Asbestos Bill Boosts Deficit, CBO Warns

Senate litigation reform proposal won't generate enough cash to pay all claims

Washington

The asbestos litigation reform bill now before the U.S. Senate is likely to boost the federal budget deficit over the next 10 years, and contributions into the victim compensation fund it creates are unlikely to be adequate to pay all claims, the Congressional Budget Office has warned.

The revenue collection stream that would be generated by the legislation is "highly uncertain," the CBO added.

The American Trial Lawyers Association immediately jumped on the report, saying that it "confirms the fundamental flaws with the proposal that victims, public health experts, independent claims analysts and senators on both sides of the aisle have been pointing out for months."

Julie Rochman, senior vice president of public affairs at the American Insurance Association in Washington, said the CBO report had something for people on all sides of the asbestos reform debate.

"If you like the trust fund, you can point to the CBO study as saying that the trust fund created by the bill is adequately funded," she said. "If you don't like the bill, the CBO study says that there is a potential for it to be inadequate. The CBO study is another piece of data, and there have been several attempts to do a definitive study of future claims projections, but the CBO itself admitted this is an inexact science."

Ms. Rochman said she expects some attempt by the Senate to pass the bill, "but it remains deeply flawed, and success in getting it through the Senate will depend on whether those flaws can be fixed."

The CBO estimated in the report that, in the first 10 years, the victim compensation fund created under the reform bill would have to borrow almost $8 billion to meet injury claims because more than half of all anticipated claims would come in that initial period, outstripping industry contributions.

"The interest cost of this borrowing would add significantly to the long-term costs faced by the fund and contributes to the possibility that the fund might become insolvent," the CBO said.

The CBO estimated the fund would increase projected budget deficits over the 2006-2015 period by about $7 billion, excluding borrowing costs, because payments and other costs over the first 10 years of the fund would be $70 billion, while contributions would be $63 billion.

The reform bill passed the Senate Judiciary Committee in May with little support from Democrats and weak support from majority Republicans, some of whom said they would vote to get it out of committee but would reserve the right to change their minds later.

However, the bill is being backed by the White House, and Senate Majority Leader Bill Frist, R-Tenn., met with insurance and defendant company officials before the August recess to ask them to help him get it through the Senate.

Reacting to Sen. Frist's comments on the Senate floor on July 29 that "it is my intention to bring that bill to the floor and pass it this fall," Senate Minority Leader Harry Reid, D-Nev., was openly derisive.

"The interest cost of…borrowing would add significantly to the long-term costs faced by the [asbestos] fund and contributes to the possibility that the fund might become insolvent," CBO says.

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Asbestos Bill Boosts Deficit, CBO Warns

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