Wretched Public Policy Arguments

If Paul Krugman is correct, it becomes more understandable why editorials from AEI "scholars" seem so often to be wretched, weak in analysis and careless with facts.

In discussing the [David] Frum firing [by AEI], Bruce Bartlett asserts that AEI has muzzled its health-care experts, because the truth is that they agree with a lot of what Obama is proposing.

Sort of an, "If you don't have anything nice to say for the benefit of our corporate sponsors, don't say anything at all"? Ensuring that your most knowledgeable experts either toe the corporate line or remain silent?

Update: "They’re hiring Jonah Goldberg and Marc Thiessen." As I was saying... wretched.

"Read My Lips...."

Bruce Bartlett takes on George Bush I, insisting that what our nation need is a new tax - specifically a national sales tax, which he prefers to deem a "value added tax". Bartlett concedes that this is a regressive tax, which burdens business and industry:

There are many arguments against a value-added tax, which is essentially a sales tax that applies at each stage of production. It is costly to put into effect, and it hits the poor and the elderly hardest because they spend a higher percentage of their income

After observing that today's Republican leaders are so fiscally irresponsible, Bartlett argues,

This behavior has led me and other conservatives to conclude that starving the beast simply doesn't work anymore. Deficits are no longer a barrier to greater government spending. And with the baby-boom generation aging, spending is set to explode in coming years even if no new government programs are enacted.

Ah... So he's not into starving the beast any more - just into making somebody else pay for its food. He anticipates a fiscal day of reckoning:

When that day comes, huge tax increases are inevitable because no one has the guts to seriously cut health spending. Therefore, the only question is how will the revenue be raised: in a smart way that preserves incentives and reduces growth as little as possible, or stupidly by raising marginal tax rates and making everything bad in our tax code worse?

Well, if Bartlett has his way, in a stupid way that will place yet another immense burden on working America, while leaving the rich pretty much exempt. Last I checked, taxes were higher under Clinton, our last fiscally responsible President, and yet our economy grew quite nicely. I recognize that cutting taxes for the rich is a cornerstone of Republican fiscal policy, but how stupid do they expect Americans to, um, continue to be?

Fixing Democracy in the U.S.A.

In "Third parties don't have a chance", Bruce Bartlett provides some interesting thoughts on the (non)viability of third parties for U.S. federal elections - and a suggestion as to how to give them life:

One reform I have long favored that is more doable would be to allow third party votes to be aggregated with those on major party lines. This can be done in 10 states, according to the New Majority Education Fund (www.nmef.org). Most prominent is New York, which has long had an influential Conservative Party, Liberal Party and Right to Life Party. When a major party candidate is endorsed by one of these third parties, votes on their line are added to his vote total. This makes their endorsement valuable and gives third parties more influence without upsetting the basic electoral system.

There are, of course, other means to the same end, but Bartlett's suggestion has the benefits pretty simple, understandable, and has proved itself to at least some degree in the states Bartlett described.

And, while whining about the fact that the Supreme Court upheld campaign finance reform, Jonah Goldberg presents the suggestion that redistricting problems can be fixed by enlarging Congress:

I don't know if we should have districts of 30,000 these days. That would create a Congress of more than 8,000 representatives. But a couple thousand wouldn't be a bad way to start.

I'm all for a larger Congress, having enjoyed a much closer relationship to and understanding of my provincial and federal legislators when living in Canada. However, larger isn't always better - and any change in the number of Members of Congress should be associated with a long-overdue federal reform of redistricting - as otherwise a map of Congressional districts for the new, larger Congress is likely to look like a spilled bowl of spaghetti. I think the present emphasis should be on redistricting reform.

A side note - I like Jonah's introductory line, "everyone who understands the First Amendment was rightly having conniptions...." I don't like it because it is fair or accurate, but because it is quite the opposite. It is a little trick I have sometimes used myself - but only in debates where my opponent is not sufficiently intelligent to pick up on the underlying logical fallacy. It's a preemptive version of "when did you stop beating your wife". Within this context, whatever the merit of the campaign finance reform decision, I would venture that the five Supreme Court justices who voted for reform understand the Constitution far better than Goldberg ever will.

[Update - Dec. 21, 2003 - Lawrence Kestenbaum has provided a highly relevant caution about Bartlett's idea, and how it can result in a significant loss of choice for voters, in the comments section.]

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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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Tort Deform

One of the pet issues of certain faux-conservatives is "tort reform". They announce that there is a big problem with "frivolous lawsuits", and then typically tell us that the remedies we should impose are:

1. Damages caps;
2. Shorter limitations periods; and
3. More statutes of repose.

The problem is, none of those "remedies" are aimed at "frivolous" litigation - in fact, those particular "reforms" are directed at meritorious litigation. They're the equivalent of the "technical defenses" some people like to complain about in the field of criminal law - where a guilty criminal "gets away with it" because of an evil "loophole" in the law. Statutes of limitation and repose prevent the litigation of meritorious cases based on the passage of time. Often, the lobbying is for limitations periods which are shorter than the time in which the negligence which might give rise to litigation could reasonably be discovered. Damages caps have no effect on "frivolous" litigation, but can have catastrophic effects on people who suffer serious personal injury and are unable to recover reasonable compensation from those who caused them harm.

Yesterday, Bruce Bartlett of the National Center for Policy Analysis published "The cost of the legal system", which is perhaps typical of the mushy-headed nonsense put forth by advocates of "tort reform". He complains that a new report from the National Association of Manufacturers and the Manufacturers Alliance indicates that U.S. manufacturing costs are the highest in the world, due to "corporate taxes, employee benefits, pollution abatement expenses and tort liability costs." This will, of course, come as a surprise to those who recognize that other nations have higher corporate taxes, offer greater employee benefits, and are intolerant of pollution - and even have similar tort laws. But let's leave that aside for a moment and assume that this industry report paints a fair and balanced picture. Bruce focuses his editorial on the following contention:

Our tort liability system is 3.2 percent more expensive. No country has a system more expensive than ours.

Actually, I'm a bit surprised that our tort liability system is only 3.2 percent more expensive on average. A principal reason that our tort liability system is so costly is that, in our system, the cost of future medical care is paid by the defendant whose negligence injured the plaintiff, whereas in other nations those costs are either non-compensible (note that Bruce includes China in this calculus - a nation not known for offering due process) or are covered by national health plans. Remove future medical costs from personal injury tort verdicts, and many will plummet in size.

Bruce next presents a classic misrepresentation of "tort reform" advocates:

This last point is reinforced by a recent study from Tillinghast-Towers Perrin, a consulting group. Last week, it estimated that U.S. tort costs climbed to $233 billion in 2002, or 2.23 percent of the gross domestic product. This is like an $809 per year tax on every American, paid in the form of higher prices for goods and services, higher insurance costs and a deterioration in living standards.

Stuff and nonsense. The tort system shifts responsibility for damages from those who suffer injury to those who caused the injury. Eliminating the tort system does not mean the elimination of a "$809 per year tax" - it means that every American will, on average, absorb $809 in damages caused by somebody else, while the person responsible for their injuries pays absolutely no price. That is, absent the tort system, there would be an additional subsidy of $809 per American per year, payable to those whose negligence or deliberate wrongful conduct injures other Americans. (The fact that "tort reform" advocates pretend otherwise serves to highlight who they actually are - business and insurance company lobbyists.)

I am reminded of Walmart's decision from a number of years back that it was more "cost-effective" to stock its high shelves in a manner that posed a risk to customers, paying off lawsuit settlements to customers who were injured or killed by falling boxes, than to improve the manner in which it secured merchandise on high shelves. Upon being presented with a memorandum documenting that this was an official company policy, an angry jury punished Walmart with a large verdict for an injured plaintiff. And, at least to some degree, Walmart improved its policy. No doubt, Bruce would find much more fault in the jury's "excessive" verdict than in the fact that Walmart was choosing to put its customers at unnecessary risk.

What's worse, even at $809 per person, the tort system grossly undercompensates injury victims. According to the Tillinghast-Towers Perrin report Bruce cites (but obviously hasn't read), the tort system returns less than 50 cents on the dollar to people it is designed to help and returning only 22 cents on the dollar to compensate for actual economic loss. Those are real costs, and are borne by tort victims. In other words, the public continues to provide a huge de facto subsidy to tort feasors.

Bruce continues,

Of course, legitimate personal injuries deserve compensation. But, less and less of each dollar awarded in tort suits actually compensates for injury. According to the Tillighast study, only 22 cents on the dollar compensate for actual economic loss. The rest went to lawyers or involved punitive damages or those for "pain and suffering" that went far beyond compensating actual loss.

So in Bruce's mind, "pain and suffering" is not a "legitimate" injury. That is, if I cut off your leg or poke out your child's eye, I should pay for the doctor bill and a prosthesis, but as you don't suffer any "legitimate" damages beyond your out-of-pocket expenses, that's where my liability should end. Am I wrong in asserting that no thinking person would agree with Bruce on that point - and that if Bruce himself were thinking, he wouldn't have presented such an absurd argument?

And I love this part - according to Bruce, we know that "tort reform" is necessary because industry-sponsored public opinion polls, driven in no small-part by nonsense such as Bruce's editorial, suggests that people "believe" it is necessary:

A poll earlier this year for the American Tort Reform Association found that 76 percent of Americans believe that their health costs are higher because of excessive medical liability lawsuits. By a two-to-one margin, people believe that lawsuits are hurting the economy and discouraging the creation of jobs.

(Bruce likes to present thoughts instead of facts - "For example, it is thought that $50 billion to $100 billion is wasted each year on unnecessary medical tests that doctors order just to protect themselves from a lawsuit". No citation, no statistics, just a "thought". When it comes to Bruce, the old saying "A penny for your thoughts" seems like a bad deal....)

Bruce, of course, makes no mention of the 1999 Institute of Medicine report which, after examining available data, estimated that between 44,000 and 98,000 people die each year from medical errors in hospitals alone, making medical errors the eighth leading cause of death in the United States. The direct and indirect cost of preventablemedical error was estimated at $17 billion per year. The Tillinghast-Towers Perrin report states that medical malpractice verdicts in 2001 totaled $24.6 billion - which seems to be a significantly lower "administrative markup" over the actual cost than that the U.S. pays for gas in Iraq.

This is not an argument that there is no room for reform or improvement in the tort system. There are reforms which could be made to make the system more efficient and more affordable, as well as to improve the odds of just and reasonable verdicts. But, unfortunately, it is the rare "tort reform" advocate who has any interest in those goals, as opposed to placing additional hurdles in front of genuinely injured plaintiffs, and limiting the compensation available to those most severely injured by their patrons' wrongful conduct. And the arguments presented by "tort reform" advocates are frequently at significant odds with the facts.

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