SIFTING THROUGH ASHES April 8, 1998 The NewsHour with Jim Lehrer Transcript

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Last June, the tobacco industry and attorneys general from 40 states reached an a multi-billion dollar settlement, pending Congressional approval. But differences between the current Senate bill and the initial agreement have prompted four tobacco industry giants to oppose the legislation. Phil Ponce and guests discuss the future of the tobacco settlement.

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A RealAudio version of this segment is available. NEWSHOUR LINKS: March 12, 1998 President Clinton endorses the bipartisan tobacco proposal. January 29, 1998 Steven Goldstone, the CEO of RJR Nabisco, acknowledges the health risk of tobacco products. January 16, 1998 Texas and Minnesota have suits pending against the tobacco companies. January 15, 1998 Documents show R.J. Reynolds used Joe Camel to attract young smokers. December 31, 1997 California bans smoking in just about all in-door public places, including bars. August 25, 1997 Florida settles with the tobacco industry for $11.3 billion deal. Online Forum Congressman Waxman and Connecticut Attorney General Blumenthal debate the tobacco settlement. June 20, 1997 A panel discussion the tobacco settlement. May 20, 1997: Research strongly suggests that second-hand smoke is a possible cause of heart disease. April 18, 1997: Experts discuss the future of the tobacco industry. March 20, 1997: The Liggett Group admits that smoking cigarettes is addictive and can cause cancer. Browse the NewsHour's coverage of law and health. OUTSIDE LINKS: RJ Reynolds Tobacco Food and Drug Administration

PHIL PONCE: For more we're joined by Bruce Reed, the president's domestic policy adviser and point man on tobacco; Sen. Don Chafee, recently a lead sponsor of tobacco legislation, he's a member of the Senate Finance Committee; and David Adelman, a tobacco industry analyst with Morgan Stanley Dean Witter, a New York brokerage firm. We asked the tobacco industry to participate, but the industry declined. Gentlemen, welcome all. Mr. Reed, we just heard the head of RJR basically say that not only was the deal dead, it was practically buried from the administration's standpoint. Is the deal dead?

Is the deal "dead"?

BRUCE REED, White House Domestic Policy Adviser: Far from it. We're disappointed with what the tobacco companies had to say this afternoon. We hope they'll reconsider. We think they will. But I think we are closer than ever to passing comprehensive tobacco legislation this year and in this Congress. Last week's historic action by the Senate Commerce Committee shows that there is broad bipartisan support for doing this.

PHIL PONCE: Senator Chafee, closer than ever, as Mr. Reed says?

SEN. JOHN CHAFEE, (R) Rhode Island: I certainly believe that we're going to see tobacco legislation passed in this session of Congress. The answer is yes, I don't think it's buried. Maybe the negotiations and a consent decree are buried, but not action by the Congress in connection with the--what the tobacco companies are doing and have done in the past and apparently plan to do in the future.

PHIL PONCE: Mr. Adelman, how does the tobacco industry see it as far as the continued viability of a "deal?"

DAVID ADELMAN, Morgan Stanley Dean Witter: Well, I think the industry's position is that the June 20th agreement, or something reasonably approximating, is viable, but the only thing that will be dead and buried, given the course that Congress is taking today, would be the industry because, in effect, the reason industry is walking away from the McCain proposal is that it would bankrupt the industry.

PHIL PONCE: Mr. Reed, do you buy that? That was one of the points that the head of RJR made, that this would--this deal would decimate the industry, would cause entire communities to go under, your response.

BRUCE REED: No, we don't believe that. We're not interesting in bankrupting the tobacco industry. We just want to put them out of the business of marketing to kids, and that's what this legislation does. By our analysis, both the June 20th agreement and the McCain bill will cut into this industry's profit margins but it's one of the most profitable industries. They'll still remain in business, and they'll still make money. They've got 50 billion adults who are addicted to this product.

PHIL PONCE: Sen. Chafee, how do you react to the--to Mr. Goldstone's argument that this is all about money and that Congress is just going into a tax frenzy?

SEN. JOHN CHAFEE: I don't think so at all. I think it's all about trying to keep young people from taking up smoking. And, as John McCain rightfully said, there are 3,000 youngsters in the United States of America every day that take up smoking. That's a million a year. And of those 3,000 that take it up every single day, 1,000 of them will die prematurely because of having smoked. And so it isn't to do with money and it's not just proceeds into the federal government is how best can we get these youngsters from starting to smoke, and I strongly believe it's by increasing the cost of a pack of cigarettes to each and every one of them.

PHIL PONCE: Mr. Adelman, why do you think the industry chose to make this announcement today? Vice President Gore late this afternoon said that he saw this as a bargaining ploy.

"They (tobacco industry) cannot live with the McCain agreement."

DAVID ADELMAN: From the industry's perspective this isn't the negotiating tactic. They're just laying out the underlying reality. They cannot live with the McCain agreement. They can't live with anything that closely approaches it. It will absolutely put them out of business. And if you truly want to address youth smoking--my position is and I think people that have analyzed this carefully--the way you do that is not by burdening the bulk of the consumers of cigarettes. 98 percent of people that choose to buy tobacco products do so legally, that are adult consumers. By penalizing them to go after the 2 percent is not the most sensible way of dealing with the issue of youth consumption of tobacco products. Let's do it on a comprehensive basis, to do it on a comprehensive basis over a long period of time with the industry's support, and the McCain legislation or anything like that isn't moving on a path to that objective.

PHIL PONCE: Mr. Reed, evidently, the administration does think that there is a relationship between teen smoking and the price of cigarettes.

BRUCE REED: Now, obviously, it would be easier to reduce youth smoking if we had the industry working with us, instead of against us. But all the public health experts say that the very most important thing you can do to reduce youth smoking is to dramatically increase the price of cigarettes.

PHIL PONCE: Mr. Reed, how do you respond to the industry's contention, as expressed by Mr. Goldstone today, that this is largely the impasse now or they see it as an impasse, is largely the function of a lack of presidential leadership, that the administration has taken the deal apart piece by piece behind the scenes?

BRUCE REED: Well, I just don't see how you can say that. This president has shown more leadership on this issue than any of his predecessors. Two years ago, this administration was the first to lead the nation in a crackdown on youth smoking. And we have been working hand in hand with members of Congress in both parties for the last several weeks to move forward on this legislation.

PHIL PONCE: Sen. Chafee, one of the other points that the industry is making is that this--this deal and what Congress is trying to do has a very much a punitive aspect to it, that you're basically looking for retribution, you want to punish the industry for all the controversies of the past?

"What we're trying to do, as I say, again, is to reduce teen smoking...."

SEN. JOHN CHAFEE: Well, that's just not so. What we're trying to do, as I say, again, is to reduce teen smoking and to stop these youngsters from taking it up in the beginning. And I don't think that's punitive or that's not seeking retribution. It's looking to the future. What can we do? And the Center for Disease Control has said that for every 10 percent increase in the price of cigarettes there's a 7 percent decline in the number of youngsters who take up smoking. And so obviously, the path I believe in and the path that Sen. McCain is chosen, I would go even further than he does, but it's the right thing, increase the cost of a pack of cigarettes and you will reduce the number of youngsters who start.

PHIL PONCE: Mr. Adelman, the administration and members of Congress are saying that they can go ahead and come up with a bill, come up with an approach without the industry. Do you buy that?

DAVID ADELMAN: Well, a few things. First, realize that cigarettes in Europe cost four to five dollars a pack. Youth smoking rates are very similar to those in the United States. So, clearly, price is not the solution. Secondly, Mr. Reed said earlier that the public health community uniformly indicates that prices is the number one factor to drive down consumption. The fact of the matter is that in 1996 when President Clinton endorsed FDA authority over tobacco and outlawed the comprehensive plan, at that time without the industry's support, the president and Sec. Shalala indicated that the program would result in a 60 percent decline in youth consumption over a 10-year period. And it did not raise prices whatsoever. So I think you clearly have seen a shift in Washington's attitude towards the industry. Two years ago, pricing wasn't the answer. Today, after the industry and its adversaries on June 20th came to a comprehensive understanding, now you're seeing a move increasingly towards punitive taxation and ultimately back-door prohibition of tobacco products.

PHIL PONCE: And let me get back to you on that question. But let's get Mr. Reed's response to what you just said.

BRUCE REED: Well, we've been working for several years to try to raise cigarette prices to deter youth smoking and, in fact, last year we were able to secure a 15 cent increase in cigarette taxes to help pay for health care. We certainly agree it takes a comprehensive approach to reduce teen smoking. We need to try everything.

PHIL PONCE: Well, did that last increase work, or didn't it?

BRUCE REED: Well, it hasn't even taken effect yet.

PHIL PONCE: I see.

BRUCE REED: But I think it's important to run counter-advertising. It's important to do everything we can to stop the industry from doing ads targeted at children. We need other prevention programs, but we have to raise the price as well.

PHIL PONCE: Mr. Adelman, getting back to you on the question that I posed earlier, and that is, can Congress go ahead and come up with a plan without the industry's cooperation or sign off in some way?

What Congress can do.

DAVID ADELMAN: Well, there are certainly things that Congress can do independently of the industry. If they want to raise taxes on the lowest economic strata in the country, the smokers in America that on average earn less than $40,000 a year, they can do that. Can they significantly restrict marketing? My view is not; that you're fundamentally impinging on their First Amendment rights to commercial free speech, and in addition, I don't think the Congress has the authority to institute the look back penalties that the industry voluntarily agreed to. In other words, the industry on June 20th agreed to a system that would penalize them if youth smoking rates, which is something I and most other observers don't believe the industry truly has any control over, they would be penalized up to $2 billion a year for the failure to bring youth smoking rates down. The McCain bill happens to have much more onerous provisions, but, irrespective, I don't think that kind of legislation would be constitutional without the industry's support. It would be similar to fining a resort in Florida for having bad weather when you go on vacation.

PHIL PONCE: Sen. Chafee, how about it, what can Congress do?

SEN. JOHN CHAFEE: Well, I think obviously it's much easier to proceed with the cooperation of the companies, but, absent that, as apparently they're saying now, Congress has several arrows to its bow. The first obviously is through the taxation rule, but second is through the Federal Drug Administration taking an ever tougher program in connection with cigarettes being an addicted drug, for example, so there are ways that the FDA can go much further than it has gone, and will it all stand up in court? I think a good deal of the steps that they possibly could take would stand up in court.

PHIL PONCE: So, Senator, what do you think the Congress is going to do?

SEN. JOHN CHAFEE: Well, I think the Congress is not going to roll over and say, well, forget the whole thing. I think Congress is deeply disturbed about what's happening with our youngsters and what it means to the future of the health of these young people, and, indeed, for those who are smokers now. I mean, when we increase the cost of a pack of cigarettes, I think many addicted--many smokers who are now addicted, if you would, will choose the route of giving up smoking, which is all for the good. That's the objective of the exercise. It isn't to punish tobacco companies or get revenge or any of that. So I think--I outlined the taxation route. I outlined the FDA route. But obviously this has a deep appeal to Senators and Representatives doing something about this problem, which is that of all our health problems this is the easiest to solve with beneficial results coming in, reducing heart disease and cancer, and cardiovascular problems of all types.

PHIL PONCE: Mr. Reed, what will be the White House's route?

BRUCE REED: I think Sen. Chafee is right. When the president and Sen. Chafee and Sen. McCain and members of Congress in both parties are as determined as we are to reduce youth smoking, we're going to get this done one way or another.

PHIL PONCE: And, Mr. Adelman, how do you think the tobacco industry will respond to what Congress might be doing?

A tax on the working class?

DAVID ADELMAN: The industry is going to obviously argue against a punitive increase in taxes, that it's--you're putting a tax on the working--the hardest working, the lowest socioeconomic sector to provide whether it's a Republican tax break or Democratic spending programs, and I think they're going to aggressively attack that with an effective grassroots campaign.

PHIL PONCE: Gentlemen, that's all the time we have. Thank you all very much.

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