Let’s define public “spatial insurance” as transfers from the federal government to geographical areas such as cities that have experienced natural disasters or terrorist attacks. In this age of federal government deficits and the rise of the global insurance industry, should private insurance cover these events?
Here is a cross-post I wrote about the financing of rebuilding Southern Manhattan and the sweet deal that Goldman Sachs has received for remaining downtown. This appears to be another example of cross-subsidization within a federal system. The people of Nebraska’s taxes are used to help Manhattan compete against New Jersey in keeping Goldman in the Big Apple.
When horrible things happen, who picks up the pieces? Who picks up the bill? If Goldman Sachs and friends doesn’t have to buy their own insurance, does this create a spatial moral hazard effect as too much economic activity locates in geographical threat zones?