When the U.S. Chamber of Commerce issued a 116-page report last spring that ranked California dead last among all states in the way state laws affect both hiring by private businesses and creation of new businesses, it was good for a belly-laugh.
Now the Chamber is out with another lengthy study purporting to show that California has lost at least 104,000 steady jobs because of its legal climate, which allows wronged parties to sue both companies and individuals.
The newest study doesn’t specifically compare California to Mississippi, as the spring report did. Back then, the business group claimed California’s rules that limit pollution of air and water made it inferior to poverty-ridden Mississippi when it came to new business. And yet…only 139 new businesses opened in Mississippi in 2009 (the most recent year the Chamber examined), compared with 10,087 in California. California, then, accounted for 19.5 percent of all new businesses in America, but had only 12 percent of the nation’s population. Mississippi accounted for a miniscule .00026 percent, but the Chamber liked it better.
Their Shameful Motives
The new report on legal climates can best be understood as part of an effort by the Chamber and its state affiliates to free businesses from as many obligations and liabilities as possible. It’s all done while chanting a “new jobs” mantra, even though there is scant evidence that loosening regulations or lowering business taxes causes businesses to increase hiring.
That’s especially true today when many of the Chamber’s member businesses have outsourced millions of jobs once held by Americans to Third World countries where they can pay wages that would dump American workers into poverty.
The newest Chamber effort assails what it calls a “tort tax” on California businesses, claiming lawsuit settlements and judgments in this state in 2009 amounted to just over $32 billion.
Putting that into perspective, it amounts to about one-third of the cost of the proposed California High Speed Rail System going to legal costs each year. The Chamber claims that businesses pay $4.47 in legal insurance premiums for every $1,000 of revenue, which it says amounts to a .45 percent tax on every dollar taken in by California businesses.
Of course, the Chamber’s own study indicates that less than half the cost of lawsuits in California involves anything at all commercial. “Personal tort costs” – one person suing another, divorce settlements and the like – amount to almost as much as commercial torts, while medical malpractice suits account for 12 percent of all legal settlements and judgments.
Worry About Home Foreclosures
The Chamber hastens to say that its newest study “does not provide a guide for specific legal reforms,” but it has often pushed to limit punitive judgments against companies that build faulty cars or sell rotten food or pollute drinking water. Both the national and state chambers have also tried repeatedly to limit class action lawsuits and make most consumers ineligible to sue when they believe they’ve been wronged.
Doing these kinds of things, the Chamber report says “could add hundreds of thousands of jobs in California.”
But as with all things in this kind of trickle-down economic theory, there is no proof that giving breaks to the rich or the corporate brass causes them to hire more ordinary folks.
At least the newest Chamber effort does not make the mistake of again comparing California to Mississippi. If the new report had done that, its own statistics would have found that lawsuits in the Magnolia State do even more to impede employment than in California, with the Chamber claiming its wished-for changes in the legal climate there could potentially produce at least 1.07 percent more jobs, compared to a minimum of just .65 percent more employment here.
The bottom line is that nothing in the new Chamber report establishes that California’s legal climate – with state legal rules often more generous to consumers and ordinary citizens than federal rules – is a major cause of the state’s economic malaise.
Here’s a suggestion for the Chamber’s corps of analysts, who seem to enjoy tackling big problems with voluminous studies: Figure out a way to solve the home foreclosure crisis that plagues much of California and the rest of America and you’ll go a long way toward fixing the entire economic crisis, which has created about half today’s rampant unemployment.
Mr. Elias may be contacted at tdelias@aol.com. His book, “The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It,” is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net
