When Theft Masquerades as Law

Grasping for the straw that will (not quite) break Joe Camel's back, the Clinton administration finally snookered Janet Reno into filing yet another lawsuit against the government's favorite whipping boy—the odious but still deep-pocketed tobacco industry. This time the stake is $20 billion per year, which the feds supposedly spend on smoking-related health care, mostly Medicare outlays.

Meanwhile, the U.S. Department of Housing and Urban Development, piloted by its politically ambitious secretary, Andrew Cuomo, has a plan to change the way the nation's gun makers do business. Already engulfed by litigation from 29 cities and counties for "negligently marketing" a "defective product," the gun industry could be crushed under the weight of legal action from a horde of 3,200 public housing authorities coordinated by HUD. Presumably, gun makers are responsible for defraying the cost of security guards and alarm systems installed to curb violence in public housing.

Then there's the problem of health maintenance organizations (HMOs), a litigation swamp created by a trio of feckless government policies. First, Congress allows employers, but not employees, a tax deduction for expenditures on employee health care. Responding to that incentive, most employers cover even minor expenditures rather than provide less costly catastrophic coverage. As a result, employees have little reason to limit their medical outlays, and costs not surprisingly have skyrocketed. Second, courts do not permit patients and health care providers to prescribe the contractual terms that will pertain if an accidental injury occurs. Instead, courts themselves have established "reasonable" standards of care, enforced by unpredictable tort liability. Third, to counteract extravagant tort awards and protect the assets of employee health plans, the federal government, through the Employee Retirement Income Security Act, immunizes those plans against some otherwise legitimate claims in state courts. The result of those three misconceived policies has been anger, confusion, and a potential bonanza for trial lawyers.

Tobacco, guns, and HMOs are not, of course, the only areas where litigation has run amok; but they are three of the most egregious examples. Let's examine each briefly—to see what they have in common, what issues each raises, and how we can prevent our judicial system from being exploited to exact tribute from corporate pariahs.

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More: http://www.cato.org/pubs/policy_report/v22n2/cpr-22n2.html