right to keep and bear arms. They may not be used as a way around the legislative process."
Bush Administration to Place Federal Jobs up for Competition
The Bush administration said today that it would place as many as 850,000 government jobs -- nearly half the federal civilian work force -- up for competition from private contractors in coming years, reports the New York Times.
Officials said the intent was to save money by ensuring the lowest cost for many routine duties like mowing lawns, picking up trash, making eyeglasses and printing paychecks. But the sweeping policy change, which could potentially lead to the shift of many thousands of jobs to the private sector, infuriated union leaders, who are already fighting the White House over labor management rules in the new Homeland Security Department.
The Senate is expected to give final approval soon to legislation establishing the security department largely on Bush's terms, which include wide latitude to transfer or fire employees.
"Any attempt on the administration's part to save taxpayers money by outsourcing government positions to the private sector is to be encouraged," said Cato Institute Research Associate Tad DeHaven. "Coincidently," he observed, "such an attempt would have the positive effect of undermining the federal bureaucracy's guardian of waste and inefficiency -- the federal employee labor unions. While President Bush speaks of outsourcing those jobs that are not 'inherently governmental,' it is time for the administration to take the initiative in advocating the elmination of government positions in agencies that are not 'inherently constitutional.'"
In "Federal Government Should Increase Firing Rate" DeHaven and Director of Fiscal Policy Chris Edwards comment on the importance of the federal government to maintain the quality of its workforce by enacting reforms to greatly increase the ability and incentives to fire poorly performing employees.
Christopher Kilmer, editor, ckilmer@cato.org
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