If you missed it, The Economist has a useful contribution on the renewed interest among many Americans in adopting the loser-pays principle in civil litigation, which most countries around the world have long embraced in light of its fairness and practicality. I’ve been writing in favor of the idea since my first book, The Litigation Explosion (more links here) and Cato has spotlighted Marie Gryphon’s important recent work on the topic. Mississippi governor-elect Phil Bryant “has already expressed support” for the concept, according to this recent report in the Jackson Clarion-Ledger.

Despite strong interest in liability reform over the past two decades, no state has joined Alaska (which has had the principle since territorial days) in adopting an across-the-board loser-pays principle. Why is that? The opposition of some plaintiff’s lawyers and legal academics is hardly a full explanation. The fact is that loser-pays reform remains perpetually sidelined because much of organized big business quietly or not-so-quietly opposes it. In fact, some D.C.-based business lobbyists even roam the country attempting to squelch outbursts of enthusiasm for loser-pays among state legislators and others close to the grass roots.

Why are these businesses opposed? Some fear that any new set of rules will be interpreted to their disfavor, or prefer not to rock the boat for fear of unpredictable consequences; others delegate the issue to outside lawyers who may see the issue through the lens of their own professional biases; and yet other businesses recognize and (as perennial defendants) fear the tendency of loser-pays systems to vindicate many strong small plaintiff’s claims better than does our current system. With an open public debate and careful drafting of reform proposals, I think most of these fears would be assuaged: for example, most big American firms also operate in Canada, Europe, and other countries where loser-pays is accepted as a normal feature of the legal landscape. In the mean time, I wish someone would organize a group called “Business Leaders for Loser-Pays.”

The U.S. Treasury Department finally released its overdue semiannual “Report to Congress on International Economic and Exchange Rate Policies” yesterday. I’ve been reading through the informative report this morning so you won’t need to. Two quick comments:

First, the report declined, once again, to brand China a “currency manipulator,” and for good reason. The term is needlessly confrontational. As the report documents, while the Chinese currency is probably still undervalued, the Chinese government has been taking concrete steps toward a more flexible exchange-rate regime. Since it began its currency reforms in July 2005, the renminbi has appreciated 40 percent on a real (inflation-adjusted) basis against the U.S. dollar. And 40 percent just happens to be the upper range of the revaluation that was demanded by Sen. Chuck Schumer (D-NY) and other critics of China trade back then. They should declare victory and move on to more pressing economic problems, such as cutting federal spending and promoting private-sector growth.

Second, the report repeats the common but false assumption that a shrinking trade deficit is necessarily good for economic growth, and a rising deficit bad. From p. 6 of the report, we read:

Trade was also a bright spot in the third quarter [of 2011], as exports once again grew faster than imports. The resulting decline in the net export deficit contributed 0.4 percentage point to real GDP growth.

This reflects the simplistic Keynesian assumption that rising imports are a drag on growth because they merely replace domestic production. The truth is almost exactly the opposite, as I documented in my Cato study earlier this year titled, “The Trade-Balance Creed: Debunking the Belief that Imports and Trade Deficits Are a ‘Drag on Growth’.”

The truth, in theory as well as practice, is that a rising level of imports typically reflects rising domestic demand by both consumers and industry. Imports fuel U.S. production by supplying more raw materials, intermediate supplies, and capital machinery at competitive prices. That is why the U.S. economy has typically grown much faster during periods of rising trade deficits compared to periods of shrinking deficits. True to form, the first three quarters of 2011 saw declining GDP growth even though, according to the Keynesian creed, the decline in the trade deficit was a supposed “bright spot.”

Even with a “freeze” in effect, federal pay rose faster than private-sector pay in fiscal 2011, according to the USA Today’s Dennis Cauchon. Crunching Bureau of Labor Statistic’s data, Cauchon found that average federal worker wages rose 1.3 percent in 2011, or slightly more than the 1.2 percent increase in average private wages. The federal increase—while modest—occurred despite the freeze Congress and the president put into effect because increases from “longevity, merit, and promotions” were not covered, according to Cauchon.

I’ve argued that federal pay and benefits are excessive and should be cut as one of many needed reforms to rein in federal deficits. Lawmakers should extend the wage freeze, but they should also reduce overly generous federal worker benefits. For example, lawmakers should repeal the defined-benefit pension plan received by federal workers because it comes on top of the 401(k)-style retirement plan that workers already receive.

The good news is that increases in federal pay have slowed from the torrid pace of the early George W. Bush years, as shown in this chart. But we will need more reforms to start reversing-out the large federal pay advantage that has been built up over the last two decades.