Consumers, Texas Economy Benefit from Tort Reform

Today, on the steps of the Old County Courthouse, Citizens for a Sound Economy (CSE) released findings from the first comprehensive study of the economic impact of tort reforms passed in Texas in 1995. The study reveals that the average Texas household has benefited $1,078 a year in reduced prices and increased personal income thanks to civil justice reform.

“Texas has set the example the rest of the states should be following,” Paul Beckner, CSE President, said in a statement today. “We hope other states will see this study as evidence that civil justice reform is good for consumers, and good for their states’ economy.”

In order to quantify the benefits of the reforms CSE’s adjunct research fellow and highly respected economist, Dr. Ray Perryman, examined the economic trends that occurred after Texas passed tort reform.

Dr. Perryman found savings resulting from tort reforms and related factors in Texas estimated to be $7.630 billion.

News is good for consumers, who realized annual savings in reduced inflation to the tune of $1.796 billion, or $216 per household; personal income growth of $7.056 billion or $862 per household; as well as $4,234 billion or $517 per household in enhanced consumer spending.

The study also found substantially improved job prospects and a more efficient judicial system so people with legitimate cases can more expediently get their day in court.

According to Dr. Perryman, because of the Texas legal reforms, “…dockets are less crowded, and legitimate cases are handled more expeditiously.”

“Consumers are benefiting from reforms championed by Gov. Bush and passed by the Texas Legislature,” according to Texas CSE director Peggy Venable.

According to the study, the Texas judiciary was expanding 20 percent to 25 percent more rapidly than the rest of the nation from 1980 to 1995. Since the reforms were enacted, the rate of increase has reached only about half that level.

In addition to allowing consumers greater access to the courts, the legal reforms provide tremendous economic benefits to the consumers of Texas.

“Even under the current reforms, less than 25 cents of every dollar spent on litigation actually ends up in the hands of the injured parties. It is clear we have more to do,” said Venable.

The study indicates these positive impacts are likely to continue and expand over time.

Dr. Perryman also found that 195,727 new jobs have been created in Texas are directly attributed to Texas civil justice reforms, and the output (gross state product) of Texas has increased by $11,601 billion.

“It can be readily seen that the reforms have contributed substantially to the outstanding economic performance of the state in recent years,” according to Dr. Perryman. “Along with the creation of nearly 200,000 jobs, tort reform played a role in the economic development success that led to the creation of an additional 295,151 permanent jobs over the last few years. This increase also brings $15.618 billion in additional personal income and $28.464 billion in gross state product. These benefits are over and above those figures attributed directly to tort reforms.”

Venable said these benefits could be short-lived. Trial lawyers are using their political power and money at the state and federal levels to try to discredit and roll back civil justice reforms. In Texas during the 1998 election cycle, trial lawyers provided 80 percent of the Texas Democratic Party’s contributions.

“All the trial-lawyer money in the world cannot change the facts. Passing legislation designed to reduce the number of frivolous lawsuits, like those passed in Texas and signed by Governor Bush, will help return our legal system to decent, honest Americans with real grievances,” said Venable.