MARGARET WARNER: With us now is Health & Human Services Secretary Donna Shalala. Madam Secretary, what is the President most trying to accomplish with this, with these changes he wants?
DONNA SHALALA, Secretary, Health & Human Services: A single goal: to reduce the number of young people who start smoking in the first place. This is all about young people and all about public health. And the President has been committed to that since he first announced the FDA regulations.
MARGARET WARNER: And he doesn't feel that the attorneys general settlement goes far enough to do that?
SEC. DONNA SHALALA: The President would like something stronger. He would like to hold the industry accountable with very strong penalties, so that economic incentives will change their behavior. And second, he would like economic incentives to change young people's behavior by raising the price of tobacco.
MARGARET WARNER: All right. Let's go into that one area, which was the No. 1 condition he set, which is a sliding scale of penalties and price increases to try to force the tobacco companies to reduce teen smoking. How would it work?
SEC. DONNA SHALALA: Well, we actually have left the details to our work with Congress. Some mix of strong penalties and an increase in the price of tobacco we think is what will do the job, but the details, how much of which, we've left to our negotiations with Congress.
MARGARET WARNER: But essentially, as I understand it, tobacco companies will be held to a certain standard and have to go down a certain percent each year.
SEC. DONNA SHALALA: That's right. And that's, of course, what the discussion will be about. The point is the President wants us to cut in half the number of young people who are smoking in this country over the next seven years. We want to hold the tobacco companies accountable. And if they don't, we want heavy financial penalties.
MARGARET WARNER: Now, how sure are you, or what makes the administration so sure that there's a direct correlation between the price of cigarettes and teen smoking? I mean, it sounds obvious, but in Europe, for instance, I think cigarettes cost more and more teens smoke.
SEC. DONNA SHALALA: Well, actually, we do have some evidence. And there has been some analytical work both done in this country, as well as abroad. But most experts believe the single thing that we could do that would have an effect on young people is the price of cigarettes; that young people are very sensitive to the price. But we're not leaving this proposal to that alone. The President believes that counter-advertising and education programs are also critical. But, look, the tobacco companies know a lot about the behavior of people and why they smoke. That's the reason we want to hold them accountable and want them to do what they can to reduce tobacco smoking by young people.
MARGARET WARNER: On the theory that they perhaps, better than anyone, knows exactly what it would take.
SEC. DONNA SHALALA: Well, they certainly have had a lot of information in this area, and they must very much be part of whatever legislation goes forward in Congress .
MARGARET WARNER: All right. Now, what about the danger that some of the tobacco companies have been raising over the past few months, that if the price gets too high, you are going to create a black market in cigarettes?
SEC. DONNA SHALALA: Well, I think this is all about kids and all about smoking and all about public health. And the tobacco companies are sophisticated in this country. We think a straightforward piece of legislation that holds them accountable, that gets the price high enough, and that has the public education campaign and the kind of flexibility we want for the FDA will get the job done. But if it doesn't, then the flexibility we want for the FDA, letting them regulate the industry, we've asserted that they have that authority, we'd like to turn into legislation. A nimble FDA will also help us change tactics if that's what we need to do.
MARGARET WARNER: All right. Let's turn to that because that's the other big component of this. Greater authority for the FDA, how is the President's proposal different from what the attorneys general negotiated with the company?
SEC. DONNA SHALALA: Well, we're not actually asking for greater authority. We've asserted the FDA's authority in the regulations that the President announced sometime ago. And we simply suggested an authority--
MARGARET WARNER: It was authority to regulate it as a drug.
SEC. DONNA SHALALA: --to regulate tobacco as a drug. We want the same authority for tobacco that we have on all other drugs, as well as medical devices for the FDA. We asserted that authority. We think that we have legal authority, but at the time we asked for legislation, we want that turned into legislation. The settlement, of course, put constraints on that.
MARGARET WARNER: Such as--
SEC. DONNA SHALALA: We want no constraints, no hoops, no delaying of the FDA's authority on nicotine, for example. Even though we have no plans on nicotine we want the FDA to have unfettered authority to regulate cigarettes in the same way that they now regulate other drugs.
MARGARET WARNER: Including requiring a reduction in the amount of nicotine, if that's what it takes?
SEC. DONNA SHALALA: If that's what it comes to, but we have no plans for that. And no one should draw us into a nicotine scare. What we're after is reducing the number of young people that start smoking in the first place.
MARGARET WARNER: All right. Now, what does the President think the tobacco companies should get out of this?
SEC. DONNA SHALALA: Well, we've put on the table what we would like to have. We have not put their proposals on the table. They will have proposals. They want some protection. The President said after he gets what he thinks will make a difference for young people in this country, then he's willing to consider what they want, which is, of course, protection from lawsuits and other kinds of provisions.
MARGARET WARNER: All right. But the agreement with the attorneys general was fairly specific about those protections. It was protection from all future class-action lawsuits, and it was also protection from any kind of punitive damages for past behavior. Is the President accepting those?
SEC. DONNA SHALALA: He is not, and he is not even considering those proposals until after he sees that he gets the proposals that involve a comprehensive effort to reduce teen smoking, as well as unfettered FDA authority, as well as what we'd like for the tobacco farmers. This is very important. The President sees that as an integral part of any piece of legislation that's acceptable to him.
MARGARET WARNER: There has been some confusion in the commentary today since the press conference about exactly what the President's saying. Is he endorsing the attorneys general agreement with changes, or is he, as other commentators have suggested, essentially saying, look, he's putting that in limbo and saying he's got to start over at the drawing board?
SEC. DONNA SHALALA: The President isn't endorsing any piece of legislation or any proposal now. What he is saying is that he's building on hearings Congress has had, his own FDA regulations. After all, no one has done more than this President on the issue of tobacco and kids, on years of public health groups fighting on these issues, and on the settlement that was negotiated by the attorneys general. He sees himself as building on the other proposals that have come forward and he congratulated the attorney general. He did not criticize them. He said that he was building on what they had proposed.
MARGARET WARNER: But he is not essentially embracing it with just five changes?
SEC. DONNA SHALALA: In fact, what the President is doing is laying out his own strategy for the legislation, very strong requirement on the industry, very strong requirements on young people, and an insistence that this be about young people and about public health.
MARGARET WARNER: All right. So if the legislation that emerges, if something emerges, doesn't essentially reflect these five major principles, as he called them, what then?
SEC. DONNA SHALALA: Well, we'll continue to do what we have been doing, and that is strengthening the federal government's role and the state's role, and denying access to young people to purchasing tobacco in making certain that the industry behaves in a legal way, and in making certain that we do everything on the public health side that we need to do to reduce teenage smoking. We'll do public education campaigns. We'll fight through the courts for our jurisdiction on advertising. We'll continue to do everything we can, and Congress, itself, clearly wants to consider an increase in tobacco prices. There will be activity, but we're not looking for that right now. Right now, the President wants legislation. He wants sweeping legislation. He wants to build on the efforts of the public health community of the attorneys general.
MARGARET WARNER: But is he essentially saying, no deal is better than a deal that doesn't include these because you do have these other avenues, you can go back to the courts, there are all these other things going on?
SEC. DONNA SHALALA: The President set a very high bar today. He said he wanted a comprehensive effort to reduce teenage smoking. If all the parties involved are not prepared to reach that bar, the President clearly is going to fight for it. But he set the bar, and he's not going to back off.
MARGARET WARNER: Trent Lott, the Senate Majority Leader, and other Republican leaders have said they don't see getting to this this year, and this is even before the President put his proposals on the table. Do you have expectations that are different from that? What are your expectations?
SEC. DONNA SHALALA: Well, I think, to be fair to the Congress, they do intend to adjourn before they could probably pass a comprehensive effort, but that doesn't mean that we shouldn't do the kind of analytical work that Congress will need, that we can't have public hearings, that we can't sort out the issues, and see where everyone is. There's a lot of work we can do between now and when Congress comes back in the spring. There also is a huge public education campaign. The President has asked the Vice President, who, after all, has been an extraordinary leader on this issue, to move around the country, to build public support for major legislation, and the Vice President will be doing that during the interim. So we have a lot of work to do.
MARGARET WARNER: All right. Well, Madam Secretary, thanks very much.
SEC. DONNA SHALALA: You're welcome.