On the heels of the recent $54 million suit in Washington, D.C., against a dry cleaner for losing a pair of pants, it seems that frivolous lawsuits are in vogue again. But such tort abuse is not always a media spectacle, and many of our political leaders disagree fiercely on the issue.

Either they believe that lawsuit abuse must be eliminated in order for America to stay globally competitive -- a belief predicated on the assumption that the legal cli mate is an integral part of the business climate. Or they side with personal injury lawyers and argue that lawsuit abuse, if it exists at all, is not problematic enough to warrant reform.

Over the past year, we've studied and compared the tort climates of all 50 states. The results of our published study -- the "U.S. Tort Liability Index" -- are quite compelling: Our data strongly support the claim that tort abuse does, in fact, have a broad and negative im pact on business climates.

States with weaker tort cli mates are losing residents, tax revenue and businesses to states with stronger tort climates. In addition, the economies of states with less tort abuse are more robust.

We ranked all 50 states according to tort burdens and reform- mindedness through 2005 -- the most recent year that comparative data is available for each state. And in New Jersey, there's room for improvement.

Although the Garden State ranked 26th overall, it came in near the bottom in monetary tort losses (43rd) and monetary caps (42nd).

It isn't just fun to pinpoint which states are getting it wrong. Where a state falls on the Index also indicates how likely it is to experience long-term economic growth.

Individuals looking to open a new business or expand operations weigh the comparative costs and benefits of different locations. They evaluate local universities, transportation networks, labor skills, market size, even the weather. They also assess the policy climate.

A healthy tort system, with relatively low damage payouts and comprehensive reforms that curb excessive litigation, attracts entrepreneurs and capital, thereby increasing jobs and new businesses.

In 2006, job growth was 57 percent greater in the 10 states with the best tort systems than in the bottom 10 states. Labor earnings growth was more than 5 percent greater in the best states. And gross state product, a comprehen sive measure of economic activity, grew 25 percent faster in the 10 best tort states compared to the 10 worst.

A healthy tort climate also improves a state's fiscal health. In 2006, the top 10 tort states had an average growth rate of tax revenues that was 24 percent greater than the bottom 10. The greater in fusion of tax revenue was due to higher economic growth, not higher tax rates. In fact, taxpayers in the top tort states paid 8 percent less in "effective tax rates" in 2006 than those in the bottom states.

Though tax cuts are typically opposed with the argument that slashing rates will force state revenue to fall, the data shatter that myth. Instead of blowing a hole in state budgets, lower tax rates re warded productivity and risk-tak ing, and allowed the economy to grow.

As the economy expanded, it generated more revenue for the state treasury as capital and people flowed in. When considered with the legal climate, this helps explain why entrepreneurs are attracted to the top states and why jobs and businesses there are growing faster. Lower taxes make these states even more appealing.

Census data show a 232 percent difference in net state-to-state mi gration rates in 2006 between the states at the top of our Index (net inflow) and bottom (net outflow). In other words, people are fleeing predatory legal environments and moving to less threatening loca tions.

The 2006 numbers on state economic performance show that a healthy civil-justice system expands economic opportunities and increases a state's employment, economic output and tax revenues. It's a lot easier to close a budget gap or retire public debt when more money is flowing into the state's coffers.

Given all the data, it's a shame that tort reform is not on the agenda of New Jersey lawmakers. The Garden State's legal system currently possesses the double whammy of a tendency to yielding high tort payouts and the absence of monetary caps on the size of those payouts. New Jersey, unfortunately, looks to be a prime place for unscrupulous lawyers and plaintiffs to play the tort litigation lot tery.

A balanced civil-justice system is a critical component of a state's fiscal health. Conversely, a poor legal system can drag down a whole economy. With this in mind, New Jersey policymakers who are concerned about their state's economic performance might want to encourage their constituents to hold onto their hot Starbucks drinks a bit tighter.

Lawrence J. McQuillan, Ph.D., is director of business and economic studies at the Pacific Research Institute, where Hovannes Abramyan is a public policy fellow. E-mail: LMcQuillan@pacificresearch.org.