Cato Daily Dispatch for November 26, 2002
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Bush Signs Terrorism Insurance LegislationGovernors Think Higher Taxes Will Solve States' Fiscal Problems
Bush to Saudis: You Do It or We Will
Bush Signs Terrorism Insurance Legislation
President Bush says legislation he signs today to shield the insurance industry from catastrophic costs of future terror attacks is vital to the war on terror and to the nation's economic security, according to the Associated Press.
"Terrorism insurance will help get America's hardhats back on the job, create new jobs for America's workers and spur billions in new investment in construction projects all across the country," Bush said after Congress gave final approval to the measure. "This bill comes at a critical time, as commercial construction is at a six-year low."
The terrorism insurance bill had been a top priority for the president since shortly after the Sept. 11 attacks. From the White House and from the campaign trail, Bush argued the inability of companies to get affordable insurance for large construction projects was costing the economy thousands of jobs.
Cato's Peter VanDoren, editor of Regulation magazine, Tom Miller, director of health policy studies, and John Samples, director of the Center for Representative Government collaborated on "Government Terrorism Insurance: Déjà Vu(Doo)?" in which they explain why government terrorism insurance is unnecessary. "By improving national security, government can reduce the risk of terrorism and its costs. Success on that front would go a long way toward reducing the uncertainty we see now in insurance markets," they write.
Cato held a Policy Forum on the subject in September entitled "Insuring Against Terror: Is There A Role For Government Reinsurance?".
Governors Think Higher Taxes Will Solve States' Fiscal Problems
Plunging tax collections and soaring medical costs have created the worst fiscal problems for states since World War II, the National Governors Association said today, as reported in The New York Times.
"Nearly every state is in fiscal crisis," the governors said in a new report surveying the states. The states' fiscal woes will force governors, many of them newly elected, to propose politically sensitive tax increases or drastic cuts in services. Raymond C. Scheppach, executive director of the National Governors Association, said states were increasing tuition at public colleges and universities, cutting Medicaid eligibility and benefits, increasing taxes on individuals and corporations and laying off state employees.
Cato Institute Senior Fellow Stephen Moore and the Goldwater Institute's Stephen Slivinski warned against raising taxes to increase revenue in a recent Cato Policy Analysis. In "Fiscal Policy Report Card on America's Governors: 2002" Moore and Slivinski write, "Most governors will confront more tough budget choices in 2003. We hope that governors do not make the mistake of raising taxes to try to balance budgets, as many did in the economic slowdown of the early 1990s....During the recession of the early 1990s, about half the states tried to close yawning budget gaps by enacting major tax hikes. As it turned out, the states that hiked taxes in the early 1990s generally did not solve their budget woes; they simply created slower economic growth."
Bush to Saudis: You Do It or We Will
A National Security Council task force is recommending an action plan to President Bush that is designed to force Saudi Arabia to crack down on terrorist financiers within 90 days or face unilateral U.S. action to bring the suspects to justice, according to The Washington Post.
Officials would not say what unilateral U.S. action might entail. But they said the United States would first present the Saudis with intelligence and evidence against individuals and businesses suspected of financing al Qaeda and other terrorist groups, coupled with a demand that they be put out of business. In return, one senior official said, the administration will say, "We don't care how you deal with the problem; just do it or we will" after 90 days.
"Saudi Arabia enlisted in the fight against terrorism only in response to intense pressure from the United States following the Sept. 11 attacks on the World Trade Center and the Pentagon. Even then, its cooperation has been minimal and grudging," writes Ted Galen Carpenter, Cato Institute vice president for defense and foreign policy studies, in "Terrorist Sponsors: Saudi Arabia, Pakistan, China", a Cato Daily Commentary. "Worst of all, the Saudi monarchy has funded dubious schools and 'charities' throughout the Islamic world. Those organizations have been hotbeds of anti-Western, and especially, anti-American, indoctrination..... It has also channeled funds to Hamas and other groups that have committed terrorist acts in Israel and other portions of the Middle East."
In another Daily Commentary, "Saudi Arabia: Friend, Foe, or Neither?", Cato Director of Defense Policy Studies Ivan Eland writes, "The Saudi government looked the other way for too long while organizations in Saudi Arabia funded and supported al Qaeda. In addition, the Saudi government openly supported the Taliban regime, which harbored al Qaeda, and fundamentalist Islamic schools in Pakistan that churned out terrorists."
Wyatt Dubois, editor, wdubois@cato.org
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