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January 17, 2005
Inaugural Sneak Peek: An End To The "Compensation Culture"

The London Telegraph reports that a key element in George Bush's inaugural speech this week will be a call for an end to the "compensation culture" that has hijacked medicine and other business in America. The message comprises a part of an entire domestic reform package that includes income taxes and the entitlement bureaucracy:

Mr Bush wants to clamp down on the "tort" system of civil damages - intended to compensate victims of negligence and accidents - which costs the US economy $230 billion (123 billion), or two per cent of gross domestic product.

Mr Bush plans to cap non-economic damages at $250,000 (133,500) per case, far less than the multi-million dollar awards that have become commonplace. Medical cases are the most visible examples, but soaring damages in class actions across the commercial sector would also be restricted.

Reform would be popular with the public, who believe that lawyers are abusing the system, but is opposed by lawyers themselves, who make up a high proportion of the country's legislators.

Philip Sherwell includes intriguing and disturbing data on the net effect of the tort system in the US. Not only do torts take two percent of our GDP right off the top, but the business has proved extremely lucrative to the lawyers and bureaucrats involved. Fifty-four percent of all awards now wind up in the pockets of the attorneys or spent on administrative fees. Only 46% of the compensation goes for actual compensation, and since most of that money is subject to tax, the plaintiffs wind up seeing around a third.

These numbers represent the averages, of course. The greater abuses occur within the class-action suits -- where, like the game shows say, the stakes are higher and plaintiff's attorneys can really compete for the big money. The amount of compensation making it to the plaintiffs usually gets them a lunch at Panera, while the attorneys score fees in the millions. And these numbers don't represent the insidious nature of the problem: settlements that never see a courtroom. Class-action suits or the threat of them turn over billions of dollars in settlements, again, to the benefit of the lawyers.

Sherwell mentions that Congress will not greet these reforms with glee, since a high percentage of our elected officials are attorneys. They intend on protecting this privileged position tooth and nail. Why? The cash flow coming to them allows attorneys to continue running for Congress, where they can continue to protect the franchise. Let me put it this way: if you got to run a legal lottery where you kept 54% of every jackpot for yourself, would you vote to ban gambling?

The claims of the plaintiff bar that they want to protect the consumer are shown to be deceptive, at best, by these figures. They're keeping more than half of the compensation they claim will make their clients whole. The tort system has transformed itself into a shakedown system, a protection racket, and it's high time Congress did something about it. Now that we've sent John Edwards into retirement, perhaps we can.

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Posted by Ed Morrissey at January 17, 2005 7:26 AM

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» Why Federal "Tort Reform" Is an Unconservative Idea from Strange Women Lying in Ponds
Captain Ed wrote an enthusiastic post regarding President Bush's plans for tort reform in his coming second term. [Read More]

Tracked on January 18, 2005 10:27 PM

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