Can A Little Lawsuit Shut Down A Big Tobacco Racket?

August 6, 2005 8:48 PM

Can A Little Lawsuit Shut Down A Big Tobacco Racket?This week, the Competitive Enterprise Institute, a free-market advocacy group in Washington, filed suit in federal court to challenge the constitutionality of the massive and fantastically lucrative 1998 Master Settlement Agreement -- otherwise known as the Tobacco Deal.

Cato's take. Background from Frontline.
posted by Kwantsar (23 comments total)

If they think they are getting out from under this without paying multiple buttloads of money, they are sorely... Oh, wait, a technicality.. never mind.
posted by Balisong at 8:53 PM on August 6, 2005

Economists have found that smoking, if anything, reduces the cost of government programs, because smokers die younger and have fewer years to collect health and pension benefits. Smoking is bad for smokers, but it has done state coffers no harm at all.

This research was funded by the tobacco industry. But never mind that pesky little detail.
posted by raysmj at 9:05 PM on August 6, 2005

raysmj, are you impugning the academic honesty of Kip Vicusi, the Harvard economist?

Not a loaded question, I just want to know?
posted by Kwantsar at 9:22 PM on August 6, 2005

You can make of it what you will. It's ridiculous on its face, I think. The argument that the tobacco industry took from his research was rejected as immaterial by various judges, if I recall correctly.
posted by raysmj at 9:26 PM on August 6, 2005

I'm certainly, for the record, impugning the journalistic integrity of the writer of the posted article.
posted by raysmj at 9:44 PM on August 6, 2005

The more obvious the liability, the more dubious the legal standing.

Gotta love it. Only in America.
posted by clevershark at 10:26 PM on August 6, 2005

Mr. Viscusi has testified for Big Tobacco but according to the Chronicle of Higher Education
"draws a distinction between his work as an expert witness ... and his work as a researcher. None of his academic work, he says, has ever been financed directly or indirectly by tobacco money. ".
I am not full convinced that his argument about cost savings is accurate, there have been other economists who have made similar arguements, like Timothy Taylor at Stanford.
posted by Duck_Lips at 11:25 PM on August 6, 2005

Duck_Lips: If you read through the article you linked, however, you will discover that the situation is not nearly so cut and dried. The author of the posted article totally leaves out any information about who was primarily known for making this argument, and the questions about the research.

Meanwhile, all I can find on Taylor is that he echoed (or cited? parroted?) the argument an op-ed for the San Jose Mercury New.
posted by raysmj at 12:22 AM on August 7, 2005

You people do realize that the MSA is being paid for by an increase in the price of cigarettes. It isn't depriving the tobacco companies of any profits. It is just another tax on the poorest third of the citizens.

Increasing the tax on cigarettes doesn't stop anyone from smoking. In my state the increased revenue is going to the general expenses of the state and not just covering the increased cost of smokers medical expenses.

I can see a small tax to cover the addition burden some smokers pose to society but this has gone way beyond bullshit.
posted by 517 at 6:57 AM on August 7, 2005

You'll never know the truth. It's been shredded.

www.ash.org.uk/html/press/000407.html
The Lancet :
campaign to discredit a major passive smoking and cancer research study [2]. The PR campaign cost far more than the research itself. The evidence shows a sophisticated world-wide public-relations campaign was created prior to publication in 1998 to mislead the public about the significance of the research [3]

http://www.tobacco.org/resources/documents/980925tully.html

"... I was requested by three of the largest Board Members to prepare ... the justification for the systematic destruction of pertinent documentation ... to identify and remove all documents which could be viewed as "problematic", damaging, or useful to plaintiffs in any ongoing industry litigation.... I authorized the destruction of close to 1 million individual pages in my seven years at TDC, and that in my last week at TDC, I spent most of my time dealing with around 3,000 key documents ... and general correspondence and notes of meeting and discussions between senior industry executives (some of which proved useful refreshers for me!).

As you are aware, such document destruction is a serious matter for the courts, ... I am sure that those Board members who requested this "service" will deny any discussion with me on such matters .... it was approved by the full Board (not as a policy, but a procedure) and I completed the task that was requested of me before I departed the TDC.
----------
posted by hank at 8:06 AM on August 7, 2005

The MSA is running small independent tobacco companies (so-called NPMs, or non-participating manufacturers, who had nothing to do with illegal advertising practices in the 1960s when they didn't exist) into the ground and then shitting on their graves by making them pay for a settlement for a crime in which they had no part. It's a nice old-fashioned protection racket priced so that only the good ol' boys can get a piece of the action; it's the greatest thing that ever happened to Philip Morris and RJ Reynolds. Meanwhile, smokers, who are disproportionately low-income, are taking it up the ass to the tune of $7/pack (the higher-income smokers, of course, get to order their cigarettes online from Indian reservations and overseas).

Note to well-intentioned nanny-statists: next time you want to protect the little guy, how bout you just help an old lady cross the street and call it a day, hmm?
posted by IshmaelGraves at 8:59 AM on August 7, 2005

Smoking among teenagers has declined by about 30 percent from the early 1990s. It has particularly fallen in states that have significant anti-smoking programs. And smoking continues to be on the decline with adults in the United States.
posted by raysmj at 10:21 AM on August 7, 2005

You people do realize that the MSA is being paid for by an increase in the price of cigarettes. It isn't depriving the tobacco companies of any profits. It is just another tax on the poorest third of the citizens.

This is a really incredibly stupid comment, no offense. No one is forcing a cigarette in your mouth.
posted by Rothko at 12:43 PM on August 7, 2005

Meanwhile, smokers, [...] are taking it up the ass to the tune of $7/pack - IshmaelGraves

That's nothing. In Canada, smokes run $10 to $13 per pack.

No one is forcing a cigarette in your mouth. - Rothko

Well, it's not 100% as simple as that either. Smokers are addicts. Just like people addicted to any other drug, once they're hooked they'll do almost anything for their next fix. Even when the prices skyrocket. Of course you could quit smoking, just like you can quit coke or heroin or meth, but it takes time and effort and support. It's not quite as simple as 'just quit'.
posted by raedyn at 1:06 PM on August 7, 2005

(I don't smoke, never have. Yet I've learned to have some sympathy for the very real challenge of overcoming an addiction. But personally, I'm young enough that my peers and I have known our entire life the dangers of smoking. What I cannot understand is why someone my age ever would have started in the first place.)
posted by raedyn at 1:08 PM on August 7, 2005

Of course you could quit smoking, just like you can quit coke or heroin or meth, but it takes time and effort and support. It's not quite as simple as 'just quit'.

It is as simple as "don't start".

I don't buy addiction as an excuse for not raising taxes. A reasoned argument would be that the taxes rarely get used for anti-smoking programs or to reimburse the state government for increased healthcare costs — but this argument is never made.

Instead, we get rationalizations and pleas from Big Tobacco and its apologists along the lines that taxes should be removed because poor people should be allowed to smoke.

The reason that apologists argue against taxation along classist lines is that it portrays government as the criminal and poor people as victims, as if the government is taking away the civil rights of poor people, and diverts attention away from the crimes committed by Big Tobacco (perjured court testimony, theft of government funds through increased, unreimbursed healthcare costs, tax evasion by encouraging internet sales, etc. etc.).

Poor people keep smoking, and Big Tobacco keeps making money, while Joe Taxpayer once again foots the bill for oxygen therapy, chemotherapy, organ transplants, and other incredibly expensive and ultimately unnecessary medical care.

Apologists for Big Tobacco don't argue against taxation for the reasons I stated above, because doing so would actually result in even lower smoking rates and accordingly lower profits. That's bad for business.

Any time that something is bad for business, poor people get used as convenient victims of nonexistent government oppression.

The class warfare angle is utter nonsense, but it sure is good for quarterly profits.
posted by Rothko at 1:37 PM on August 7, 2005

"but this argument is never made"

I made it. Read it again.

This is a really incredibly stupid comment, no offense. No one is forcing a cigarette in your mouth.

and no one is forcing alcoholics to drink either, but I'm willing to bet you wouldn't make that comment. Not to mention that everyone pays taxes that go to covering health cost incurred by alcohol abuse but alcohol isn't specifically taxed because of it.

"no offense"

I guess that absolves you of responsibility for your comment, way to be decisive.

"Joe Taxpayer once again foots the bill for oxygen therapy, chemotherapy, organ transplants, and other incredibly expensive and ultimately unnecessary medical care."

Joe tax payer isn't paying any more for me, I have heath insurance, which I get to pay more for because I smoke. So joe tax payer also isn't paying higher insurance premiums because I smoke. And once again I point you to alcohol.

"The class warfare angle is utter nonsense"

Not according to this, or this
or this.
posted by 517 at 2:36 PM on August 7, 2005

Personally, I'd like to see the tax on cigarettes rescinded (I have to pay $7.10 at the kwiki-mart down the street from my house (thanks Christine Gregoire!)) and a $1.50 tax per pack or however they sell them on Bibles.
posted by Captain_Tenille at 2:44 PM on August 7, 2005

rich people smoke too.

non-smokers die too.

maybe we ought to tax sex too. people do it by choice and there is a heavy burden put on society as a result.
posted by brandz at 3:45 PM on August 7, 2005

Am I the only one here very confused by seeing a CATO article that seemed to be advocating increased government interventing to stop free-market activity?

What next, the ARI coming out in favor of progressive income taxes?
posted by InnocentBystander at 6:00 PM on August 7, 2005

Kwantsar---the article alludes to Viscusi's cost calculation as if it is an undisputed established fact, but both Viscusi's methods and the common interpretations of his results are heavily contested in both the legal and economic academies. More broadly, Viscusi's pro-tobacco work has been strongly criticized by at least one of his own Harvard Law School colleagues, Jon Hanson - see, e.g., Jon Hanson and Doug Kysar, Taking Behavioralism Seriously: Some Evidence of Market Manipulation, 112 Harv. L. Rev. 1420 (1999) (criticizing Viscusi's survey design and resulting inferences concerning smokers' perceptions of risk).

Of course, even if the calculation is substantially valid, that doesn't mean assigning liability to tobacco companies is a bad idea. To take the article's "bogus claim" argument seriously, one essentially has to accept that two wrongs make a right---"sure, our health care system sets prices inefficiently, but our social security system then taxes people inefficiently in a way that makes the government richer on net. So, um, everything's okay." While government funds may be largely fungible, the incentive schemes set up by our various tax, transfer and insurance systems may have a noticeable effect on individual behavior. It might just be a good idea to price our health insurance more efficiently while calibrating social security to more accurately reflect the true costs involved, rather than relying on SS to subsidize smokers' health-related costs.

By placing liability on tobacco companies for tobacco-related health expenditures (which is essentially what the MSA attempted to do, albeit not very well), the health costs associated with smoking are passed on primarily to smokers (though not entirely - to say that it all gets passed on is a canard - it should almost certainly also reduce the incidence of smoking, by making it more costly for new smokers to start and for current smokers to continue). Smokers may then face something closer to the true cost of their actions when deciding whether to buy a pack of cigarettes (of course, the common cig tax distorts this quite a bit, and one might wonder whether these taxes have been used appropriately). Placing liability on tobacco companies essentially segments the health-insurance market perfectly between smokers and non-smokers, and allows them to charge higher premiums to people who smoke more - the premium is paid per pack. This would help greatly to reduce two of the most pervasive economic problems in insurance markets - adverse selection and moral hazard.
posted by dilettanti at 8:52 PM on August 7, 2005

I, also, was worried by the CATO take on this.
posted by Balisong at 12:24 AM on August 8, 2005

It is as simple as "don't start". - Rothko

Well, yeah. That's been my approach. And that's what I was getting at by saying (in the paragraph immediately below the one you quote):

I'm young enough that my peers and I have known our entire life the dangers of smoking. What I cannot understand is why someone my age ever would have started in the first place.

But that doesn't help the millions of people who are already addicted.
posted by raedyn at 9:21 AM on August 9, 2005