The Parasite Economy: Where Deficits Come From


December 01, 1992|By DONALD R. MORRIS

HOUSTON — Houston.--The vocabulary of presidential elections -- especially the one jut past -- has a monotonous similarity. All candidates use the same terms over and over again: ''government waste,'' ''health care,'' ''deficit,'' ''balanced budget.'' These terms aren't discussed, merely mentioned, and were dozens of sound bites and official statements presented to the public without identification, only the obscure staffers who had written them could identify whom they should be attributed to.

As is often the case, foreign analysts, with no emotional entanglement on the domestic scene, do a better job of fingering problems than Americans. The Economist magazine, in a couple of recent issues, pointed out some dillies.

Worker's compensation, for example. Time was, a worker hurt on the job was out in the cold, with no rights or compensation of any description; now every state has programs to insure that injured workers are compensated. California has a beauty -- which is contributing more than its share to the state's economic collapse. Major firms, unable to shoulder the burden, are moving to other states -- taking precious jobs and tax dollars with them.

According to the governor, 600,000 employers are paying $11.5 billion in mandatory insurance compensation to cover 12 million workers. That works out to 47 cents per payroll $1, the third highest in the nation. But California ranks 30th in payouts; a totally disabled worker gets a miserly $336 a week. There is general agreement that benefits should rise and premiums fall, but the system is in the way.

For every $1 paid on a claim, the worker gets 30 cents, the medical profession gets 43 cents -- and the insurance company gets 27 cents. And all three must cough up for lawyers, since three out of four permanent-disability claims are litigated, and these bring in still more doctors, as consultants.

The real villain is ''stress.'' A couple of decades ago, everybody knew some jobs were more stressful than others; if the heat was too much you got out of the kitchen, and somebody else was happy to take your place. No more. The California state legislature in its wisdom has decreed that if even 10 percent of stress is job related, there's a court case for compensation. Claims have jumped from almost none a decade ago to about 12,000 -- perhaps half from women who claim ''emotional disability'' as the result of ''job pressure'' or ''harassment.''

Still a small proportion of total claims, stress cases are skyrocketing, and they're suspect. Los Angeles has discovered several ''medical-legal clinics'' pumping out such claims -- they use ''cappers'' to snatch people from the streets or unemployment lines to pose as victims. One such paper mill used 20 ''cappers'' and generated $100 million in claims a year. The governor would like at least to raise the job-related portion of ''stress'' to 50 percent (except for police and firemen, who know what stress is) -- but the California legislators, who have a few political stress problems of their own, won't play ball.

The Economist also went into what it calls our ''parasite economy.'' This is complex; essentially, wealth is created when someone makes something and sells it. This costs money -- the cost of production. But transaction costs can rise, raising the GNP but not the volume of goods and services. Several economists who have analyzed the trends over the last four decades have discovered that transaction activities have been growing faster than output, with the result that national-income and product statistics have overstated the improvement in average living standards; growth in per-capita output may have fallen more than 11 percent.

There are all manner of transaction activities, some more necessary than others. In the last 30 years, the number of lawyers has tripled, to about 760,000; until 1980 there were about 120 lawyers per 100,000 people; now there are 300. Federal lawsuits have tripled since 1960.

In 1956 there were 4,900 trade organizations, the number today pushes 25,000. (Health-care groups went from 117 in 1979 to 741 in 1991.) The 365 registered Senate lobbyists of 1960 now number 40,111 -- or 400 per senator (although only about 75 per senator are currently ''active.'')

All this contributes to regulatory costs. For every problem, trade associations, lobbyists -- and lawyers -- sooner or later wring a bill out of Congress. They're all ''worthy'' -- hailed by public and media alike. But we already have 130,000 federal employees attempting to inspect and enforce such acts; most are overworked (like social or parole workers ''responsible'' for thousands of cases), and total costs are rarely balanced against the gain.

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