A Manufacturer's Christmas Wish List

Yesterday I took on Bruce Bartlett's inane views on "tort reform" which were largely based upon a recent report from the National Association of Manufacturers and the Manufacturers Alliance. In reading the report, it is interesting to see what the manufacturers desire:

1. Lower corporate taxes;
2. Lower employee benefits costs (particularly health care costs);
3. Lower litigation costs (particularly asbestos-related litigation);
4. Lower costs for pollution abatement; and
5. Lower natural gas prices,

While I have sympathy for the manufacturers' arguments on health care costs, it should be (and isn't) noted in their report that the primary reason these costs are borne by employers in the United States is that, unlike every other western nation, we have no national health plan. Apparently, it would be heresy to suggest such a thing, so intead they propose "greater individual responsibility for coverage costs and health status" - which sounds a lot like the desire to terminate or reduce health care as an employee benefit. They also desire (in addition to a set of massive corporate tax cuts) subsidies for providing health care benefits to employees. Either way, it's a shift of cost from the employer to the individual taxpayer (or to the nation's astonishing deficit.)

It is also interesting to note that they choose to use projected data, as convenient, in order to further their arguments. (e.g., "Currently, [China] operates a parallel rate structure consisting of a 33 percent rate for state-owned domestic enterprises and an 18 percent rate for foreign-funded enterprises. However, observers are expecting the National Peoples Congress to merge the two systems under a single statutory rate of 25 percent—a figure used in this analysis." They apparently see no need to even present alternative figures - one based on reality, and one based upon their educated guesswork. They later argue, "Comparable international data do not exist to make meaningful quantitative comparisons [for double taxation of dividend income or tax treatment of foreign-source income" - and then argue that those factors magnify the U.S. tax disadvantage. Now there's some objective analysis)

In terms of tort litigation, unlike Mr. Bartlett, the manufacturers' concerns are focused primarily on asbsestos liability, although more generally they advocate elimination of joint and several liability, additional statutes of repose, and caps for punitive damages. There are good arguments for retaining or eliminating "joint and several liability", but it is not my impression from what I have seen in Michigan that such a change will have a profound impact on tort liability or the size of settlements - and unfortunately the report presents no data. The other two proposals, unsuprisingly, are aimed at reducing liability for the cases where manufacturers face the most exposure for wrongful conduct - working to the expense of the most injured plaintiffs. None of these proposals would have any effect on "frivolous litigation".

They propose federalizing class actions - it is not presently clear what effect that would have on class action litigation. It may backfire, if the federal judges who get assigned to hearing hundreds of class action lawsuits start requiring the plaintiff's lawyers and manufacturers to end their sweetheart deals, and to start delivering adequate compensation to the injured class. (Sorry - I don't think that a typical "$2 coupon off your next purchase from the defendant"-type settlement serves the injured class - even if it allows for a cheap settlement (as the defendants know most coupons will go unused) and huge attorney fees - payable, of course, in cash and not in coupons.)

For regulatory reform, they propose what sounds like a new regulatory agency (perhaps private in nature) to regulate regulations, and to provide cost-benefit reviews. There is, of course, no reason why manufacturers cannot set up such an independent body right now.

In terms of natural gas cost, beyond arguing for increased drilling of new gas reserves, they seem to be advocating government subsidy of other forms of energy.

In short, the report seems to be less a valid analysis of manufacturing costs, and more a "wish list" to President Bush for the next round of tax cuts and subsidies to be handed out to the wealthy.

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