Today, the Washington Post is carrying an op ed by the head of the American Tort Reform Association, who argues that states should limit corporate liability for wrongdoing because this will create jobs, citing the National Federation of Independent Business for the proposition that lawsuit threats are "a significant influence on its regular index of small-business confidence." Oh no you don't.
On July 5, we posted a piece on this very subject - with citations - illustrating that in the real world in which most of us live, this is an absurd thing to say - even according to NFIB's own members! It was a pretty good post, so we'll just repeat it here:
In this weeks’ Business Insurance magazine, a trade publication for the insurance industry, our friends at the U.S. Chamber of Commerce have announced their new, or rather recycled PR messaging trying to link the relatively infrequent litigation by consumers against corporations, and job loss. And that's so they can justify their campaign to strip everyday Americans of their legal rights - so-called "tort reform."
Nothing like trying to exploit the country’s economic crisis with myths and fear-mongering to pad the bottom line of their members. Seem like a shrill thing to say?
Well, we decided to see what businesses themselves really think about this argument, as opposed to their lobbyists and PR spokespeople. If any sector of the business world were going to care about this, it would have to be small businsses, right? So we checked out the most recent “Small Business Problems & Priorities” survey issued by the National Federation of Independent Businesses (NFIB), a “small business” lobby group that is one of the Chamber’s closest allies in their fight to limit corporate liability for wrongdoing. We started to look down the list of 75 issues that are important to NFIB’s members. And we looked. And we looked. Finally, we hit #65: “Cost and Frequency of Lawsuits/Threatened Lawsuits.” That’s right, this issue ranked 65 out of a possible 75 matters that small businesses care about, just below "Solid and Hazardous Waste Disposal."
Wow, that's some crisis. The Chamber is right about one thing though. There’s nothing new here. They’ve been trying to make this failed argument for years. Check out this 2004 White Paper from the Center for Justice & Democracy, Small Business and “Tort Reform”: Much Ado About Nothing and Congressional testimony here.
The Economic Policy Institute looked at this issue as well. Here’s what they found:
There is no historical correlation between the inflated estimates of the costs of the tort system and corporate profits, product quality, productivity, or research and development (R&D) spending. Evidence suggests that the tort system, without the proposed restrictions, has actually been beneficial to the economy in all these areas.… [S]ignificant tort law change would be more likely to slow employment growth than to promote it. Endlessly repeating that so-called ‘tort reform’ will create jobs does not make it true.”