- June 15, 2012
When Florida Gov. Rick Scott delivered his first State of the State address in March to the full Legislature, he urged lawmakers: “Don't blink.”
“I did not fight to become the 45th governor of the greatest state in the nation to settle for a status quo that does not promote the enormous potential of our people,” Scott said. “I am completely committed to this mission. It is achievable.
“A vast majority of legislators were elected, as I was, on our promise of smaller government, lower taxes, less regulation, support for job creation, individual opportunity, individual accountability and more freedom.
“Don't blink. Don't let special interests persuade you to turn your back on the people who elected you ...”
And they missed a big opportunity to make a big impact on the forward momentum of Florida's economy.
The Legislature has about a week before finishing its regular 2011 session. And in that time, it doesn't look as though lawmakers are likely to embrace the most significant pieces of Scott's agenda — eliminating the corporate income tax and cutting property taxes to reduce taxes by $2 billion.
Had they done this, imagine the national media attention it would have garnered, and imagine the message it would have sent nationwide: that our “jobs” governor and the Republican-dominated Legislature were and are indeed determined to resurrect Florida's economy, and that Florida is open to business.
Instead, what are we getting? What message is Florida's Legislature sending to Floridians and the nation?
How about this: Ho hum. Or better yet, to paraphrase that famous 1980 Boston Globe headline: “More mush from the wimps.”
Name one thing the Legislature has done so far that will shake the economic landscape. The answer is: Blank.
Lawmakers likely believe they delivered a major accomplishment by trimming about $4 billion in spending — the expected gap between next year's state spending and revenues. While that is indeed significant and delivers to an extent on the promises by the governor, House speaker and Senate president to shrink state government, many Florida taxpayers will look at the new budget and say, “Big whoop. That's your job.”
In the end, the balanced budget will mean lawmakers shrank the budget a piddling 3%.
They deserve a little due. State employees will be required to contribute to their own pension plans. But even this change was not as dramatic as it should have been and not exactly a show of high-risk political courage.
And they adopted some Medicaid reform. But like the pension issue, this wasn't one that would resonate with the average Floridian as a step toward boosting Florida employment and attracting businesses.
As of this writing, meaningful measures that would move Florida toward a friendlier economic climate and a more limited government sat stalled. To wit:
• The phasing out of the corporate income tax;
• Cutting or eliminating the locally required state school property tax;
• A taxpayer bill of rights limiting the annual growth of government to the combined rates of population and inflation growth;
• Tort reform.
These measures would have rocked the state's foundation for the better. But instead of joining with Scott to move Florida ahead, Speaker Dean Cannon and Senate President Mike Haridopolos maintained the status quo. That is, they were not going to let a rookie governor push them around. They have their power to protect.
Scott won't give up. But now he has a good measure of the opposition — the wimps who show little courage of conviction and are happy to operate in the margins.
+ Do it: Ditch Citizens
Shocking. Just shocking.
Florida Gov. Rick Scott, according to Florida's daily newspapers, wants to phase out Citizens Property Insurance Corp., the taxpayer/state-owned and largest property insurance company in Florida.
That evil Scott.
How could he? How could he support dismantling the socialized, state-owned property insurer in favor of a private-sector insurance market?
Indeed, the way the mainstream press colors it, eventually shutting down Citizens Property Insurance would make as many as 1.3 million property owners “turn to the surplus lines market, where rates are unchecked and policies are not backed by a state guarantee,” according to the St. Petersburg Times.
And imagine this: Gov. Scott's policy managers apparently had the gall to meet with insurance industry lobbyists. Can you imagine — political officials meeting with industry lobbyists?
The scary thing is there probably are way too many Floridians who believe, as the liberal press does, that dismantling Citizens; meeting with lobbyists; and having a deregulated insurance market with no taxpayer guarantees are outrageous horrors.
But all we can say is: Go for it! Get rid of Citizens Property Insurance. Sell it to the private sector. And deregulate Florida's property insurance markets. Those indeed should be the Legislature's goals over the next four to six years.
The real story of Florida's property insurance market is not the prize-winning revelation that millions of Florida property owners are ultimately insured by unregulated reinsurers who make a lot of money and party in Monaco and Bermuda. The real story is Florida taxpayers are sitting on a time bomb that easily could make us all forget Hurricanes Andrew, Charley, Wilma and Katrina.
It's probably safe to say most Floridians have no clue that when one of Florida's urban areas experiences a direct hit from a hurricane, every Florida property owner will be paying higher taxes to cover claims that Citizens will be unable to fulfill.
Eli Lehrer, an insurance analyst and scholar for the James Madison Institute, has reported for more than two years now that unless the Legislature dramatically shrinks Citizens Property Insurance Corp.; reforms the state's Hurricane Catastrophe Fund; and moves to a more deregulated property-insurance model, when that Big One hits, every Floridian (each and every 18 million of us) will be paying as much as $6,000 in taxes to fulfill the unfilled insurance claims of Florida hurricane victims.
Read the box below left. Lehrer says a direct hit will trigger the equivalent of Florida declaring bankruptcy protection because it will not have the funds to pay what Citizens and other insurers are promising to pay their policyholders.
Few Floridians realize this, but state law requires that Florida taxpayers will be the “insurers” for whatever Citizens Property Insurance cannot pay.
Florida's insurance system has been like this — a disaster — ever since Hurricane Andrew hit Dade County in 1992. And every condition that exists in Florida property insurance is a direct result of bad policy making:
• Lack of insurance supply and insurers;
• Undercapitalized insurers;
• Lack of rate competition;
• Inadequate rates for the risk for insurers;
• Insurers sheltering income in spin-offs;
• Insurers resorting to high-priced reinsurers;
• Taxpayers holding huge financial risk.
All of this is because of lawmakers who have not had the courage or will to make tough decisions.
Finally, in Scott, taxpayers elect a governor who is willing to do the right thing for the right reasons — phase out Citizens Property Insurance and let the private sector serve consumers.
But as always, the political class cowers at giving up power, and the media perpetuate their incessant harping on the insurance industry, never able to understand how capitalism and profits work or the evils of political intervention.
Capitalism is the free, peaceful exchange between a buyer and seller, each of whom receives a mutual benefit in the agreed-upon transaction. “Free prices and free profits will maximize production and relieve shortages quicker than any other system,” wrote economist Henry Hazlitt in the 1940s. (Unfortunately, in Florida insurance, the state mandates the price and what it buys; the buyers and sellers have little say and we have shortages.)
Profit is what makes the economy work. The surplus after expenses is the capital that begets more and better products and services. With no profit in insurance, no insurance. Profit, too, is a reflection of ingenuity and risk-reward. Surely, even the liberal press cannot argue with the notions that ingenuity deserves its reward and that reward should be commensurate with risk.
And then there's government intervention. This always tilts the table to one man's advantage at the expense of another. Frenchman Frederic Bastiat described government intervention and “lawmaking” as placing “the collective force at the disposal of the unscrupulous who wish, without risk, to exploit the person, liberty and property of others. It has converted plunder into a right, in order to protect plunder.”
The Legislature has another week to go before its session ends. Valor may still prevail. We may yet begin to see the defusing of Florida's time bomb.