Tobacco settlements: the latest addiction
August 29, 1997
Web posted at: 1:46 p.m. EDT (1746 GMT)In this story:
• National cravings run deep
• Tobacco: one tough negotiator
• Quick fix fosters a bad habit
An essay by CNN Interactive Writer Emily Looney
(CNN) -- The trend toward multibillion-dollar settlements between tobacco industry and government leaders aligns our interests with the tobacco companies' -- we will both need new smokers to keep the money coming in.
Just this week, Florida Gov. Lawton Chiles happily announced his state was becoming the second to settle individually with tobacco companies, after suing for reimbursement of Medicaid money spent to treat patients with tobacco-related illnesses.
On the face of it, Florida's settlement, Mississippi's deal last month and the $368.5 billion multi-state agreement reached in June all sound promising. It seems reasonable to make the industry pay for costs related to tobacco's well-documented health risks.
But the settlements give us a vested interest in tobacco company profits. To get the settlement money, promised in installments, our governments need tobacco companies to remain profitable.
And unless these companies abandon tobacco, our budget-makers will find themselves hooked on these new infusions of tobacco-stained money.
National cravings run deep
Public addiction to tobacco revenue is nothing new. The settlements are just the latest manifestation of the industry's pervasive influence.
Politicians have long craved tobacco money. Some now dither about whether to take it, but many still do.
Tobacco interests made nearly $3.3 million in contributions to federal candidates, plus another $6.8 million in more general (soft money) donations in the 1995-96 election, according to the nonpartisan Center for Responsive Politics.
Tobacco taxes also provide another kind of government buzz. Federal, state and local governments netted more than $13.5 billion in consumer excise taxes in fiscal 1995 alone, according to the industry-funded Tobacco Institute.
Tobacco: one tough negotiator
The tobacco companies involved, despite dubbing the massive multi-state settlement a "bitter pill," really aren't being poisoned.
The settlements are largely pegged so far to tobacco-related Medicaid costs. But that doesn't begin to cover all the medical costs associated with tobacco.
The federal Centers for Disease Control and Prevention estimates the direct medical costs associated with smoking at about $50 billion annually, based on 1993 figures. Of that, federal and state governments cover more than 40 percent, or $20 billion.
The big-ticket multi-state deal, if cleared by Washington, would largely supersede the individual state deals. Either way, tobacco companies are only paying a fraction of the health care costs related to tobacco.
It's also worth noting that tobacco companies are settling out of court even as their officials hint at tobacco's health risks in depositions, and as internal documents emerge to indicate the companies knew of those risks long ago.
The industry's timing is good. The prospect of limited liability is considered to have helped boost stock in the two giants, Philip Morris Companies and RJR Nabisco Holdings.
Quick fix fosters a bad habit
The government negotiators of these new settlements don't actually mean to be encouraging smoking -- just the opposite.
The multi-state and Florida deals sharply curtail the advertising of tobacco products, especially to children, in a move meant to cut smoker ranks. The multi-state deal also would strengthen Washington's powers to regulate nicotine as a drug.
But it's safe to say that making tobacco elusive will not end its appeal. That hasn't worked for alcohol or guns, for example.
Trying another tack, Washington could stop subsidizing tobacco, and instead provide new incentives for plowing under the whole industry. But those would have to be some major incentives.
Philip Morris and RJR Nabisco already have diversified through their food divisions, which produce brands such as Kraft and Nabisco. But their 1996 figures indicate tobacco's profit margin is higher -- so much so that, even when the companies took in more revenue from their food sectors, tobacco actually returned more dollars.
Meantime, as tobacco companies market their products abroad to gain more customers, the United States will be in the undiplomatic position of continuing to export a product that's actively discouraged at home.
The settlement plans may prove to be the best way to redress the tobacco industry's unhealthy medical legacy.
But as Washington reviews the multi-state settlement this fall, Texas heads to court and about three dozen other state cases proceed, it helps to recognize an addiction for what it is.
Related sites:
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- CNN Special: Tobacco Under Attack
- RJR Nabisco
- Philip Morris Europe S.A.
- The Tobacco Institute
- Center for Responsive Politics
- Centers for Disease Control and Prevention
External sites are not endorsed by CNN Interactive.
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