Public Policy, Economics and Entrepreneurship: September 2007 Archives

Read Nathan Griffith's essay on why Social Security reform is so difficult in the US today at our LockeSmith blog.

The story of the dry cleaners who got sued for $67 million by a judge for losing a pair of his pants has taken a sad turn. From the Washington Business Journal:

The Chung family said it closed one of its dry cleaners in D.C. after losing money fighting the high-profile lawsuit involving a missing pair of pants.

South Korean immigrants Jim Na and Soo Chung, who operated Custom Cleaners...for seven years, were sued in 2005 by D.C. administrative law judge Roy Pearson for $67 million for mishandling a pair of pants.

The amount in the high profile case was later lowered to $54 million.

Despite winning the suit that went to trial in June in the D.C. Superior Court, the Chungs spent money fighting Pearson and ultimately had to close the store, according to a press release issued by their attorney.

Pearson is not giving up on his attack on these small business owners. He is appealing the court's ruling, so the case goes on and the legal costs continue to grow for the Chung family.

Karen Harned, executive director of the National Federation of Independent Business Legal Foundation, had this to say about this case:

"Small-business owners, like the Chungs, live in fear every day that they will be the next victim of a frivolous lawsuit and could possibly lose their business. For the Chungs, this fear has become a reality - forcing them to close the doors to Custom Cleaners. Even after they were victorious at trial, the costs and pressures of the ongoing lawsuit have now taken the business that they worked so hard to maintain and operate. It is disgraceful that our legal system operates this way. Outrageous litigants should not be able to use our judicial system to take advantage of innocent small-business owners.

"NFIB hopes the D.C. government will follow through with the proper proceedings to ensure Mr. Pearson is no longer entrusted with the authority to make legal decisions on behalf of the people of the District of Columbia. Removing Pearson's robe as an administrative judge is a small, but important, step towards changing the system so that the courts are no longer used to kill the American dream. It unfortunately is too late to save Custom Cleaners. However, we hope this regrettable story will help the public and government officials realize that tort reform is needed to prevent these types of frivolous lawsuits from killing another small business."

I could not agree more! I hope they do remove the judge from the bench for this despicable act. If these efforts are successful, I can see the headline: Judge Exposed -- Loses His Robe and His Pants.

I share some of the latest news -- and not good news, I might add -- on the current push for new public economic policy coming out of Washington at the LockeSmith blog.

Small business owners do not seem to be feeling the effects of the credit problems touted in the media, according to the August National Federation of Independent Business Small Business Economic Trends Report.

Regular borrowing activity was reported by 35 percent of owners surveyed, down one point from last month. The net percent of owners reporting loans harder to get in recent months rose two points to a net 7 percent, but this is still an historically low percentage. Readings as high as 12 percent were common in the early 1990s.

Only 3 percent of the owners cited the cost and availability of credit as their No. 1 business problem, far from the record 37 percent reached in 1982 and typical of readings for the past decade. Thirty-five percent reported all their credit needs met; 4 percent reported problems obtaining desired financing, typical of readings for the past few years. The net percent of owners reporting higher rates on their short-term loans was 14 percent (seasonally adjusted), two points above July, but one of the lowest readings since 2004.

Although tight credit does not seem to be slowing small businesses down, economic conditions have created
a very cautious attitude in small business owners according to this survey. Sales and profits seemed to be rather anemic. Capital and inventory spending was reported as weaker.

The one report that continues to worry me is that wage pressure still seems to be a problem for many small businesses. Those of us who remember inflation gone wild and past periods of stagflation (a recession and inflation all rolled into one big mess, as we had in the late 1970s and early 1980s) are keeping a wary eye on wage and other inflationary pressures in the economy.

There are calls for Canada's floundering system of socialized entrepreneurship to become even more meddlesome. Read my post at LockeSmith for my post on calls for this disturbing shift in public economic policy to our north.

Nathan Griffith rights a provocative essay about the notion of democratic deficits at our new LockeSmith blog.

You hear a lot in European Union circles about "democratic deficit." The argument--or perhaps more accurately, assumption--is that EU institutions are not sufficiently accountable to voters. I have to admit, the term has always disturbed me, though not for the usual reasons. I'm not disturbed that there is a deficit, though many EU folks get highly exercised on that point. Instead, I'm disturbed that we worry about there being enough democracy. (Or, as you're probably thinking now, I'm just plain disturbed.)

The post I made on the Oregon Innovation Initiative created several comments questioning my critical view of this set of policies and initiatives. I decide that our new blog LockeSmith was a better venue to use to respond. If you want to follow the continuing debate on this issue, please see this post at our other blog.