Tort reforms benefit state
Americans seem to be fascinated with slogans that promote something as “new and improved.” In many cases, such marketing strategies are valid and worthy of consideration because the product actually is better than it was previously. In other situations, however, the difference between the original and the sequel is often imperceptible and the benefits insignificant.
In the case of the tort reforms passed by the Texas Legislature in 1995, the “new and improved” system has had a significant impact on the state’s economy. Thanks to the civil justice reform, the average Texas household has benefited $1,078 a year in reduced prices and increased personal income. That’s one of the findings identified in a study recently performed by The Perryman Group, “The Impact of Judicial Reforms on Economic Activity in Texas.”
Historically, Texas has had a judicial system widely believed to be imbalanced. The unpredictability and risk associated with this situation added to the cost of living, as well as the cost of doing business, in the Lone Star State. During the past few years, however, the civil justice system in Texas has experienced a major metamorphosis as the new judicial procedures have produced a more efficient and effective use of resources, savings on goods and services, and a stimulus to economic development. The entire state has been the beneficiary.
The results of The Perryman Group’s analysis reveal that legal reform was a notable factor in creating a better environment for economic development within Texas. Some 195,727 new jobs stem directly from civil justice reforms.
Over the last few years, tort reform also played a role in the economic development success that led to the creation of an additional 295,151 permanent jobs. This increase also brought in $15.628 billion in additional personal income and $28.464 billion in gross state product.
$7.63 billion savings
It is estimated that the total cost of the tort system in Texas this year will be $15.482 billion. Had no reform measures been passed, the costs would have been about $25.889 billion. Although about 26.7 percent of this savings can be credited to improvements at the national level, the remainder, about $7.630 billion, is attributable to the actions of our legislators.
Over the past five years, Texas enjoyed a very modest inflation of only 1.57 percent per annum. In the absence of reforms the rate would have been 1.64 percent, a 4.3 percent climb. This reduction has brought $1.796 billion in net savings to Texas consumers in reduced prices. Translated into more easily grasped numbers, that’s about $216 per household each year.
The overall impact of judicial reform on the state’s economy for 2000 (including all direct, indirect, and induced effects) is estimated to be $23.07 billion in expenditures and $11.601 billion in gross state product. The forecast for annual personal income growth of $7.056 billion is approximately $862 per household, and the $4.234 billion expected in enhanced consumer spending will likely average about $517 per household.
While all those numbers are certainly impressive, it should be noted that by improving the competitiveness of the Texas economy, tort reform measures also have ensured consumers will receive more of the other advantages that markets provide. Among them will be enhanced consumer choice, greater innovation, higher output, and lower prices.
Yet another significant benefit wrought by tort reform is the “new and improved” flow of justice. Many dockets are now less crowded, enabling legitimate cases to be handled more expeditiously. And that’s good news for everyone.