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Senate’s Asbestos Bill: Ticking Time Bomb for Taxpayers

This week senators voted to bring S. 852, the Fairness in Asbestos Injury Resolution (FAIR) Act to the Senate floor for debate. Although its supporters portray this proposal as a way to control rapacious trial lawyers and protect businesses from unfair claims, conservatives have reason to be skeptical.

The legislation, sponsored by Senate Judiciary Chairman Arlen Specter (R.-Pa.), would establish a $140 billion national trust fund that would compensate asbestos exposure victims and resolve their legal claims. Despite months of negotiations with various "stakeholders," Specter is still working to "improve" the bill. A great amount of uncertainty surrounds the proposal’s final language as well as how Congress will respond to the fund’s inevitable bankruptcy. Unfortunately, no amount of tinkering or tweaking at this stage will improve the FAIR Act.

The FAIR Act aims to remove the bulk of asbestos litigation from the court system and resolve it through a no-fault administrative process. The bill’s $140 billion trust fund would be financed through involuntary "contributions" from defendant firms, insurers, and bankruptcy trusts. Yet, no company knows its expected payment level since funding formulas are still in flux as supporters struggle to obtain enough votes for passage. Last minute exemptions and "carve-outs" may force firms to pay more than they might have otherwise expected.

The fund’s fiscal viability is also uncertain. Supporters of the plan cite a cost estimate from the Congressional Budget Office (CBO) and suggest that the trust fund will be fully solvent over its decades-long lifespan. Yet, CBO concludes that the fund may or may not have adequate resources noting, "There is a significant likelihood that the fund’s revenues would fall short of the amount needed to pay valid claims, debt service, and administrative costs." CBO’s analysis is just another in a long list of "maybes" concerning the fiscal impact of the legislation. Taxpayers deserve a better answer.

Some opponents argue that the bill’s medical criteria are too strict and prevent some claimants from receiving compensation. Testifying before the Judiciary Committee last year, Dr. Laura Welch with the Center to Protect Workers Rights stated, "If [the] current level of the trust is insufficient to compensate these individuals, we must increase the funding." It is reasonable to expect Senators to offer amendments that would expand, rather than reduce, the number of individuals eligible for compensation. Weakening the plan’s already questionable medical standards would only hasten the financial demise of the fund.

Proponents argue that taxpayers won’t be on the hook once the fund goes bankrupt. Since when do fiscal conservatives blindly accept the assurances of politicians that a given program will be less expensive than expected? Even Senate Budget Committee Chairman Judd Gregg (R.-N.H.) and ranking Democrat Kent Conrad (D.-N.D.) aren’t convinced. They plan to offer a budgetary point of order against bill.

Supporters of the bill have also argued that if the trust fund goes broke, victims can always go back to the courts, which is a ridiculous suggestion. This entire bill was written because supporters think the courts can’t handle asbestos claims. Does anyone seriously believe that members of Congress will simply dump victims back into that very same court system when the trust fund goes bust? Lawmakers will look to someone for the additional money to keep the fund afloat — and the first "someone" they’ll find is the American taxpayer.

Last November, the Government Accountability Office issued a study that examined four existing federal programs whose elements bear a resemblance to those in the asbestos legislation. The report warned that "the federal role in all four programs has expanded significantly over time" and that "policymakers must carefully consider the cost and precedent-setting implications of establishing any new federal compensation programs …" S. 852 would create one of the most vaguely-defined and fiscally-volatile entitlements in recent history, and the more information supporters provide, the more ambiguous the picture seems to become. Without stricter medical criteria written into the legislation itself, taxpayers will be trapped in a trust fund solvency guessing game for years.

A more effective and less costly remedy for taxpayers would be the passage of legislation that contains strict medical criteria, while extending legal filing deadlines so that a claimant can pursue a case if he or she becomes ill in the future. Such a bill would benefit victims, businesses, and taxpayers by ensuring that only legitimate claims are considered by the court system.

Congress now has before it a choice: It may select a medical standardsmand litigation reform bill that provides victims an end to the asbestos issue, or it may choose Senator Specter’s FAIR Act, which offers only one assurance: taxpayers will have to bail out the trust fund at some point in the future.

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Written By

Mr. Sepp is vice president for communications with NTU.

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