Letter from Washington: It’s Stormy

by Eli Lehrer on January 4, 2011

photo by Mark Stosberg/Flickr, used under a Creative Commons license

The already very weak case for a national hurricane catastrophe fund—a government takeover of the reinsurance business—gets weaker by the day. Three major data points  worth looking at.

First, the two major sponsors of government-run reinsurance: Rep. Ron Klein (D-FL) and Rep. Gene Taylor (D-MS)  both lost their elections. Klein’s replacement, Alan West, has come out, strongly and clearly against proposals for a government reinsurance backstop. (Taylor’s replacement has Steven Palazzo is a little less clear about what he supports or doesn’t support.)

Second, Aon Benfield, the huge reinsurance broker, is reporting that prices for homeowners insurance are continuing to go down in Florida (the place where the real problems existed) and capacity is continuing to increase. This means, quite simply, that the need for government-run reinsurance is a lot smaller.

Finally, and most interestingly both Aon’s report and another one I’ve gotten find that there’s strong and growing evidence that the Florida hurricane catastrophe fund has actively—and directly—caused reinsures to return lots of capital to their shareholders. This isn’t news, of course—share buybacks have been announced ever since the Cat Fund began its huge growth–but now there’s the actual math to back it up.

There’s still a chance, of course, that someone is going to introduce government-run reinsurance legislation in the next Congress—at least a dozen House sponsors are still around. But the legislation just isn’t going to go anywhere. And that’s a good thing.


Frumforum, where I’m a frequent blogger, is a conservative website with a mostly left-of-center readership. As such, most of the comments on most of what I write there (and, frankly, most of what others write there too) are pretty negative. I’m used to that.
My last post, however, received comments that are unusually. . . well, personal. Some people leaving comments have reasoned theories as to why I’m wrong. . . and, maybe, I am. That’s fine, good and healthy. (More on that below.)

But this time, there’s also a long thread attacking me personally and going after Heartland.

Let’s start with the personal attacks. To those that wish to make them, I have three words: “BRING IT ON!” I’d like to think I’m important enough to attack personally and tend to think that all publicity is good publicity. (Hint to those who dislike me: in honesty, there are lots of people far more worthy of your time.)

The stuff about Heartland, however, does step over the line: it’s  old, not very relevant, and not entirely accurate. The donors one poster cites have given only a few percent of HLI’s total funding and no donor has ever given more than about five percent.

Heartland decides what it thinks and then looks for donors that agree. When Heartland disagrees with donors, they often stop funding. That’s how it works and how it should work. Heartland is independent. Furthermore, not a single one of the Heartland donors listed in the FrumForum post has ever directly supported my work at Heartland.

(Ten years ago, I did get funding from the Bradley Foundation when I worked for the Heritage Foundation. Although Heritage, like Heartland and every other non-profit I know of, doesn’t disclose its donors, my title at Heritage was, um, “Bradley Fellow.”)


Like a lot of other economy watchers, I’m quite worried about the possibility that the United States could end this recession with a level of “structural unemployment” higher than in the past. . . that policymakers might have to consider a 6 or 8 percent unemployment rate “full employment” rather than the 3-4 percent that has typically been considered “good” in the past. Two quick thoughts on that topic:

First, historically, technological/economic change hasn’t increased structural unemployment in the United States. From the early 1950s–the first time we have directly comparable unemployment rates—the U.S. has accelerated a shift from farms to cities and suburbs, seen a massive decline in the percentage of the labor force working in manufacturing, become vastly more educated and done it all while unemployment has been lower and labor force participation higher than the rates in most other OECD nations. Based on past experience at least, there’s no particular reason to think that current and coming technology-driven job losses in industries like printing, retail, and the like will axiomatically result in more job losses.

Second, both government and private sources are where the new jobs are going to come from. The mass computerization of society, for example, didn’t actually create a lot of jobs manufacturing computers and may have even destroyed some of them. In the 1960s, 1970s, and early 1980s, a most of the big computer companies—IBM, my former employer Unisys (and its precursor organizations), and even Apple had sizable factories where rather skilled workers assembled computers partly by hand in hospital-like clean rooms.  Insofar as government programs trained people for this kind of work (or, say, COBOL programming), the “computer workers” probably ended up on the unemployment lines.

The real mass of computer jobs came in fields like web design and systems integration that didn’t even exist when even at the time when lots of people realized that computers were going to be the next big thing.

Until next week,

Eli Lehrer, Vice President, Washington DC operations

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  • Guest

    What relationship does the photo have to the content?

  • Agreenwood

    Hi Mark,nnCan I make the case that the third part of Eli’s letter, talking about technology and unemployment, relates the photo to the piece?nnArin

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