Trial Bar Investment

John Berthoud While a number of the Democratic candidates for President have already outlined their ideas for big new government programs, perhaps the most expensive agenda for taxpayers lies hidden amidst the candidates’ recently filed campaign contribution reports.

John Edwards, a former trial lawyer, has already collected millions of dollars from attorneys and others who would be enriched by greater litigiousness in American society. Over 60 percent of the money raised by Edwards comes from trial lawyers, family members of trial lawyers, or employees of trial lawyers. Should Edwards win, this multimillion-dollar political debt is a harbinger of more litigation and more legal costs that ultimately will be borne by the American taxpayer.

America’s legal system is already the most expensive in the history of the world. As the American Tort Reform Foundation observes, the U.S. tort system imposed costs of $152 billion on the American economy in 1994 – in subsequent years, these costs have risen by 125 percent.

For taxpayers and consumers, this prospect is all very bad news. For the most part, they are the ones who end up footing the bill for the trial lawyers’ exploits. This is true in private actions – when a company has to pay millions for a claim, those costs are largely passed on to consumers (although employees and shareholders also take a hit).

And it’s true when the trial lawyers goad government into legal action against the private sector. The states’ $246 billion settlement with the tobacco companies is a classic example. As with any other tax, the costs have been passed along, and consumers consequently face higher prices. For someone who smokes two packs of cigarettes a day, the “tort tax” amounts to $364 per year. And 60 percent of tobacco taxes are paid by those making less than $30,000 annually. On the spending side, any positive uses of the money – like tax relief – have largely gone by the wayside, as most states have used the money like a big slush fund to underwrite ongoing programs. Indeed, more than a dozen states have already sold off the 25-year stream of future payments promised by the tobacco settlement and received a discounted lump sum payment today just to help fill their current budget gaps.

Pouring millions into Edwards’s campaign is just another step in the trial lawyers’ “investment strategy” of recent years. Not stocks and bonds, but politicians offering a green light to more litigation are their investments of choice. Trial lawyers who earned legal fees from the tobacco settlement have donated nearly $2 million to political campaigns since the settlement. All told, trial lawyers of all stripes have pumped more than $100 million into campaigns over the past decade.

For the trial lawyers, the rewards from successful political investing can be enormous. Just in Florida, Texas, and Mississippi, trial lawyers will receive more than $8 billion in legal fees out of the tobacco settlement.

In the Senate, Edwards has worked hard for the trial bar’s interests. When the Senate was debating the Terrorism Risk Insurance Act, Edwards was instrumental in defeating an amendment that would have established modest limits on personal injury lawyers’ ability to sue.

So one wonders what the millions of dollars in campaign cash from trial lawyers will reap should Mr. Edwards be elected to the Presidency. Efforts to reform spiraling tort costs would obviously be stopped dead in their tracks. Perhaps there will be further legal crusades by the Department of Justice against corporate America – carried forth, no doubt, with the able assistance of trial attorneys. While tobacco has been a favorite target industry, trial lawyers have turned increasing attention to other industries which have created what they call “social costs.”

Tort costs already represent 2.2 percent of America’s Gross Domestic Product. It’s almost impossible to imagine greater litigiousness in our society. But in John Edwards, that’s exactly what the trial bar is betting on.

John Berthoud is President of the 335,000-member National Taxpayers Union.

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