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An Open Letter to the United States Senate: Taxpayers Still Oppose the Fairness in Asbestos Injury Resolution Act

July 5, 2006

Dear Senator:

On behalf of the 350,000 members of the National Taxpayers Union (NTU), I urge you to oppose any efforts to create a federally-administered asbestos trust fund. Although the Fairness in Asbestos Injury Resolution (FAIR) Act of 2006 (S. 3274) has been modified to address some concerns, our members still have deep reservations regarding the extent to which taxpayers will be imperiled should this fund become insolvent.

While NTU wholeheartedly agrees that it is long past due to address the flood of asbestos claims clogging up our legal system, we contend that the revised FAIR Act is not the solution. In late 2005, NTU conducted an exhaustive analysis of the trust fund concept and found that the original FAIR Act introduced in the 109th Congress would create another entitlement program whose failure is likely to put taxpayers on the hook for billions of dollars.

Upon further examination of the modified FAIR Act, we still believe that both the funding and expense scenarios are unrealistic. Even with tightened requirements for fund claimants and recalculated contributions for donor companies, the trust fund could still quickly go broke due to a rush of claims. Should the fund go bankrupt, claims are supposed to revert back to the legal system. However, bankruptcy is more likely to prompt Congress into taking political action that would increase taxpayers' financial exposure. This would most likely come in the form of a massive infusion of taxpayer cash to save the fund.

NTU is not alone in respect to these serious reservations. In his June 7, 2006, testimony before the Senate Committee on the Judiciary, former Congressional Budget Office Director Douglas Holtz-Eakin elaborated upon the bill's likely fiscal impact on taxpayers, noting, "When FAIR Act benefits exceed fund resources, a future Congress and administration are equally likely to turn to the taxpayer for the shortfall [emphasis added] ... Recent modifications to the FAIR Act have not significantly changed these fundamental features of its design." With regard to the sunset provisions that are supposed to take effect if the fund's revenues are not sufficient to meet obligations, Holtz-Eakin testified that "this approach is extremely unlikely to insulate taxpayers from meeting the demands of the new mandatory spending."

Taxpayers need only to look back on past fiscal history to find many cautionary tales of similar federal ventures. The Black Lung Trust Fund, for example, proved to be at least three times costlier than initially estimated. Additionally, the Savings and Loan bailout and the Medicare drug benefit both illustrate how reluctant policymakers can be to address rising costs once programs are enacted.

Instead of pursuing the FAIR Act, Congress should consider legislation with much more stringent criteria for filing claims and limits on punitive damages. Such a bill would benefit victims, businesses, and taxpayers by ensuring only legitimate claims are considered by the courts.


Kristina Rasmussen
Senior Government Affairs Manager