NCPA - National Center for Policy Analysis

Tort Costs Add to Manufacturing's Woes

December 15, 2003

One of the biggest problems manufacturing faces is not competition from overseas, but our own tort liability system. It is 3.2 percent more expensive than any other system in the world, and adds exorbitant costs to manufacturing's ability to compete, says Bruce Bartlett.

According to a new study from Tillinghast-Towers Perrin, a consulting group:

  • U.S. tort costs climbed to $233 billion in 2002, or 2.23 percent of the gross domestic product; this is like an $809 per year tax on every American, paid in the form of higher prices for goods and services, higher insurance costs, and deterioration in living standards.
  • In awards for personal injury compensation, only 22 cents on the dollar compensate for actual economic loss; the rest went to lawyers or involved punitive damages or those for "pain and suffering" that went far beyond compensating actual loss.
  • For example, it is thought that $50 billion to $100 billion is wasted each year on unnecessary medical tests that doctors order just to protect themselves from a lawsuit.
  • Pharmaceutical companies have cut back on the manufacture of vaccines in large part due to lawsuits, leaving many unprotected.

People are not unaware of the heavy cost they pay for an out-of-control legal system. Yet every effort to reform the system is blocked by the trial lawyers who have gotten rich off of it. And as the biggest contributor to the Democratic Party, they have the clout to do it, says Bartlett.

Source: Bruce Bartlett, "Tort Costs Add to Manufacturing's Woe's," National Center for Policy Analysis, December 15, 2003.


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