Posted on 11/26/2002 10:58:55 AM PST by Willie Green
For education and discussion only. Not for commercial use.
WASHINGTON (Reuters) - President Bush on Tuesday signed legislation aimed at removing a roadblock to major construction projects by ensuring companies can obtain terrorism insurance.
The legislation will boost the economy by allowing billions of dollars worth of construction projects to proceed that had been stalled by a lack of insurance, Bush said. But independent economists said the initial impact is likely to be minor.
"Today we're taking action to strengthen America's economy, to build confidence with America's investors and to create jobs for America's workers," Bush said at a White House signing ceremony. He was flanked by six construction workers in blue jeans and work boots.
During the autumn congressional election campaign, Bush made a major issue of the legislation, casting it as a needed stimulus to a soft economy that would create thousands of new jobs, and blaming Senate Democrats for holding it up.
The measure, known as the Terrorism Risk Insurance Act, provides up to $100 billion in U.S. government backing for insurance companies in the aftermath of another attack like that of Sept. 11, 2001, and requires that companies offer terrorism coverage in their policies.
Bush said on Tuesday that more than $15 billion in real estate transactions were delayed by an inability to obtain terrorism insurance following the 2001 attacks on the World Trade Center in New York and the Pentagon.
The attacks led to an estimated $40 billion to $50 billion in insurance claims, and insurers have said they could be ruined by another similar attack.
"By helping to ensure that terrorism insurance is affordable and available, the Terrorism Risk Insurance Act will permit many construction projects to move forward and to help this economy grow," Bush said.
"Billions of dollars in investments will be more secure. The nation's hard-hats will get back to work, being able to put food on the table for their families," he said.
But Wells Fargo chief economist Sung Won Sohn said the main cause of a slowdown in commercial construction has been a soft economy, meaning the terrorism insurance bill is likely to provide little help.
"We have a glut in office space ... from a macroeconomic point of view, it wouldn't be a good time to build anything," he said.
Furthermore, he said, in a $10 trillion U.S. economy, the impact of $15 billion in delayed construction projects is small.
Economist Mark Vitner of Wachovia Securities said the law's impact would become more significant as the economy picked up and construction rebounded. The demand for office and industrial space has shown signs of reviving, he said.
"I don't think it's a huge immediate impact (from the bill), but what this bill does more than anything else, it helps remove some of the uncertainty surrounding commercial real estate development," he said. "Without those issues being addressed we can't even move forward."
Consumer organizations have criticized the law, saying it exposes taxpayers to potentially billions of dollars of claims and removes incentives for insurers to protect against future attacks. The insurance rating agency Fitch Ratings has voiced similar concerns.
Sohn said the prospect of a government terrorism insurance program probably discouraged the private sector from developing its own programs and may have served to prolong the backlog in projects awaiting terrorism insurance.
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