Idea of the Day: Protect the U.S. Economy from Costly Disruptions

July 10, 2008

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Terrorism is an economic weapon, and the stakes are very high. Since the private sector is likely to be the target of future attacks, governments must provide incentives for private sector action and also create opportunities for real public–private partnerships.

Terrorism risk insurance is a good case in point. Despite Bush administration objections, Congress rightly renewed the Terrorism Risk Insurance Program, which provides for a sharing of terrorism risk between the government and the private commercial insurance market that has kept commercial coverage both available and affordable. The government and the private sector should work cooperatively to promote a broader range of long-term mechanisms to manage terrorism risk.

The ineffective federal recovery program for Hurricane Katrina demonstrated that it is better to have established disaster response programs in place before the next attack than to coordinate ad hoc programs after the fact. Given the very real potential for more and deadlier storms in the future due to global warming, federal and state governments must devise more effective means of managing the risk of natural disasters as well, tied to more prudent zoning standards and stronger building codes.

By minimizing the economic loss and disruption of a terrorist attack, we prevent groups such as Al Qaeda from achieving their strategic objective. If this threat constitutes a war, as President Bush suggests, then the government should be involved, particularly given the risk of a potential—even if remote—major nuclear or biological attack that exceeds available capital in the private market.

For more information on this topic, please see:

• Safe at Home: A National Security Strategy to Protect the American Homeland, the Real Central Front by P.J. Crowley