When Government Messes Up, It’s Nobody’s Fault


Imagine additional tests find that the HPV vaccine leads to some major long-term side effect that was somehow not discovered during trials.  The manufacturer would be targeted for lawsuits, to be sure, but what about the state government in Rhode Island, which has made it mandatory?  I think affected Rhode Islanders would get a nice big “oops” from their appointed rulers, if that.

As Shikha Dalmia writes in The Week, families in Flint, Michigan, had the similar misfortune of being harmed by a government entity, rather than a private company:

GM had to pony up $35 million to NHTSA (National Highway Traffic and Safety Administration) and $900 million to the Justice Department in penalties for the faulty switch in its 2005 Cobalt that was linked to 125 deaths and 250 injuries. What’s more, despite the totally deplorable liability shield or immunity from personal injury lawsuits the automaker received from the Obama administration as part of its 2009 bankruptcy restructuring, it still paid $625 million in compensation to the victims. And of course it recalled and fixed all the 2.6 million affected vehicles. All in all, it was down $1.5 billion.

But Toyota coughed up more than double that amount for its suddenly accelerating vehicles that resulted in 12 deaths and 31 accidents. It paid $1.2 billion in fines to Justice and $35 million to NHTSA and fixed all the vehicles, of course. In addition, it made an out-of-court settlement for an undisclosed amount that was likely more than what GM paid to each victim. But the real kicker is that, because it did not have GM’s liability shield, it also paid $1.6 billion to all Toyota owners for the loss of the resale value of their cars.

Compare all of that to the $115 million or so that Flint victims will receive!

The main reason that they don’t have a prayer of collecting much more is something called the doctrine of sovereign immunity. Under this doctrine, citizens are barred from suing their government for screw-ups that it has caused in the course of discharging a core function unless the government itself consents. Some very narrow exceptions exist but it is very difficult to make them stick.

The longer one pays attention, the more difficult one finds it to understand why people would want government to be involved in more and more aspects of our lives.  Why those who want to do things might look to do them through government is easy to understand.  They merely have to convince a small group of politicians rather than a large number of customers, they gain access to government’s ability to regulate burdens on their competition, and they offload risk, whether that means financial risk (as with 38 Studios) or liability risk.

But everybody else loses out on the deal when government’s involved.