In his seminal 1987 work Crisis and Leviathan, economic historian Robert Higgs traces the pattern of government growth as a response to catastrophic events. The federal government, in particular, grows over time through a “ratcheting up” effect, as politicians respond to disasters and catastrophes with calls to “do something,” often involving the creation of new laws, regulations and agencies.

Inevitably, the crisis passes, but the new government structures it engendered remain. Indeed, not infrequently, those structures have little tangible relation even to the immediate crisis they ostensibly were intended to address.

We could be in the midst of seeing yet another example of this ratchet effect in the making. The tragic events in Paris over this past weekend have renewed political interest in the fight over reauthorizing the James Zadroga 9/11 Health and Compensation Act. If the reauthorization bill’s primary Senate sponsor –Sen. Kirsten Gillibrand, D-N.Y. – has her way, the legislation could be used as a vehicle to smuggle in a completely unrelated change in U.S. tax law — a thoroughly destructive and utterly protectionist tax on offshore reinsurance.

Originally signed by President Barack Obama back in early 2011, the 9/11 Health & Compensation Act established the World Trade Center (WTC) Health Program, which funds medical services (once workers’ compensation resources have been exhausted) for roughly 60,000 first responders who report medical complications stemming largely from exposure to airborne toxins at the World Trade Center, Pentagon and Shanksville, Pa. sites. The law also reopened the September 11 Victim Compensation Fund – originally exhausted in 2003 – for another roughly 25,000 residents of lower Manhattan who experienced economic losses as a result of illness or injury stemming from the 9/11 attacks.

Statutory authorization for both the compensation fund and the WTC Health Program – the latter of which is administered by the National Institute for Occupational Safety and Health and is 10 percent funded by the City of New York – expired Oct. 1. At the current pace of drawdowns from their financial reserves, both the program and the fund will be completely bust by late 2016.

One might ask what any of that has to do with offshore reinsurance. It would be a valid question. Gillibrand made no mention of reinsurance in the reauthorization bill she introduced on the subject back in April (S. 928), which has attracted an impressive 65 Senate cosponsors. It’s also not mentioned in the companion House bill (H.R. 1786) introduced by Rep. Carolyn Maloney, D-N.Y., which itself has some 249 cosponsors.

The subject has come up only recently, in the wake of Rep. Steve Chabot, R-Ohio, introducing H.R.3858, the September 11th VCF Reauthorization and U.S. Victims of State Sponsored Terrorism Compensation Act. Unlike the Gillibrand and Maloney bills, which call for permanent reauthorization of both the WTC health program and the victims’ compensation fund, Chabot’s bill proposes only a five-year reauthorization and only of the compensation fund. And while Chabot’s bill currently has only two cosponsors, one of them is Rep. Bob Goodlatte, R-Va., chairman of the committee of jurisdiction.

Another crucial difference is in the funding. The Congressional Budget Office has estimated the Gillibrand bill would require between $8 billion and $11 billion in additional spending over the next decade, with additional spending continuing for several years after that.

By contrast, the Chabot-Goodlatte bill would be funded by redirecting $2.77 billion to the compensation fund from an $8.9 billion settlement the government reached in June 2014 with French bank BNP Paribas SA for violating U.S. sanctions against the Sudan, Iran and Cuba. The U.S. Justice Department is currently administering $3.8 billion of the fines for a victims’ compensation fund, while the rest was split among the New York State Department of Financial Services, Manhattan district attorney’s office and the Federal Reserve System’s Board of Governors.

At the time of its introduction in late October, Gillibrand called the Chabot-Goodlatte bill “outrageous” and previewed that:

‘We have a way to pay for our bill that will be disclosed in due time that is acceptable to the Republican leadership,’ Gillibrand said. ‘So we have a way to pass the bill as written and pay for it completely. So what Congressman Goodlatte has done is irresponsible.’

That “way” finally was unveiled this week, as Gillibrand announced her bill would be financed by “closing a tax loophole” that, she says, “allows foreign insurance companies to issue reinsurance in the United States without paying the same taxes as their U.S. competitors.”

For those who have been around the insurance world a few more years than Kirsten Gillibrand, we’ve seen this script before. A cadre of large domestic specialty insurers have been pushing for similar legislation, literally, for decades. It does not involve “closing a loophole.” It involves treating insurance groups differently based on where their headquarters is located.

For those whose home office has a U.S. address, operating units could continue deducting the cost of affiliate reinsurance, just as they always have. But if the postal label instead reads “Bermuda” or “Switzerland” or “Ireland,” that option no longer would be available. The net result would be to make U.S. insurance and reinsurance markets less competitive and to make coverage more costly. The intent is to give a leg up to the largest domestic carriers, both against foreign-based competitors and also against smaller domestic competitors, who purchase relatively more reinsurance.

The idea, which has become a standing line item in the Obama White House budget, has been vetted repeatedly and found lacking. A study earlier this year by economist Art Laffer at the Pacific Research Institute estimated imposing the change would cost the U.S. economy $1.35 billion in gross domestic product, with private sector losses estimated to run roughly four times as great as the tax revenues raised. A report from the Cambridge, Mass.-based Brattle Group estimates taxing offshore affiliate reinsurance transactions would cost consumers between $110 and $140 billion over the next decade, taking the form of lost capacity and higher insurance prices.

There is no good policy case for this proposal when, if anything, we should be seeking ways to lower the corporate taxes that have led insurance capital to move overseas in the first place. Moreover, our major trading partners already have made it known they believe such a change would be a violation of the 20-year-old General Agreement on Trade in Services. Adopting this policy almost certainly will spark both retaliatory taxes and the very real possibility of sanctions from the World Trade Organization. This would be precisely the opposite message the United States is trying to convey in a time when our trade ambassadors continue to seek finalization of the Trans Pacific Partnership.

Of course, the real irony of looking to fund a 9/11 victims compensation fund with a punitive tax on foreign insurers is that foreign insurers already bore as much as half of the $25 billion the insurance industry paid out in response to the attacks, and they continue to pay first responders’ workers’ comp claims.

If Congress believes the health and compensation funds need to be extended, then that’s a responsibility we all share. Proposing to fund those shared responsibilities with a gimmicky tax should be considered an insult to their dignity.

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