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Remarks to Greater San Antonio Chamber Of Commerce

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Remarks to Greater San Antonio Chamber Of Commerce
April 29, 2005

Thank you, John, for that warm and generous introduction. It's an honor to be hosted by the Greater San Antonio Chamber of Commerce.

I would like to thank the Chamber and all of you in this room today for your efforts on behalf of business owners throughout our great city.

Whether it's sponsoring trade shows to boost economic development, or holding seminars to help individuals strengthen their businesses, or supporting community events, the Chamber advances the best interests of all San Antonians.

It has been a privilege to work with the Greater Chamber, and the U.S. Chamber of Commerce, to support policies that create jobs and economic opportunities in Texas and the nation.

Let me begin with some positive news. Our economy has posted steady job gains for each of the last 22 months-creating over 3 million jobs since May 2003. Job creation was up in 49 of the 50 states last year, the unemployment rate was down in 43 of 50 states. Unemployment rates have fallen across all levels of education, ages and ethnic groups.

More good news, even though figures can be tiresome: Last year, the nation's Gross Domestic Product rose at the fastest annual growth rate in 5 years. The homeownership rate increased to a record 69 percent.

Personal income in 2004 had the best annual showing since 2000. And in the past five years, overall productivity has grown at the fastest rate in 50 years.

On the home front, San Antonio has experienced 16 straight months of employment gains, adding 12,800 new jobs since March last year. Unemployment levels have fallen to 5.1 percent, below the state average.

So our economy is strong. To ensure that we continue to travel down the road of prosperity, Congress must do its part by continuing to support a pro-economic growth agenda.

This includes protecting small business owners from excessive and frivolous litigation, lowering the costs of health care and reducing taxes.

In February, the Class Action Fairness Act became law. This bipartisan, common sense bill restores confidence in America's justice system by reforming the class action system and addressing the judicial abuses that harm so many small businesses.

We've all heard of the lawsuits in which the plaintiffs walk away with pennies - sometimes literally - while their attorneys walk away with millions of dollars in fees. That problem is addressed in this bill by providing greater scrutiny of settlements that involve "coupons" or very small cash amounts.

The new law also ensures that deserving plaintiffs are able to make full use of the class action system. It allows easier removal of these types of cases to federal courts.

This is important because class actions tend to affect numerous Americans and often involve millions of dollars. Federal court is the right place for such large lawsuits.

Passage of class action reform represents real progress, but another area that needs to be addressed is the ever-increasing number of junk lawsuits.

Frivolous lawsuits harm our economy and threaten to bankrupt business owners. This is especially true of small business owners who do not have the money to defend against a prolonged lawsuit based on dubious claims.

These lawsuits also bankrupt individuals, ruin reputations and drive up insurance premiums. They make a mockery of our legal system.

Of course, many Americans have legitimate legal grievances, from someone negligently injured to a company responsible for contaminating a community's water supply. No one who deserves justice should be denied justice.

However, gaming of the system by a few lawyers drives up the cost of doing business and drives down the integrity of the judicial system.

For example, a Pennsylvania man sued the Frito-Lay company claming that Doritos chips were "inherently dangerous" after one stuck in his throat. After eight years of costly litigation, the Pennsylvania Supreme Court threw out the case, writing that there is "a common sense notion that it is necessary to properly chew hard foodstuffs prior to swallowing."

In a New Jersey Little League game, a player lost sight of a fly ball hit to him because of the sun. He was injured when the ball struck him in the eye. The coach was forced to hire a lawyer after the boy's parents sued. The coach settled the case for $25,000.

Today almost any party can bring any suit in almost any jurisdiction. That's because plaintiffs and their attorneys have nothing to lose. All the filers of frivolous suits want is for the defendant to settle. This is legalized extortion. It is lawsuit lottery.

Some lawyers file lawsuits for reasons that can only be described as absurd. They sue a theme park because its haunted houses are too scary. They sue the Weather Channel for an inaccurate forecast. And they sue McDonald's claiming a hot pickle caused a mental injury.

Defendants, on the other hand, can unfairly lose their careers, their businesses and their reputations. In short, they can lose everything.

There is a remedy: the Lawsuit Abuse Reduction Act, legislation I introduced that will reduce frivolous lawsuits. This bill passed the House last year, but did not pass the Senate. I have re?introduced it this year.

It applies to both plaintiffs who file frivolous lawsuits merely to extort financial settlements, and to defendants who unnecessarily prolong the legal process.

If judges determine that a claim is frivolous, they can order the plaintiff to pay the attorneys' fees of the defendant who was the victim of the frivolous claim. This will make a lawyer think twice before filing a merit?less lawsuit.

This legislation also prevents "forum-shopping." It requires that personal injury claims be filed only where the plaintiff resides, where the injury occurred, or where the defendant's principal place of business is located. This provision addresses the growing problem of attorneys who shop around the country for judges who routinely award excessive amounts.

Curbing frivolous lawsuits, along with putting caps on excessive litigation awards, will also help resolve the national medical insurance crisis that is devastating our nation's health care system.

Over the years, medical liability insurance rates have soared to incredible levels, causing major insurers either to drop coverage or raise premiums to unaffordable levels.

Doctors are being forced to abandon patients and practices, or to retire early, particularly in high risk specialties such as emergency medicine, brain surgery, and obstetrics and gynecology. Women are particularly hard hit, as are low income and rural residents.

The obvious cause of higher medical liability premiums is escalating jury verdicts. The median malpractice jury award doubled between 1995 and 2000 from a half a million to $1 million.

In a report last year, the General Accounting Office found that rising litigation awards - not, as opponents of legal reform claim, lower investment returns of medical professional liability insurers - are responsible for skyrocketing medical liability premiums.

The report stated that "GAO found that losses on medical malpractice claims - which make up the largest part of insurers' costs - appear to be the primary driver of rate increases in the long run."

The CEO of Methodist Children's Hospital here in San Antonio, and also one of the only three pediatric neurosurgeons in the area, has seen his insurance premiums increase from less than $20,000 to $85,000 over the last few years. He has been sued three times.

In one case his only interaction with the person suing was that he stepped into her child's hospital room and asked how the child was doing. Each jury cleared him of any wrongdoing and the total amount of time all three juries spent deliberating was less than one hour. Of course, the doctor's insurance company spent a great deal of time, money and effort on his defense, leading to increases in premiums.

Another doctor from Texas, a family physician, was sued 12 times in 13 years. All of the suits were dropped, but her insurance went up nearly 200 percent.

An out?of?control health care litigation system costs taxpayers billions of dollars annually. As former Democratic Senator George McGovern has written, "The legal fear drives doctors to prescribe medicines and order tests, even invasive procedures, that they feel are unnecessary. Reputable studies estimate that this defensive medicine squanders $50 billion a year, enough to provide medical care to millions of uninsured Americans."

This is why we need medical liability reform.
While Congressional reform of the litigation system will benefit our economy, without proper judicial interpretation of the law, these measures and others will not be successful.

Over the last several years, we have witnessed judges determining social policy rather than interpreting the Constitution. They seem to be legislators, not judges; promoters of a partisan or personal agenda, not wise teachers relying on established law.

Judicial activism has become not a legal ideology, but a political one.

Judicial abuse occurs when judges substitute their own political views for the law. Judges should interpret the law, not make it.

While judicial activism has existed from the founding of our nation, it seems to have reached a crisis. Judges routinely overrule the will of the people, invent new "rights," and ignore traditional values.

Some judges have redefined marriage, deemed the Pledge of Allegiance unconstitutional, outlawed religious practices, and imposed their personal views on Americans.

To use a sports analogy, judges should be the equivalent of an umpire in a baseball game. An umpire's duty is to enforce already existing rules. They don't write the rules; they decide how to apply the rules to each play.

Like an umpire, a judge should not apply his or her own views to the law. The laws and our Constitution are the pre-existing rules that judges must enforce, regardless of their political or personal opinions.

Activist judges directly violate the Constitution when they take for themselves powers granted in the Constitution to the legislative or executive branches of government.

The judiciary must be independent, but - like Congress and the administration - it must be accountable to the people, who, after all, are the repository of power in a democracy.

Some proponents of judicial activism suggest any criticism of our judges is somehow inappropriate. Not so.

The judiciary is a co-equal branch of the federal government. It is subject to checks and balances - scrutiny and criticisms. Congress is right to evaluate judges when they behave like un-elected super-legislators.

And just as Congress has oversight responsibility over the executive branch, it also has oversight responsibility over the courts. So when judges step out of bounds, Congress should raise a red flag. Just as the judicial branch is a check on the legislative branch, so the legislative branch must be a check on the judicial branch.

Judicial independence is important, and it must be preserved. But it can only thrive and prosper when judicial decisions can withstand public scrutiny.

Judicial independence and judicial accountability go hand-in-hand, and we will continue to work hard to strengthen them both.

Now that I have covered several legal reforms that can affect our economy, let me talk about some other economic issues that Congress is addressing.

If we want to keep America competitive and prosperous, then we must continue to reduce taxes across-the-board.

Congress tackled this late last year when it enacted the Working Families Tax Relief Act.

Without this legislation, millions of taxpayers would have been forced to pay higher taxes this year because many of the tax reductions passed by Congress since 2001 were set to expire.

Without this legislation, the marriage penalty would have crept back into the Tax Code. The child tax credit would have dropped from $1,000 to $700. The 10% bracket would have been applied to less income, and the alternative minimum tax would affect more middle-income families.

Overall, 90 million more Americans will have a lower tax bill this year, including 40 million families with children, because of this legislation.

Our families and our country are better off when government lets people keep more of what they earn. Congress is expected to consider several legislative measures this year to lower the tax burden on families and small businesses.

One bill the House of Representatives has already passed is a measure to permanently repeal the death tax.

More formally known as the "estate" tax, the death tax is a levy imposed on wealth transfers at the time of an estate holder's death. It affects many Americans, and has a particularly negative impact on small-business owners, farmers and ranchers.

Collecting this tax often prevents families from passing along their life's work and savings to their children. Family farms, ranches and small businesses have to be sold in order satisfy the death tax's punishing marginal rates, which can reach 55%.

Congress took the first step toward death tax repeal in 2001 when it temporarily wiped the tax off the books. But unless Congress permanently repeals the tax, it will be reinstated in 2011.
That's not only bad tax policy; it's also bad for families and small businesses.

No one should be taxed throughout their lifetime and then have their property re-taxed at the time of their death. It's the wrong tax, at the wrong time, on the wrong people.

While reducing taxes will do much to boost economic growth across the board, we must also pay attention to more specific issues. One of the most important in the 21st District and nationwide, is intellectual property.

Encouraging the continued growth and protection of intellectual property is the main focus of the Intellectual Property or "IP" Subcommittee, which I chair.

The Subcommittee has jurisdiction over such areas as copyright and patent protections, cyber-security and patent and trademark office reform, which is of particular interest to high?tech companies.

High-tech is important to Texas, but especially to the 21st District. San Antonio is home to numerous nanotechnology, biotechnology, and homeland security companies. San Antonio's high tech industry has grown significantly in the past few years. Organizations like the SATAI Network have played a large role in developing our region's unique strengths.
The SATAI Network partners with the University of Texas, the City of San Antonio, and the high tech industry to help inventors and entrepreneurs utilize their innovations and enter the marketplace. This has helped San Antonio become a leader in both Texas and national high tech initiatives.

There is a good reason why those who wrote the Constitution embraced the concept of intellectual property protection. The Founding Fathers realized that if creators cannot gain from their creations, they won't bother to create.

Article One, Section Eight, of the Constitution reads "The Congress shall have Power ... To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

Through these rights, the IP owner is rewarded in the marketplace, and this encourages further creativity and innovation. That benefits us all.

One way to protect innovation is to reform the Patent and Trademark Office.

The PTO does not receive the attention that other government agencies, such as the Department of State and Department of Justice, receive. It should. This office is critical to the health of our economy and to the lives of millions of Americans.

The PTO protects the rights of all American inventors. From the lone individual working in their garage to the small biotech business person with a breakthrough idea to the large high-tech company in San Antonio that applies for hundreds of patents, all rely on a responsive PTO.

Since U.S. Patent Number One was issued in 1837 for traction wheels, the patent system, and the creativity, genius and talent that define it, have benefited all Americans.

From the revolutionary electric light bulb to the latest software technology, patents drive an ever-improving standard of living and contribute to our economic prosperity.

Improving patent quality is one of my top priorities for the IP Subcommittee this year.

Another way to generate, or at least maintain, economic security on an individual basis is to reform the Social Security system before it's too late.

Among all the issues that Congress is expected to address this session, few will be as important as finding the right solution to preserve and strengthen this program for future generations.

Created in 1935, Social Security is a social insurance program that provides income to seniors upon their retirement. It is paid for by working Americans and their employers through a payroll tax on their wages. The money workers pay into the program immediately goes to pay the benefits of today's retirees. It is not set aside for future retirement payments.

This pay-as-you-go system works fine - so long as you have many workers paying in and few retirees collecting benefits. This was the case in the 1950s when 16 workers paid into the system for every one retiree receiving benefits. But America's demographics have changed.

Seniors are now living much longer then they did when the program was first created. In the 1930s the average lifespan was 62; today, the average lifespan is 77.

With Americans living longer, there are more people collecting benefits, yet fewer workers to support them. Today, there are about three workers for every one retiree.

With fewer workers supporting more retirees, the current system simply cannot work. By 2017, it is expected that Social Security will reach a point where it pays out more benefits than it collects in taxes, creating a large and ever-increasing deficit in the program.

To ensure that Social Security is available to future generations, Congress must take steps now to reform and strengthen the program.
No one believes that this will be an easy challenge. But the longer we wait to address this problem, the more difficult and costly it will be to fix.

One proposal already suggested to strengthen the program is personal retirement accounts. This voluntary program will give younger workers more control over their retirement security by allowing them to invest a portion of their payroll taxes in an account similar to an IRA.

With this account, they will be able to accumulate funds for their retirement that cannot be taken away by the government and can be handed down to their children, not possible with the current social security system.

Personal accounts will give workers the opportunity to earn higher rates of return-and receive higher benefits-than the current system can afford to pay.

At retirement, personal accounts will pay a portion of a worker's Social Security benefits, with the rest coming from traditional programs.

As proposed by President Bush, this plan will be voluntary. Those who want to stay in traditional programs can do so.

I consider personal accounts a viable idea, but it will take a number of careful and well thought-out solutions, gradually implemented over time, to stabilize Social Security.

I hope that in the coming months Congress can come together in a bipartisan fashion and do what is necessary to protect this important program.

Being this close to the Alamo reminds me of the story of Davy Crockett as he was preparing to travel with his companions to San Antonio de Bejar. In the last letter he wrote to his daughter, Margaret, he said to her, "Do not be uneasy about me. I am among friends." That is the way I feel today.

Thank you for hosting me, and I look forward to your questions.

http://lamarsmith.house.gov/News.asp?FormMode=Detail&ID=625

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