Government Risk-Bearing: What Works and What Doesn’t

In considering which government risk-bearing programs are successful — and what makes them that way — a number of difficulties must be noted and observations made at the outset. The 1990s are proving that underestimating financial risk can create substantial economic burdens for our society. The savings and loan crisis is only the clearest manifestation of this problem to date. But the nation’s approach to other areas of liability, most notably our policy toward nuclear energy risk, has shown that there are ways to avoid or to limit adverse consequences. Pollution liability poses a similar challenge, but so far we have failed miserably at developing a rational approach. Our national policy toward environmental impairment, as reflected in Superfund and similarly structured federal and state programs, is grossly ill-considered. Unless radically altered, it will lead to huge financial losses that will ultimately have to be assumed by the government — that is, by taxpayers.