The House Judiciary Subcommittee on the Constitution held a hearing Tuesday, “ Can We Sue Our Way to Prosperity?: Litigation’s Effect on America’s Global Competitiveness.” The testimony by Paul J. Hinton, vice president of NERA Economic Consulting, proved the answer to be, “No. No we cannot sue our way to prosperity. But we can sue ourselves into a global competitive disadvantage.”

From Hinton’s prepared statement:

One NERA study I directed on Tort Liability Costs for Small Businesses shows that tort costs are not borne evenly throughout the economy. Small businesses bear a relatively larger share of tort costs than larger businesses. For example, businesses with less than $10 million in revenues in 2008 represented

Paul Hinton

only 22 percent of U.S. business revenues but incurred 83 percent of tort costs. This is economically important because small businesses generate the majority of net new jobs, 65 percent over the past 17 years.The costs of the U.S. tort system may have effects on businesses similar to an implicit tax. The economic literature on the effects of taxes on business activity is instructive in identifying the effects of higher costs of business on economic development. This literature as well as surveys of business attitudes describe how business decisions on where to make investments and add jobs are sensitive to local costs of doing business. Tort liability costs may also affect the growth of existing businesses within the 50 states.

In another NERA study, I worked with colleagues to examine how relatively higher tort costs in the U.S. affect international competitiveness. We compared the growth of productivity in the manufacturing industries affected by asbestos litigation in the U.S. since the late 1980s to productivity growth of the same industries in other industrialized countries. We found that productivity growth in the U.S. industries affected by asbestos litigation was 0.5 percent per year slower than their counterparts in other countries. Over the period of study from 1987 to 2000, the lower U.S. productivity growth amounted to lost GDP of over $300bn, with $51bn of that loss realized in 2000. (continue reading…)

The House Energy and Commerce Committee this morning is marking up H.R. 5, the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011, legislation to control the unnecessary or excessive litigation costs that afflict health care in the United States. (Committee video. Hearing started at 10:41 a.m.)

In a timely and important contribution to the debate, the American Tort Reform Association has released a new paper,”The Constitutional Foundation for Federal Medical liability Reform.” In a news release, ATRA explained:

The ATRA paper, The Constitutional Foundation for Federal Medical liability Reform, addresses in some detail questions recently raised about whether provisions of H.R. 5 are consistent with the Commerce Clause, the Tenth Amendment, the guarantees of equal protection and due process, and the right to a jury trial.

“Citing more than 100 years’ worth of Supreme Court precedent, the consistent rejection of federal constitutional challenges to state medical liability reforms, and the opinion of the Congressional Research Service itself,” Joyce said, “our paper puts an end to any serious concern or question about the constitutionality of federal medical liability reform.

“With respect to perhaps the most important question about whether the Commerce Clause gives Congress sufficient authority to promulgate medical liability reform for the nation as a whole, it’s not even a close call. Congress has that authority.

Author of the paper is Mark A. Behrens of Shook, Hardy & Bacon L.L.P., a man who knows his civil liability issues. The National Association of Manufacturers has worked with Behrens and the law firm on numerous occasions over product liability litigation and related issues.

UPDATE (10:45 a.m.): Very timely report. Rep. Tammy Baldwin (D-WI) is making a “states rights” argument against the bill, proposing an amendment. She’s always been such a strong advocate for federalism.