Phil Brennan
Wednesday, Jan. 15, 2003

If America is to continue to prosper in the future as it has in the past, we are going to have to take a series of steps that will restore the economic élan vital that made us the envy of all the world.

The genius of the free enterprise system that has produced the most formidable economy in all the world's history is the emphasis it places on private industry unfettered by unnecessary intrusions by the state or any other entity with legal clout.

If we are to reawaken the initiative that has driven individual Americans to create new enterprises and technological innovations and the jobs that go with them, we are going to have to remove the chains that have slowly been wound around the necks of our business enterprises. We must free them to operate in the atmosphere of freedom that has created and fostered the American dream that any citizen can achieve whatever he or she can without undue let or hindrance.

Tragically, over a long period of time we have allowed government – federal, state and local – to impose a whole host of laws, rules and regulations, many totally unwarranted, that have eaten away the vitals of a free enterprise system that fosters the American dream.

We have created a tax system that punishes success and discourages private initiative – a tax system so complicated that the code that governs it simply boggles the mind.

We have allowed our legal system to be exploited by the greed of trial lawyers whose excesses are beggaring business, driving doctors out of the practice of medicine, and burdening consumers with the costs levied on them by legal costs and the huge judgments often involved in so-called class action litigation or the multitude of frivolous lawsuits drowning the courts.

The costs of government regulation are strangling the national economy. According to last year's Grandfather Economic Reports, government regulations are costing us far more than the taxes we pay.

A report issued by the group last March revealed the startling fact that complying with regulations eats up a staggering $1.1 trillion a year ($826 billion in federal mandates, $276 billion in state & local government mandates). That consumes fully 13 percent of the economy, or $3,964 for every man, woman and child in America.

Other findings in the report:

• Adding regulation costs to $11,530 in government spending per person equates to $15,494 per person of government impact.

• Federal expenditures on regulatory activity increased 2.7 times faster than economic growth since 1960 – at 14 percent per year compounded.

The report goes on to note: "If a nation has a goal of continually increasing real income & economic living standards for its citizens, plus a strong currency and positive international trade balance, it must make sure the free-market private sector is by far the largest and fastest growing share of the national economy.

"The relative share of the economy represented by the pure free-market private sector is determined by the share of the economy controlled by federal, state and local governments – which is determined by the sum of government spending plus all costs to the private sector for compliance with government-mandated regulations.

"The larger the section of the economy that is consumed by government spending, and the higher the regulatory costs mandated, the smaller the effective share of the economic pie remaining to the 'free-market private' sector."

Said Dr. Murray Weidenbaum, professor and chairman of the Center for the Study of American Business at Washington University in St. Louis:

"I consider regulatory reform one of the most necessary items for improving and sustaining faster economic growth. Although no regulatory agency has been given the express mission to depress the economy, many of their actions have that undesirable effect. The impact of governmental rule makers is in one predictable direction, to increase a firm's cost and reduce the resources available to produce goods and services for the customer.

"The benefits of regulation should not be overlooked, but it is too generous to assume that every regulation is effective. Given the current estimate of [federal] compliance costs of $600 billion a year, a 10% reduction stemming from sensible reforms would have the benefit of a $60 billion tax cut."

Government regulations such as the absurd Endangered Species Act have crippled economic activity all across the nation simply to satisfy an elite bunch of so-called environmentalists who put the welfare of toads above that of working Americans. This farce of a law should be repealed before it costs any more Americans their livelihood.

Congress should take the time to carefully examine the army of regulations it has imposed on the nation and junk every one which cannot be justified in the light of the harm it does on the nation and its people.

For years many have urged a complete overhaul of the tax system, which is outmoded, incredibly complicated and unfair. Some recommend a flat tax, others a national sales tax. In formerly communist Russia, for example, a 13 percent flat tax has been put into effect and has given the once-faltering Russian economy an enormous boost.

Finally, we need tort reform. Brakes must be put on the runaway tort system. We can no longer tolerate the outrages being perpetrated by attorneys who view their law degrees as licenses to hold the nation hostage to their greed.

As the Joint Economic Committee of the U.S. Congress noted back in 1996:

"Individuals suffer from the high price of insurance and the increased cost of goods and services. Businesses are hurt by the higher prices they must charge to pay their insurance costs. The overall economy also suffers when productivity and growth are slowed by excessive litigation, which discourages risk-taking and slows the introduction of new products and technologies."

Says Wayne T. Brough of Citizens for a Sound Economy (CSE): "Someone must pay the litigation jackpots and multimillion-dollar awards. Like any tax, the "tort tax" is eventually paid by individuals."

According to CSE:

"The direct cost of the U.S. tort system is over $180 billion annually – roughly 1.8 percent of the nation's output. That is two and one-half times greater than other industrial nations. These estimates are conservative and do not include the substantial indirect costs of excessive litigation, such as 'defensive medicine,' or the foregone benefits of products and services no longer available or never produced due to fear of lawsuits.

"In fact, the United States is in the midst of a liability crisis, with more than 15 million civil cases being processed annually in state courts alone. Frivolous litigation increases the burden on the courts while crowding out legitimate legal grievances. On average, it takes almost 5 ˝ years for victims in injury cases to go to trial, 15 months longer than it took in 1990. And the system is a terribly inefficient mechanism for compensating victims. Less than half of every dollar spent goes toward compensation, with administrative costs and legal fees comprising the bulk of the costs."

CSE concludes:

"Critics of reform assert there is no crisis and the system works. But the data say otherwise, suggesting an increase in claims and frivolous lawsuits. For example, roughly 70 percent of medical malpractice claims result in no payments, but the median cost of defending such a case is $66,000. Claim costs have been rising three times faster than the rate of inflation. Overall, between 1930 and 1994, tort costs grew four times faster than did the U.S. economy."

Clearly, tort reform must be a vital cornerstone of any economic reform program. And we had better get to it while there's still a doctor practicing medicine in America.

As I said, the Bush program is just one step in the right direction. The other steps must follow if the program is to succeed to the extent it should. We simply must stop killing the goose that lays the golden eggs.

Phil Brennan is a veteran journalist who writes for NewsMax.com. He is editor & publisher of Wednesday on the Web (http://www.pvbr.com) and was Washington columnist for National Review magazine in the 1960s. He also served as a staff aide for the House Republican Policy Committee and helped handle the Washington public relations operation for the Alaska Statehood Committee which won statehood for Alaska. He is a trustee of the Lincoln Heritage Institute.

He may be reached at phil@newsmax.com.

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