The ChamberPost

$55 billion is "practically nothing"?

by Bryan Quigley

Earlier this week, the respected medical journal Health Affairs published a study that estimates the negative cost of America’s broken medical malpractice system at $55.6 billion a year. By any measure this is a huge number, greater than the combined 2009 budgets for the Departments of Commerce, Interior and State and the entire legislative and judicial branches. It’s also greater than the cost of 270,000 houses at the current U.S. median price for new homes. In fact, the $556 billion projected ten-year cost of medical malpractice is equal to more than 50% of the total $940 billion cost of President Obama’s new health care law over the same period!

Most Americans realize the defects of the current medical malpractice system and support reform. But in the bizarre universe of Washington, the trial lawyers’ lobbyist group thinks $55 billion is chump change. In a recent blog post from The Hill, this group amazingly claims that reforming medical malpractice “will do practically nothing to lower health care costs.”

The American people know this claim is ridiculous.  They understand that the fear of lawsuits drives doctors to practice defensive medicine, which increases health care costs for everyone.  In fact, according to a Massachusetts Medical Society study, the practice of defensive medicine is so widespread that 80 percent of doctors routinely order extra tests to try to avoid being sued, which adds billions of dollars to our nation’s health care costs.

While six in ten Americans called for the inclusion of meaningful medical malpractice reform in the health care bill, Congressional leaders ignored their voices.  When Congress revisits this issue in the future, they should listen to average voters who want solutions that will decrease costs for physicians and patients, not Washington trial lawyers who see $55 billion as chump change. 

September Most Ridiculous Lawsuit Poll – The “All the Tea in China” Edition

by Bryan Quigley

Not content with merely suing for all the tea in China, a Las Vegas man recently brought a lawsuit against a law firm for $38 quadrillion dollars.  For those keeping score, only $24 trillion is in current circulation … not just in the U.S. but in the entire world.  So, regardless of the merits of the case, one plaintiff in this month’s Most Ridiculous Lawsuit Poll is literally suing for more than all the money in the world. 

But let’s quickly take a look at the lawsuit itself.

The plaintiff was a consultant with a minor contractual dispute with a mining company, which had defaulted on a loan and was being sold by a capitol property group.  But before it could be sold, the plaintiff put a lien on the property for back payment of 16 months of consulting work.  The amount of the lien?  A cool $918 billion. 

How did he get to that number?  The Daily Herald reports that the plaintiff “said the property has been valued $36 billion and asked for 12.5 percent of that value, $4.5 billion. He also asked for additional compensatory damages of four times that amount and punitive damages of 200 times the amount, which added up to $918 billion.”  But when the capitol property group filed a lawsuit to remove the lien, the plaintiff then “filed a second complaint for $38 quadrillion, having multiplied the $918 billion complaint by 204 two times.”

The perplexing math in this lawsuit might make it the most ridiculous of the month.  But before voting, check out the other nominees:

• An addicted video game player sues a game maker for his inability to function in the real world;
• A lawsuit in California wants to prohibit minors from “liking” any Facebook pages, pictures, comments or ads without parental approval;
• An upset teenager who intentionally crashed her car into oncoming traffic in a suicide attempt sues the estate of the pregnant woman whom she killed;
• A self-proclaimed “anti-feminist lawyer” sues nightclubs for violating his civil rights by charging men more than women on “ladies nights.”

Go to FacesOfLawsuitAbuse.org and cast your vote before the month is up.  And while you’re there, check out last month’s Most Ridiculous Lawsuit winner: the burglar who sued the men who captured him, claiming a rough citizen’s arrest.

Obama NLRB Prepares To Eliminate Right to Secret Ballot for Union Organizing

by Mike Eastman

And so it begins. The Obama Board has commenced the process that will likely lead to the reversal of a number of important precedents. On August 27, 2010, the last day of Member Schaumber’s term, the Board issued a multitude of decisions, several of which were contentions. Perhaps the most significant involves the precedent established in Dana Corp. (commonly referred to as Dana/Metaldyne), 351 NLRB 434 (2007). In that case, the Board gave employees the right to demand secret ballot election if a union and their employer tried to circumvent the election process by agreeing to card check recognition. Prior to this decision, employees had no way to demand an election if the employer agreed to recognize a union based on authorization cards.

On August 27, 2010, the Board, with Republican Members Schaumber and Hayes dissenting, issued its decision in Rite Aid Store #6473, 355 NLRB No. 157, finding “substantial issues concerning voluntary recognition arising under the Board’s decision in Dana.” In conjunction with the decision, the Board issued a Notice and Invitation to File Briefs. In it, the Board stated:

Dana was decided nearly 3 years ago. To date, over 1,000 requests for voluntary recognition notices have been filed. As a result, the Board is now in a position to evaluate whether its decision in Dana and the procedures developed to implement that decision have furthered the principles and policies underlying the Act. In addition, parties to voluntary recognition and affected employees are now in a position to inform the Board whether Dana and the procedures implemented pursuant to Dana have advanced or hindered employees’ choice of whether to be represented and the process of collective bargaining that should take place if employees choose to be represented.

The Board has requested briefs to be filed by Nov. 1 addressing whether the Board should modify or overrule Dana. The Board also invited comments on several specific questions and invited the submission of empirical data and factual descriptions of their experience under Dana.

Members Schaumber and Hayes wrote a strong dissent defending the Dana decision and noting that it has not created uncertainties to destroy the incentives for voluntary recognition, as had been predicted by the dissent in Dana. Schaumber and Hayes recount statistics showing that since the Dana case was issued, the regional offices have received “1111 requests for voluntary recognition notices, 85 election petitions were filed, 54 elections were conducted, and in 15 of those elections employees voted against the voluntarily recognized union, including 2 elections in which a petitioning union was selected over the recognized union.” The dissent concluded that these statistics show that “we already have empirical evidence showing that Dana has served its purpose of protecting employees’ free choice without discouraging voluntary recognition or the overall process of collective bargaining. There is not a scintilla of objective evidence to the contrary.”

In a concurrence, Chairman Liebman responded to the dissent stating that she was interested in what members of the labor-management community had to say about this data and its lessons. She noted that the data tell nothing about hypothetical labor agreements that were not reached due to the parties concerns over Dana. She also questioned whether the “asserted benefits of the Dana regime outweigh its costs” noting in a footnote that the recognized union was not rejected in 99 percent of cases and so “it is arguable that Dana did not serve any clear purpose.”

It is ironic that the first major case the Obama Board is moving toward reversing will actually deprive employees of rights under labor laws. While the majority opinion goes out of its way to say that it has not made a determination on the merits of reversing Dana Corp. or MV Transportation this is the first step in that process. The very active period that Board observes have long predicted has now begun. You can bet that organized labor will file briefs to ensure the record supports overturning this decision. Employers and counsel would be wise to file briefs as well to provide balance to the record and ensure that it accurately reflects experiences under these decisions.

Human Rights Watch Again Misunderstands International Labor Law

by Mike Eastman

Last week, Human Rights Watch issued a report, A Strange Case: Violations of Workers’ Freedom of Association in the United States by European Multinational Corporations, alleging to detail “ways in which some European multinational firms have carried out aggressive campaigns to keep workers in the United States from organizing and bargaining, violating international labor standards and, often, US labor laws.”  In response to a story about the report, representatives from the U.S. Chamber and the U.S. Council for International Business sent the following letter to the Financial Times:

The Human Rights Watch report referenced in your September 2 article “Groups attacked on US labour practice” reflects a fundamental misunderstanding of international labour standards and US labour law.

In the first instance, European Union labour laws do not define international labour standards. International Labour Organization conventions explicitly allow for different national approaches in their application. If you follow the logic of the HRW report, any country that does not apply EU labour law is in violation of international standards. This is sheer nonsense.

Second, US labour law is consistent with the principles and policy objectives that underpin the ILO’s fundamental labour rights. The fact that US and EU labour laws differ in technical details does not make US laws “weak”.

Finally, US labour law is clear that employees have a right to choose whether to join a labour union. There is no international standard against “discouraging workers from forming unions”. Indeed, the ILO recently held that an employer’s right to freedom of expression and opinion during union organising is consistent with the principles of freedom of association as they are defined internationally, and confirmed that employers have the right to provide employees with information that an employee can use to decide whether – or not – to join a union.

We anticipate publishing a more substantial response to the HRW report at a later date.

When is a Tax Incentive Not a Tax Incentive?

by Pat Cleary

Today, the President will travel to Cleveland in the industrial heartland to announce a series of tax and other incentives – most targeted at business – ostensibly aimed at stimulating the anemic economy. But like all things too good to be true, this doesn’t quite live up to the White House hype.  Taken together, they are of dubious job-creating value, but worse yet, the ultimate burden to business – tax and otherwise – will far exceed any benefit they may bring.

Take for example the research & development tax credit. This provision has routinely been renewed without controversy essentially for 3 decades until last year. The investment tax credit, too, seems unassailable on its face. But in making this proposal, the Administration trumpets its central weakness pointed out by the WaPo in its editorial last week, i.e., the abject lack of business expertise among the President’s advisers or Cabinet members. This is a proposal that someone unfamiliar with business would think that business would like. In a Wall Street Journal article on the topic today, one CEO says, "No one goes and builds a plant just because of a tax break. What's really needed is a thoughtful, cogent tax policy that everyone—consumers and businesspeople—can rely on for a number of years."

And therein lies the rub. The biggest impediment to business investment is not lack of capital – they have a record $1.8 trillion in reserves – but rather uncertainly brought about by the policies wrought by this Administration and the Congress. Think of the investment tax credit as an incentive to buy a house built on a marsh, or a flood plain. Would you take that deal?

Meanwhile, reports that the Administration is planning to increase taxes on those companies earning over $250,000 a year – which even the President’s former director of OMB says is a bad idea – will land disproportionately on small business. 48% of our sole proprietorships, partnerships, and S corporations would be hit with these tax hikes and beyond the direct hit, there is the hit to their customers. Although only 3% of all U.S. households would have to pay higher taxes, this group accounts for a whopping 25% of consumer spending.  As Mark Zandi argues: “If they pull back, even a bit, the recovery could be derailed.”

And so while the headlines from today’s event will tout massive tax break for business, we urge you to read the fine print. At the end of the day, the job creation potential is negligible, the stimulative effect nil and the cost to business - large and small - substantial.

The Importance of Not Raising Taxes

by Brad Peck

The WSJ finds Mark Zandi Notable & Quotable:

I wouldn't raise anyone's taxes in 2011. I mean, I think the recovery is just too fragile and we can't take that chance...In my view, the reason why businesses aren't hiring—the key reason is because of a lack of confidence. They're just nervous, flat out nervous. And we have to provide some certainty in [taxation]. From an economic perspective, the sooner the better.

Small Business Feeling Squeezed

by Brad Peck

More small business stories, this time from the Washington Post:

Last year, even as he struggled through the worst of the recession, Chris Upham said revenue at his District-based real estate and construction businesses doubled -- allowing him to hire two agents. But Upham said he hasn't increased his staff thus far in 2010 and he doesn't expect to for the remainder of the year. That's because his taxes rose sevenfold. And he said he anticipates they'll increase again if the Bush tax cuts for people earning $250,000 and above expire at the end of the year. As small businesses try to plot their recovery, attention is turning to what many owners consider burdensome policies -- higher taxes, new accounting procedures and health-care mandates. Even as the government tries to help with an array of small-business initiatives, many owners say the intervention is as much a hindrance to hiring as the faltering economy.

...In all, the administration has implemented about a dozen small-business programs, including a health-care tax credit; more opportunities for women business owners to receive government contracts; and cuts in capital gains taxes...But Brian Bethune, chief U.S. financial economist at IHS Global Insight, asserts that the initiatives coupled with numerous other new regulations are making owners feel overburdened, overregulated and less secure about the economy. They may see it as more interference," Bethune said, "they see it as bureaucratic intrusion."

Some business owners and advocates complain that some of the programs contradict one another. Stephanie Cathcart, spokeswoman for the National Federation of Independent Business, said benefits from the payroll tax exemption business owners use when they hire unemployed people are mitigated by provisions in the health-care overhaul law that reduce a tax credit when businesses hire. "It's counterintuitive," she said. "Frankly, a lot of these initiatives fall short."

...Dinesh Sharma, president of government contracting firm Washington Business Group in Chantilly, said he ruled out using the payroll tax exemption, believing the savings couldn't justify the tens of thousands of dollars he'd spend in salary and health insurance for a new employee. "We're not large enough to hire someone just to take the benefit of a small tax break," he added. "The burden is more than the benefit."

Tax Hikes Would Make Job Market Worse

by Brad Peck

Former OMB director Peter Orszag has his first piece out as a NY Times columnist and gives us the lines of the day:

...no one wants to make an already stagnating jobs market worse over the next year or two, which is exactly what would happen if the cuts expire as planned. Higher taxes now would crimp consumer spending, further depressing the already inadequate demand for what firms are capable of producing at full tilt.

Labor Day 2010

by Pat Cleary

It is by now an article of faith that the AFL-CIO and their gloomy allies at the Economic Policy Institute will inevitably greet Labor Day with a grim assessment of the state of the American worker. Yet like a broken clock that is accurate twice a day, this year they may have inadvertently stumbled upon the truth. In their blog post, they point out - correctly - the persistently high rate of unemployment and the anemic rate of job creation. To be sure, this is not one of the better Labor Days for America's workers. Lest you need any confirmation beyond what you hear in your own neighborhood and workplace, here's a map that pretty dramatically shows the oppressive march of unemployment from January 2009 to today.

Yet through this gloom, employers -- working men and women all -- have persevered. As you'll see from this fact sheet, employers collectively have spent $6.5 trillion on wages and salaries and another $1.5 trillion on benefits. According to the Census Bureau, over 170 million workers receive employer-provided health care -- voluntarily - at a cost of $637 billion, a number larger than the entire GDP of the country of Turkey. Over 55% of employers with over 100 employees provide both undergraduate and graduate educational assistance to workers.

Spend some time with any group of employers - and employees - and you will hear near-heroic stories of firms large and small who have labored mightily to keep from laying off employees, by having near-idle employees doing inventory, tidying the shop or other tasks - often at great cost to themselves and their companies. The fact is that through some of the worst economic times this country has experienced, employers have stepped up, have soldiered on, have continued to provide opportunity and create wealth for some 139 million employees in the workforce. And they do this while navigating the labyrinth of new requirements on health care, looming tax increases, voracious trial lawyers and a very long wish list of items that will make it harder and harder for them to compete. And so on this Labor Day 2010, when there is precious little else to celebrate, we honor the employees and employers who work side-by-side every day, imbued with that unique blend of American capitalism and optimism, who "strive valiantly," as Teddy Roosevelt said, in the hopes of more prosperous Labor Days yet to come.

Can This 'Marriage' Be Saved?

by Pat Cleary

That is essentially the crux of this WaPo editorial entitled, "Troubled Marriage," subtitled, "Feeling scorned by the president, big business is turning to the GOP How fair is that?"

How fair, indeed.

The piece opens with a mention of this piece by hedge fund founder Daniel Loeb - former Obama classmate and fundraiser - accusing the Obama Administration of undermining the principles of free-market capitalism. (Among his points, Mr. Loeb cites the new credit card bill as an example, noting, "The effect is a redistribution of wealth from people who pay their debts on time to those who do not." Yeah, we knew that.)

The WaPo goes on to wring its hands over uncertainty, but quickly dismissing it due to lack of mention by Ben Bernanke in Jackson Hole. To be fair, Bernanke had a lot of ground to cover in Jackson Hole, and chose to focus on other things. But there is no doubt that uncertainty continues to bedevil business. This is the twin uncertainty that US Chamber economist Marty Regalia noted in the Labor Day press event -- uncertainty about the market and uncertainty about government policy, brought to you by the Obama Administration.

The Post ends with a "Why can't we get along?" plea, but it is a little disingenuous. To the question, one might say, "Gee, I don't know - maybe it's the uncertainty, maybe it's the planned higher taxes on small business, maybe it's the increased costs of health care, maybe it's the the increased regulations, maybe it's this mind-boggling chart of looming workplace legislation from the White House's allies in Congress."

Add it all up and there is plenty of cause for concern. If this "marriage" is troubled, it's because business has proved an all-too convenient whipping boy for this Administration, and an all-too convenient paymaster for its long wish list. If the White House wants a better relationship with business, maybe they need to look not only at their rhetoric but at the substance of the job-killing policies that they are advancing.