Critics Question Tobacco Pact ' s Effect on Teen Smoking
By Jeffrey Taylor
08/19/1997
The Wall Street Journal
Page A20
(Copyright (c) 1997, Dow Jones & Company, Inc.)
WASHINGTON -- As President Clinton nears a decision next month on the proposed $368.5 billion tobacco settlement, its supporters have consistently advanced a central premise: that the settlement would force cigarette prices higher, taking a disproportionately large bite out of teenage smoking.
Now, this notion is under attack. While a preliminary White House study suggests the proposed deal would curb the number of underage smokers, some health-care economists contend that the 62-cents-a-pack increase prescribed by the settlement would still fail to meet the pact's targets for cutting youth smoking.
To reach a goal of a 30% reduction in smoking by 13-to 17-year-olds within five years, the price of cigarettes would have to rise $1.50 more a pack than what the settlement would impose, argues Jeffrey Harris, an economist at the Massachusetts Institute of Technology and a doctor at Massachusetts General Hospital. "The 62 cents is not going to be enough," agrees Frank Chaloupka, an associate professor of economics at the University of Illinois who has surveyed and interviewed teens about their smoking habits.
Proponents of the deal counter that the 62-cent price increase is only one of the approaches the settlement would use to curtail youth smoking. The price increase would be bolstered, they say, by the agreement's extensive restrictions on advertising and marketing, including its prohibitions on outdoor ads and placements of cigarette brands in movies and its allowance of $500 million a year for "counteradvertising" about the dangers of smoking. "Price alone isn't enough; you've got to have a comprehensive program," says William Novelli, president of the National Center for Tobacco-Free Kids, which helped negotiate the settlement.
Mr. Novelli adds that the 62-cents-a-pack increase would be supplemented by the 15-cents-a-pack federal cigarette tax recently approved by Congress, plus an additional 10 cents distributors and retailers are expected to tack on to protect their profit margins and, in some regions, state excise taxes. While older teens may be able to afford these prices, potential smokers aged 13 and 14 may be priced out of the market, he says.
Lawmakers of both parties and antitobacco activists have attacked the settlement on various fronts. They say it would weaken the Food and Drug Administration's ability to regulate nicotine, grant tobacco companies blanket immunity from punitive damages for past misconduct without forcing them to disgorge secret documents, and fine them too little for failing to meet targeted youth-smoking reductions.
The Clinton administration, which has done a preliminary economic analysis of the pact accepting the projected 30% decline, is expected to send the settlement along to Congress with a qualified endorsement, proposing a series of changes to correct some of these perceived defects. Congress will then be left with the delicate task of satisfying the settlement's critics while not toughening the deal so much that the tobacco industry backs away.
Critics such as Dr. Harris and Mr. Chaloupka are making this task more difficult. Mr. Chaloupka co-wrote a July 1996 study that is often cited as intellectual justification for the tobacco settlement's basic approach to fighting underage smoking. The study concluded that raising cigarette prices is three times as effective in reducing teen smoking as it is for adult smoking. Mr. Chaloupka, however, agrees with Dr. Harris's contention that the settlement won't raise prices enough to meet its reduction targets of 30% in five years, 50% in seven years and 60% in 10 years.
Moreover, Mr. Chaloupka asserts, the penalties tobacco companies would pay for failing to meet the targets won't sufficiently motivate them to work for reductions. Tobacco companies would have to pay fines of as much as $2 billion a year if they fall short of the targets. But they could deduct such payments from their taxes and could petition to get 75% of their money back if they prove they pursued all "reasonably available measures" to reduce youth smoking. "The penalties are fairly small," Mr. Chaloupka says, "compared to the profitability of getting young people to start smoking and keep smoking."
Dwight Lee, an economics professor at the University of Georgia, argues that the advertising restrictions being proposed have often proved ineffective. In a recent paper prepared for Washington University's Center for the Study of American Business, Mr. Lee cites advertising bans in European countries such as Finland, Norway and Sweden in the 1970s, which he says were followed by unchanged or higher teen-smoking rates. Australia's 1992 ban also was followed by increased underage smoking, he says.
"These kids are out there experimenting," Mr. Lee says. "If they can buy a $100 pair of sneakers, they can certainly spring for a pack of cigarettes."
While some younger smokers might be deterred, critics contend that tobacco companies appear to be responding by targeting a slightly older crowd in their marketing. David Kessler, the former FDA commissioner who has become one of the tobacco industry's most visible adversaries, notes that while RJR Nabisco Holdings Corp. eliminated the controversial "Joe Camel" cartoon character, they replaced him with images of attractive models in glamorous settings.
To give cigarette companies a stronger incentive to curb underage smoking, Dr. Harris suggests a tax specifically tailored to teen smoking: Congress, he says, could call for surveys of high-school students to determine what brands they smoke and then tax the companies according to their share of the teenage market.