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Commentary

How lawsuit abuse hurts businesses and raises unemployment

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Consdier this paper from the Heritage Foundation, featuring a variety of views on lawsuit abuse.

Excerpt:

LAWRENCE J. McQUILLAN, Ph.D.: I am an economist. I focus on this issue as an economic issue, an economic problem. I have been working on this issue for about four years as a full-time project, and the first study that we did in 2006 was Jackpot Justice, which Hans mentioned earlier.

In this study, what we set out to do is measure the total cost of the U.S. tort liability system and put that cost in perspective. Hans mentioned a figure of $252 billion a year. That is the direct cost of the tort liability system, but what we wanted to do in this study is also measure the indirect cost. When we crunched the numbers, we arrived at a total of $865 billion annually as the cost.

It is a lawsuit industry. That’s really the way to look at it. It truly is an industry in terms of the size, scope, and amount of resources devoted to it. To put it in perspective, it’s roughly the size of the U.S. restaurant industry: About 6.5 percent of GDP would be the equivalent. It is about 30 times what the National Institutes of Health spends each year on finding cures for deadly diseases. It’s a huge amount of resources that are diverted toward, basically, a transfer system.

The Costs of Lawsuit Abuse

Every year, lawsuit abuse costs each American about $2,000. That is the cost that is factored into all the goods and services that we buy, from ladders to lawnmowers. Built into every price is a component to pay for liability insurance and lawsuit defense.

We estimated the wasteful part of that $865 billion to be about $589 billion a year. In other words, you could remove that part from this total cost and not change manufacturers’ incentives to produce safe products. You could still fully compensate truly injured individuals.

Here is one of the ways that lawsuit abuse changes the free market:

Indirect Costs: Defensive Medicine[…]The first one that gets talked about a lot these days is defensive medicine. Ninety-three percent of all physicians report practicing defensive medicine. These are basically unnecessary tests, procedures, referrals that they know are not really medically necessary to protect the patient, but they do them anyway to protect themselves from litigation. About 25 percent of all procedures, according to a survey last year by the Massachusetts Medical Society, are deemed by the physicians themselves to be unnecessary defensive medicine procedures.

We crunched the numbers in terms of how much this defensive medicine costs the economy. We arrived, in 2007, at $124 billion a year, which is about 8 percent of total health care expenditures. Today, that number would be roughly about $191 billion a year.

You also have to remember that these defensive medicine expenditures get passed along to all of us. We all end up paying for this in terms of our insurance. So insurance premiums go up, which then crowds out a lot of people from being able to afford insurance that they normally would be able to afford. We wanted to estimate what that costs. After crunching the numbers, we estimate that about 3.4 million Americans would have insurance today but do not because of the higher premiums due to just defensive medicine: today about $191 billion.

I think yesterday there was a report that came out that showed something like 14,000 people a year die because they do not have health insurance. It would not surprise me if a lot of these 14,000 people that die every year are part of those 3.4 million people.

And one more:

Indirect Costs: Research and Development

Another indirect cost of the excessive tort liability system is R&D impact. Of course, businesses have to spend a lot more money on legal defense that would otherwise go to product research and development, new product innovation, and new products being introduced. We estimated that total at about $367 billion a year of lost sales of new products that would otherwise come to market but do not because of the diversion of resources basically away from R&D and new product development toward legal defense: again, another huge indirect cost where it is hard to measure what would have been but is not.

Basically, the vaccine industry has fled the country. It is hard to find a manufacturer anymore in the U.S. that does vaccine development and manufacturing, primarily because of liability concerns. It was reported that the FDA granted the H1N1 virus vaccine to four companies to be manufactured, and without much of a surprise, three of the four companies are actually located outside the U.S.: Swiss, Australian, and French companies were all awarded the vaccine licenses.

There is one company in the U.S in Maryland, but I think it got the license to manufacture only because they have a technological advantage. They are going to produce an inhalable version of the vaccine rather than the standard injectable version. I think that is probably why they got a license. Otherwise, I think all of the manufacturers would have come from Europe or Australia.

That is a great example of how it really does impact U.S. business and how the liability system is forcing more and more business overseas. As a result, it hurts us in terms of the economy and job growth.

As another example, Volkswagen was going to introduce a three-wheel vehicle, very green technology, that gets about 49 miles per gallon. They were going to sell it in the U.S. for about $17,000 a vehicle. Probably most people in this room would not want to drive this vehicle, but I can tell you that where I come from in California, it would have sold well. It would have had a big market. It actually got qualified, too, to use the HOV lanes in California.

At the last minute, Volkswagen decided to pull it from the U.S. and not market it here because of liability concerns, but it is available in Europe. So once again, another example where European markets are perceived to be more favorable in terms of liability than the U.S.

I do not think it is any accident, too, that they tend not to have punitive damages in Europe and, also, that they have the loser pay system. This is another example of the indirect costs, fewer products available in the U.S. A lot of people probably would have loved to buy this car, but it is not available.

In terms of how expensive the U.S. system is compared to other countries of comparable standards of living, the estimate is that we have about 59 percent higher tort costs. These are direct costs. These are awards, attorneys’ fees, and administrative expenses. This does not include the indirect costs that I just talked about, but it gives you a good indication of our system compared to other systems in the world. It is just much more expensive for compensating injured individuals.

That is just one of the perspectives provided in this excellent article.

If we expect to have jobs in the future, then we should be thinking about who we expect to hire us. Tacking on frivolous costs onto business owners who develop products and services that we need means that there will be fewer businesses to hire us when we are looking for jobs and less choice and competition when we make purchases.

Keep in mind that trial lawyers are one of the pillars of the Democrat party, and they fight against any regulation of lawsuit abuse.

I noticed that Hans Bader published an article here talking about how the Supreme Court has been attacking businesses. This is one of the reasons why we are bleeding jobs to other countries. Judicial activism is hostile to business and the free market.

News

How universities discriminate against evangelical Christians

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From the American Center for Law and Justice (ACLJ). (H/T ECM)

Excerpt:

We are preparing for trial in a very important religion discrimination case in Kentucky that’s likely to attract a lot of attention.

We represent Professor Martin Gaskell, an internationally-respected astronomer who was turned down for the post of Observatory Director at the University of Kentucky in 2007 after concerns were voiced that some of his writings contained in a personal website discussing the relationship between science and religion showed him to be “potentially evangelical.”

Professor Gaskell has filed suit against the University claiming that, by considering his religion in the hiring process, Kentucky violated Title VII, the Civil Rights Act of 1964…

The University of Kentucky tried to avoid a trial, but Judge Karl Forester ruled that there was enough evidence to go to trial, such as:

  • The record contains “substantial evidence that Gaskell was a leading candidate for the position until the issue of his religion” became part of the search committee’s deliberations.
  • The head of the search committee wrote in an email to the Chair of the Physics & Astronomy Department that “no objective observer could possibly believe that we excluded Martin [Gaskell] on any basis other than religious . . .”
  • The Department Chair admitted “that the debate generated by Gaskell’s website and his religious beliefs was an ‘element’ in the decision not to hire Gaskell.”
  • One member of the search committee admitted that Gaskell’s “views of religious things” were “a factor” in his decision not to support Gaskell’s candidacy.
  • Another member of the committee, having discovered Gaskell’s website, warned fellow committee members that Gaskell was “potentially evangelical.”
  • The search committee head, anticipating a decision against Gaskell by his fellow committee members, wrote that “Other reasons will be given for the choice . . . but the real reason we will not offer him the job is because of his religious beliefs in matters that are unrelated to astronomy or to any of the other duties specified for this position.”

This is why I blog under an alias. And I recommend it to any evangelical Christian who aspires to have an influence in academia.

 

Commentary

How divorce courts put men in debtor’s prisons

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Story from the National Post.

Excerpt:

Jeff Dolan spent Father’s Day in jail, locked away for failure to pay child support. Deadbeat dads don’t garner a lot of sympathy. But you don’t need to study Jeff’s case for long before you realize that he’s anything but a deadbeat. Instead, he’s a man hopelessly ensnared in a crushing bureaucratic machine: He’s in jail because he couldn’t pay child support, but he couldn’t pay child support because he was unemployed … and he was unemployed because the court took his driver’s license for failure to pay child support … after he went bankrupt paying his court costs.

[…]Courts, in their earnest efforts to do right by families, are destroying them, instead. Men, who want only the chance to be good fathers, are crushed under the weight of gender-biased default rulings and the inertia of unfeeling bureaucracies. Whether in far-off Minnesota or, as Post columnist Barbara Kay has shown time and again, right here in Canada, men fighting custody battles are outgunned from the start. Jeff’s story, of being forced into bankruptcy by family court proceedings and then being jailed by those same courts for not being able to pay their court-mandated payments, is no surprise to any number of Canadian dads.

Bill Levy, a Canadian with bitter personal experience in such matters said it best: “Canada has reopened debtor prisons, only for parents. Only alienated parents go to jail for poverty. No Mastercard or mortgage debtors. The Constitution does not permit this, we can’t be forced into servitude. And yet no one will stand up in court and make these arguments. Men, and some women, too, can’t fight back against the court’s preference for expediency.” That mirrors what Jeff’s brother Jon told me in a phone interview: “Jeff isn’t in jail because he’s an abuser or a bad father. He’s in jail because he’s poor in a bad economy where there are no jobs.”

About 45% of first marriages end in divorce, with women initiating about 70% of divorces and getting full custody about 90% of the time. False accusations are regularly used by the person who initiates the divorce in order to get restraining orders and de facto custody of the children, and the child support payments that go with them. It is a massive transfer of wealth from men to women at gunpoint, and a massive loss of liberty for men.

People keep expecting men to step up and take on the role of husband and father, but when the chips are down, 77% of young unmarried women voted for Barack Obama and his policies of destroying the economy. A job is a requirement for men to marry and to take on the role of husband and father. Not only are the schools and universities biased against men, but the industries where men dominate have also been hit hardest by the recession.

We need to spend less time on fashionable causes like environmentalism, gun control, pacifism, animal rights and universal health care, and more time on economics. It’s men who have the most to lose emotionally and financially from a divorce. Not only that, but women commit domestic violence against men at rates equal to men, but the laws (e.g. – VAWA) don’t recognize the truth. The vast majority of the social programs are for women only.

A good start would be to read this summary of the divorce courts by Stephen Baskerville, and also listen to the Dr. Morse lecture on marriage. Either we are going to encourage men to marry and praise them for marrying or we are going to discourage them and then blame them for not marrying. Men respond to incentives. As long as society as a whole chooses to remain ignorant of the facts and chooses to continue to blame men, men won’t marry.