Legal Reform: Another Way to Boost the Economy
President Bush need not pin all his economic hopes on a $726 billion tax cut. There's another option: legal reform. Market analysts say solving the legal liability crisis could make the President's proposed dividend tax cut seem like small change.
Says Morgan Stanley's Steven Galbraith: "We can safely say that tort reform would be one of the most positive changes we can imagine for markets. Conversely, lack of progress could be every bit as damaging to market confidence as last year's corporate perp walkathon."
Enter the asbestos litigation crisis, a legal and financial emergency that won't be solved without federal action, but which, if properly solved, could give a huge boost to the U.S. economy, provide better compensation to victims of asbestos-related illnesses, and not cost the taxpayer one red cent.
In short, everybody -- except perhaps lawyers -- wins.
Asbestos-related litigation already has bankrupted over 60 companies and thrown 60,000 people out of work. It may cost the economy more than $300 billion -- by most estimates, more than the war in Iraq.
Scandalously, despite the costs, genuine asbestos victims are not being properly compensated. 60 percent of asbestos awards have gone to lawyers and court costs, not plaintiffs. 65 percent of funds that do reach plaintiffs go to people who aren't sick.
The system works well for no one but lawyers. Victims face jackpot justice or none at all, companies -- including many with only a scant association with asbestos -- are facing bankruptcy, employees lose jobs and retirement portfolios suffer. Wall Street and our economy has been hard hit.
The damage is so bad that Congressional compromise is possible. Republican Senate Judiciary Chairman Orrin Hatch says an asbestos bill is a top priority. Democrats, usually shy about legal reform, seem to be concluding that the asbestos crisis cannot be swept under the rug.
But what's the best route to reform? Some propose the establishment of medical standards an asbestos victim must meet in order to sue. But that proposal lacks important benefits.
A far better alternative is for Congress to establish a federal trust fund through which genuinely sick asbestos victims could receive prompt compensation.
A trust fund, which should be funded solely by companies facing asbestos lawsuits, would have the following benefits:
* All funds awarded would go to asbestos victims, not to lawyers, trial costs, or healthy people with good lawyers.
* Victims would receive compensation faster -- nearly immediately, in dire cases.
* Victims who become ill from exposure at a bankrupt company would receive the same compensation as those exposed at a thriving firm.
* Asbestos-related bankruptcies would cease, as firms would know their liability, and could plan for it.
* Victims would be fairly treated based on suffering, not on state of residence or which lawyer they hire.
* Sick persons could more easily prove eligibility for compensation, as they would not need to prove a specific defendant caused their illness.
* The economy would receive a substantial shot in the arm, benefiting all Americans.
Heavy, unpredictable legal costs related to asbestos litigation and trial lawyer excesses have undermined business confidence, left business investment underfunded and undercut America's ability to recover economically from September 11. And this damage has been done without fairly serving those who have been hurt, and who need help.
There's a better way. A privately-funded federal asbestos trust fund offers prompt and fair compensation for victims and a big economic boost for us all.
by Amy Ridenour
Contact the author at 202-507-6398 or [email protected]
Tort D'Jour: You Can Lead a Plaintiff to Water, But You Can't Make Him Drink
A Corpus Christi lawyer was fined $50,000 for filing frivolous lawsuits. How did the judge know they were frivolous? The patient whom the lawyer claimed was harmed by a drug had never taken it.
Source: Dr. Christine Canterbury, Corpus Christi Caller-Times, August 26, 2002, as cited by www.sickoflawsuits.org
Tort D'Jour: Take It To Castro
A German couple is suing a tour operator because a maid repeatedly interrupted them when they were trying to have sex in their hotel room during a vacation in Cuba. The pair is demanding $6,300.
Source: The Scotsman, 2/20/03
"The $136 billion excessive cost of the U.S. tort system would be equivalent to a 2 percent tax on consumption, a 3 percent tax on wages, or a 5 percent tax on capital income."
-White House Study Reveals Tort System's Harm To America's Workers And Consumers, Press Release, The Business Roundtable, 4/29/02
"While the cost of the U.S. tort system has increased one-hundred fold over the last 50 years, GDP has grown by a factor of only 34."
-U.S. Tort Costs: 2002 Update, Tillinghast-Towers Perrin, as cited by the Business Council of New York State
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