Federal Preemption: Crony Capitalism at its Worst

Ken Connor

11/16/2008 12:00:10 AM - Ken Connor

President George Bush likes to describe himself as a "conservative" but his track record doesn't back up his claim.

Conservatives believe in limiting the power of the federal government, protecting the rights of states to solve problems at the local level, and promoting personal accountability as a means of ensuring that individuals and corporations act in a responsible manner. When it comes to those conservative ideals, Mr. Bush has shown himself all too willing to jettison principle in favor of "crony capitalism."

"Crony capitalism" is a term used to describe the incestuous relationship that has developed between big business and big government. It's the classic "you scratch my back, I'll scratch yours" formula elevated to a new level. In exchange for campaign contributions from the coffers of big business, professional politicians accord special privileges to corporate fat cats. Tax breaks, federal subsidies, limited accountability for liability—all are examples of crony capitalism. In each case, the interests of Wall Street trump the interests of Main Street. The most recent examples are the bailout plans designed to "rescue" (don't you just love political euphemisms) profligate insurance companies, banks, and other corporations deemed "too big to fail."

One arena in which Mr. Bush has been hugely successful in promoting crony capitalism is in the area known as "federal preemption." His success in this arena has resulted in enormous windfalls to corporate America, huge concentration of federal power in the hands of unelected bureaucrats, and massive erosion of individual and states' rights.

"Preemption" is a simple concept cloaked in an unfamiliar word. Federal preemption simply means that federal law trumps state law when the two come into conflict in a given area. In other words, when the Feds say one thing about how a matter is to be regulated and the states say something else, the federal view controls. The classic example occurs in matters involving consumer protection or state tort law.

During Mr. Bush's tenure, federal bureaucrats have worked hard to immunize manufacturers and drug companies from liability from defective products. Notwithstanding that innocent people have suffered grave harm from such products, officials of the Bush Administration have argued that the companies putting such products into the stream of commerce should be immune from liability because federal bureaucrats put their seal of approval on the products before they were marketed. The Administration advanced these arguments even though the home states of the victims provided a judicial remedy which would allow them to recover for the damages they suffered from the defects.

A prime example is the Riegel v. Medtronic case recently decided by the Supreme Court of the United States. Mr. Riegel suffered catastrophic complications when a defective balloon catheter manufactured by Medtronic was inserted into his artery. As a result, Riegel fell into a coma and ultimately died. Medtronic argued that because its device had been approved by the Food and Drug Administration, Reigel's family should not be permitted to sue for his injuries and suffering. In a Friend of the Court brief, the Bush Administration sided with the manufacturer and against the family of Mr. Riegel and the state laws which permitted them to pursue the corporate wrongdoer. The Supreme Court, in turn, sided with the Administration and Medtronic, holding that the state laws which permitted the family to recover against the corporate wrongdoer were preempted by federal laws. The result was that Medtronic was effectively immunized from liability for its wrongdoing.

A similar case, Wyeth v Levine, is pending in the Supreme Court and is yet to be determined. In that case, Ms. Levine, a professional musician, seeks to recover for the amputation of her right arm as a result of injuries she sustained when she was injected with Phenergan, a medication manufactured by Wyeth. Wyeth's warning label allowed for the method of administration of its medication used in Ms. Levine's case (an IV "push" as opposed to an IV "drip") even though it knew that such method had caused gangrene in several instances. Nevertheless, Wyeth argued that since its warning label had been approved by the FDA, it had no further obligation to warn of the risks associated with an IV push. The company's position was backed up by the Bush Administration.

In a number of other instances, minions of the Bush Administration have stealthily sought to insert language in federal regulations which would immunize corporate wrongdoers from the consequences of their neglect, notwithstanding the existence of state laws that would permit victims to recover for their losses. Their goal is to ensure that federal law trumps state law and that corporate wrongdoers escape liability for their wrongdoing.

It is well established that federal agencies like the FDA are inadequate to protect the consuming public and that they often act as mere "stooges" for the industries they regulate. State laws act as an important check on the abuse of federal power and the misconduct of errant manufacturers. Local juries act as powerful checks on the conduct of greedy manufacturers who would put profits over people.

Conservatives who are interested in preserving our federal system and promoting America's core values should look askance at attempts by Republicans who seek to undermine both. Just because a politician has an "R" after his name doesn't make him a conservative. Conservatives don't just mouth conservative principles, they live by them.