Visit the Press Room for more breaking news

Contact: Chris Mather
202-965-3500 x369
202-725-5252 (Cell)

Hearing Confirms Asbestos Bill is Bad for Victims, Bad for Taxpayers
S. 3274 Would Give $20 Billion Bailout to Asbestos Companies That Knowingly Poisoned People and Would Leave Many Victims with Nothing

(Wednesday, June 7, 2006 -Washington DC)—Today the Senate Judiciary Committee held a hearing on the re-introduced asbestos bailout bill. In response, Ken Suggs, President of the Association of Trial Lawyers of America (ATLA), issued the following statement:

“This is the same old, fundamentally-flawed bill, and the new testimony we heard at today’s hearing – most notably from the former CBO Director who said that taxpayer bailout is likely – confirms the Senate was wise to block this bill in February.

“Today’s hearing confirmed once again that this bill is bad for victims, bad for taxpayers, and bad for small business – it is nothing more than a $20 billion bailout for a handful of large asbestos companies that knowingly poisoned people.”

[Below is an analysis of former CBO Director Douglas Holtz-Eakin’s testimony]

Former CBO Director Says Taxpayer Bailout of Asbestos Fund Likely

“When FAIR Act benefits exceed fund resources, a future Congress and administration
are equally likely to turn to the taxpayer for the shortfall.”

The only analysis that proponents of the asbestos trust fund currently being considered in Congress could point to that showed that the fund is not destined for bankruptcy was that of CBO. And now today we have the professional opinion of the former CBO Director Douglas Holtz-Eakin, who oversaw that analysis, saying that he believes fund obligations will exceed revenues, requiring a taxpayer bailout.

Every independent analysis of this proposed asbestos fund (eg, Bates White, Peterson, Minority Staff of Senate Budget Committee) had already concluded that it is grossly under-funded and destined for quick bankruptcy and taxpayer bailout. This is in keeping with recent history: All existing federal compensation funds have faced shortfalls and delays – one, the Black Lung Fund, has required a $38 billion taxpayer bailout

With Holtz-Eakin’s testimony, it’s now unanimous – this fund shifts the cost of asbestos disease from the corporations responsible for it to the U.S. taxpayer.

What does Holtz-Eakin Say?

• Revenues will likely fall short.
• The fund will require massive federal borrowing at a time when budget obligations are growing.
• The fund represents a massive expenditure of federal dollars.
• Taxpayer bailout is likely.
• The sunset provisions will not protect the taxpayers or victims.
• The re-introduced bill solves none of the fundamental fiscal flaws of S. 852.
• The bill overall is not an improvement over the status quo.

On Likelihood of Taxpayer Bailout

“It is implausible to take the FAIR Act at face value. The fund envisioned is similar in spirit to the Pension Benefit Guaranty Corporation. Under current law, the PBGC is expected to rely exclusively on “private money” (assets of pension funds and premiums). It is widely agreed that these sources will be insufficient to meet pension commitments and that a future Congress and administration are guaranteed to turn to the taxpayer to make up the shortfall. When FAIR Act benefits exceed fund resources, a future Congress and administration are equally likely to turn to the taxpayer for the shortfall.”

On Impact on Federal Spending

“[I]t is straightforward that dollars flowing out of the Fund constitute mandatory federal spending – and on a potentially very large scale.”

“This is the wrong time to create new federal mandatory spending. Indeed, the most central budget challenge is the need to have less mandatory spending in the years to come.”

On How Borrowing Affects Taxpayer Liability

“The CBO (and others) estimate that the fund would face substantial start-up pressure and spend more than half of the total outlays in the first 10 years. In contrast, the anticipated revenue will arrive much more evenly over the first 30 years. As a consequence, the Administrator of the fund will need to borrow funds to bridge the shortfall. This borrowing will exacerbate Treasury borrowing at time when the retirement of the baby-boom generation and the demands of existing mandatory spending programs (especially Medicare, Medicaid, and Social Security) will likely already be straining federal fiscal policy.

“The additional borrowing will carry interest costs that will add to the level of mandatory spending and contribute to the long-term costs faced by the fund – and thus the federal budget – and raise the odds that the Fund might become insolvent.”

On Sunset

“The “Sunset” Provisions Should Not Be Taken At Face Value … This approach is extremely unlikely to insulate taxpayers from meeting the demands of the new mandatory spending.”

On Comparison to Status Quo

“[T]he FAIR Act is a puzzling initiative in that it does not directly solve any single of these perceived problems [with the existing tort system].”

On How S. 3274 Differs from S. 852

“Recent Changes to the FAIR Act Do Not Alter the Basic Problems”

On Difference Between His Professional Opinion and the CBO Report

“[M]y position at that time – Director of the Congressional Budget Office – required that my analysis take the law at face value and be devoid of recommendations. At this time, I would make the additional points: It is implausible to take the FAIR Act at face value. …”

###

As the world's largest trial bar, ATLA promotes justice and fairness for injured persons, defends the constitutional right to trial by jury, and strengthens the civil justice system through education and disclosure of information critical to public health and safety. With 60,000 members worldwide, ATLA provides lawyers with the information and professional assistance they need to serve clients successfully and protect the democratic values of the civil justice system.