New Report: US Wins Gold Medal in Tort Costs

By March 16, 2006General

Towers-Perrin has issued its annual update of tort costs, and it’s a downer. if you’re not having a great day, go back to Friday Follies, as this ain’t gonna make you feel any better.

According to the report, tort costs (not legal costs, a larger number that would include legal fees for things like wills, divorces, real estate, other general transactions) for the most recent year, 2004, reached a whopping $260 billion. How depressing. This is money that is largely flushed down the drain, making rich lawyers richer. This sum represents $886 per person — every man, woman and child in the country.

It also represents over 2.2% of our Gross Domestic Product (GDP), making us once again the undisputed gold medalists in tort costs. The nearest country to us in terms of percentage of GDP is Italy. However, our 2.2% is of an $11 trillion economy. Their 1.7% is of a $1.6 trillion economy. Somebody else can do the math, but you get the idea. According to this chart, the $260 billion we spend — no, waste — on tort costs is slightly larger than the GDP of Indonesia, a substantial country. And, as you can see from the chart, the amount we squander on tort costs is larger than the entire GDP of about 150 countries. Talk about depressing!

This is a huge drag on our competitiveness as a nation, and it’s something Congress can fix today if it wanted to, by moving to limit lawsuits in every form. In fact, click here to drop your representatives a note. Next time you hear Lou Dobbs ranting about outsourcing and low wages, think about the real problems here — energy and legal costs — that are making it tougher for manufacturers to compete and are driving jobs to more favorable business climates.