Tuesday, May 19, 2020

Holding the States and Cities Hostage to Enable Corporate Recklessness

by Neil H. Buchanan

Mitch McConnell announced earlier this month that he, Donald Trump, and their Republican enablers will "take a pause" before moving forward on any further economic relief bills.  And why not?  Democrats capitulated to McConnell's insistence that the bills that have been passed thus far leave out states and cities, which desperately need fiscal relief.  Meanwhile, Lindsey Graham has said that extending unemployment benefits will happen "over our dead bodies."

On the other side of the ledger, there is still a half-trillion dollar slush fund that Trump's Treasury lackey Steve Mnuchin can dole out to Republican-friendly corporations.  The deal so far, just as it was with the 2017 tax cut, is to provide crumbs to the masses and feasts for the wealthy.  But it is always possible to grab for more, and McConnell knows a good hostage when he sees one.  What does he want?  An end to corporate accountability, of course.

Here, I want to discuss McConnell's insistence on holding up aid to genuinely needy and essential recipients like state and local governments and to explain why his opportunistic decision to tie any such aid to "lawsuit protection" for businesses is nonsensical.  Although I have reluctantly concluded that Democrats should grit their teeth and pay the "corruption premium" that Republicans have demanded, allowing McConnell to get away with this heist would represent perhaps his most cynical success yet (outside of his court-packing schemes, obviously).

My recent two-part column on Verdict (Part 1 here and yesterday's Part 2 here) lays out the case for aid to state and city governments, both as a matter of sound public health policy and anti-depression economics.  Meanwhile, two of my recent Dorf on Law pieces (here and here) have grappled with the question of how one knows when a politician is abusing a crisis to push forward an unrelated, preexisting agenda.  Both pairs of columns are relevant here.

In that most recent Dorf on Law piece, I picked up on a comment from Professor Dorf that assessments of a politician's efforts to advance an agenda during a crisis "will depend in part on what one thinks about the policy's merits."  That is, if we think that a policy made no sense before the crisis, then it would take something special about the crisis itself to justify it; and if the policy was eminently sensible pre-crisis then it would take something unique to make it a bad idea now.  As a matter of fact, however, most of the Democrats' preexisting agenda (for example, universal health care, paid sick leave, and so on) is actually even easier to justify now.

I am against government waste as a general matter.  During a crisis, however, even wasteful government spending can do good things, which means that I would approve of paying people to dig holes and then fill them back in (or simply to stay home) in Spring 2020 but not in most other circumstances.  I am also against regressive tax cuts in general, but unlike wasteful spending that actually does some good during a crisis, regressive tax cuts are still a bad idea today because they not only do not increase long-term growth but they waste money by giving it to people who will not spend it now.  It is a loser from both the short- and long-term perspectives.

Having the federal government provide funding to states and cities is generally a good idea only in certain contexts, such as equalizing school funding or preventing race-to-the-bottom destructive competition between states.  Providing emergency funds to states and cities now, however, is not just a great idea but is absolutely necessary, because without it, millions more people will be laid off and states and cities will not have the money to run their public health systems and the many other crucial things that the federal government does not do.

One would think that moving forward on a good idea -- an idea that one might even call an existential imperative -- would not require a negotiation.  "Hey, extraterrestrials have sent us a message that they plan to shoot a death ray from a ship sitting high above Nebraska, destroying Earth.  We can shoot it down and end the threat.  Should we do it?"  The answer is not: "Well, what can I get out of this crisis?"  It should not be, but have you seen the Republican Party lately?

As soon as Republicans recaptured the House of Representatives in the 2010 midterms, they had the brilliant idea to manufacture a political crisis in order to force President Obama to make spending cuts that they had not been able to get him to adopt during the normal budgeting process.  These geniuses decided to threaten not to increase the debt ceiling, thus supposedly forcing Obama not to spend already-appropriated funds when the country reached that arbitrary ceiling.

Leaving aside the thousands of words that Professor Dorf and I published discussing the constitutional questions raised by the series of fiascoes that followed, the motivating idea from Republicans was always a head scratcher.  They insisted that Obama was the one who "wanted" to avoid hitting the debt ceiling and defaulting on our obligations, so they were going to force him to meet their demands before they agreed to "allow" him to spend the money that they had ordered him to spend in Republican-written budgets.

After a foolish first go-round in which Obama played the game the Republicans' way (resulting in the now-infamous "sequester" and other historical jokes like the "supercommittee"), Obama soon found his footing and was able to get Republicans simply to do what was necessary as a nonpartisan matter: prevent the U.S. government from defaulting on its obligations.

Even so, Republicans continued to play chicken with the debt ceiling, coming within days on multiple occasions of causing a global financial crisis and the end of the U.S. dollar's central role in international finance.  The consequences of default would have been disastrous, but Republicans proceeded as if avoiding that disaster was something that they would permit Obama to do only if he satisfied their demands first.

Today, Republicans are again playing the same game, pretending that saving the states and cities from collapse is somehow something that Democrats should pay a political price to achieve.  During the debt ceiling crisis years, I occasionally wondered why Republicans' demands had not expanded beyond budgetary matters to include anything else on their wish list, such as outlawing all abortions or making labor unions illegal.  Why not go there, given that their negotiating position boiled down to: "You care about not harming these innocent hostages, and we'll promise not to shoot them if you do what we want"?  Nothing about that position limits the subject matter of the extortion demands.

And that is what McConnell has decided to do now.  The crisis of state and local governments should not be tied to anything else, because addressing that problem is good for everyone.  Even so, McConnell has decided that "lawsuit reform" is his price for doing the right thing.  What is going on?

As I noted above, assessing the merits of a policy in non-crisis times is at least a key starting point for determining whether the policy makes sense in the midst of a crisis.  What are the merits of the Republicans' obsession with shielding businesses from lawsuits -- an obsession that predates the COVID-19 crisis by at least a half-century?

The fact is that Republicans have unfortunately already had a great deal of success in limiting lawsuits against business defendants across all areas of law: dangerous products, unsafe workplaces, environmental damage, and so on.  Where did that success come from (other than the most cynical answer, which is the loads of corporate money supporting this ongoing campaign)?

The big lie that anti-lawsuit lobbyists were able to implant in people's minds was that there had been an "explosion" of lawsuits across the country.  Heavily funded right-wing research (often through gifts to universities) pushed the lie forward by pointing to a surge of lawsuits in the 1970's.  That surge, however, had been in response to thousands of cases of mesothelioma and asbestosis caused by asbestos, lawsuits that were completely meritorious and that led to culpable parties creating trust funds to compensate the victims.  Take out those asbestos suits, and there was no "explosion of litigation."

What better, then, than to come up with a poster child for supposedly frivolous litigation, the "McDonald's Hot Coffee Case"?  Yesterday, I happened upon a very good, short summary of the real facts of that case, which all readers are hereby strongly advised to read.  Most of the public mythology about that case is so far off base that it is difficult to know where to start, but I will at least note that the plaintiff in that case initially asked McDonald's to pay only for her $11,000 in direct medical expenses for third-degree burns to her groin and thighs, and even though the company knew that this was a widespread problem, it rejected the offer and proceeded to trial.

Even though the case was nothing like the public caricature that corporate PR firms painted, it became a cause celebre even for leftish types -- including standup comics, "The Daily Show with Jon Stewart," and especially "Seinfeld."  That the existing legal system already had plenty of guardrails in place against frivolous suits (including, for example, the judge in the McDonald's case itself reducing punitive damages by more than 80 percent) meant nothing.  There was, everyone became convinced, an epidemic of baseless litigation against innocent companies.

As an initial matter, then, there was no need for lawsuit reform before 2020, and certainly no additional measures were needed beyond those that corporate lobbyists and Republicans had already pushed through over the last few decades.  Even so, as I noted above, there are times when policies that were unsupportable before a crisis become essential during a crisis.  Is additional lawsuit protection for corporations somehow the same as, say, paying people to stay home during a pandemic?

The argument is apparently that businesses are scared stiff about being sued by workers and customers if new cases can be traced to a particular business after reopening.  Weirdly, this ignores one of the arguments that business lobbyists usually make when they oppose consumer or worker protection laws, which is that "the market" will discipline companies so that they dare not, for example, use tainted ingredients in restaurant food.  Businesses that want to stay in business, the thinking goes, fear the wrath of customers and workers running away from them.

That theory is tendentious at best, but it is based on the obvious truth that businesses need people to trust them enough to become their customers or work for them.  A business that currently worries about whether customers will come back, or whether workers will risk working for them (or, gulp, actually try to unionize), has a strong incentive to convince people that the business is safe in the post-lockdown world.

Why, in that environment, would a business want people to hear that the government just made it impossible (or at least more difficult) to sue companies that negligently or recklessly (or perhaps even knowingly or purposefully) endanger their customers and workers?  The answer can only be that businesses think that they can get away with dangerous behavior, somehow avoiding public blame for the damage that results.  Lawsuits have the pesky feature of discovery, where damning evidence actually comes to light.

In any case, the question of whether this is good public policy in the current crisis can only be answered in the affirmative if the net benefits of giving businesses carte blanche with public health exceed the costs.  Knowing that individual businesses will have every incentive to test boundaries and hope to get away with dangerous behavior raises a collective action problem.  Even if business lobbyists and Republicans reflexively oppose lawsuits and other forms of regulation, sometimes businesses need to be protected from themselves.  Just as bar-goers cannot be trusted to socially distance on their own, businesses cannot be trusted absent the fear of lawsuits to do what is in their own self-interest.

Again, however, the big picture here is that McConnell and the Republicans -- even if they had a good argument to further reduce corporate liability -- are tying this issue to the unrelated issue of aid to states and cities.  They are, therefore, holding us all hostage to their efforts to allow businesses to harm us without consequence.

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