Tobacco: From Player to Pariah
As lawmakers weigh a bill that will reshape the industry, cigarettemakers see their congressional clout evaporate.
The past 12 months may have been the American tobacco industry's worst since the Jamestown colonists started growing leaf in 1612. Not only has Big Tobacco seen its image sullied with the public, but its clout on Capitol Hill has dissipated like a wisp of smoke.
It's a sudden change for an industry that has carefully cultivated its standing in Congress, spending millions on campaign contributions and lobbying to persuade powerful lawmakers to protect its interests. Even as late as last summer, the industry was able to lower a proposed tobacco tax by 25 percent.
But in the cigarette companies' moment of truth, as Congress weighs sweeping legislation that will affect the industry's future, most of their defenders have fled the ramparts. In fact, a traditional supporter, House Commerce Committee chairman Thomas Bliley Jr. (R) of the tobacco-growing state of Virginia, this week demanded that the industry surrender additional documents and threatened it with a contempt citation if it did not. Last winter, he released papers showing that the industry knew nicotine was addictive and that it aimed advertising at teenagers.
"Tobacco has lost a good bit of its political clout on Capitol Hill," says Kim Wallace, a political analyst for Lehman Brothers, a Wall Street brokerage.
What brought down Big Tobacco?
For one, more adults have been exposed to research detailing the harmful effects of smoking, Mr. Wallace says. But more dramatically, industry documents made public by Representative Bliley and a Minnesota judge have sparked a round of rethinking.
"As litigation has forced the industry to open its vaults on information concerning [the industry's] science ... and its own marketing, members of Congress and the American public have been appalled," Wallace says.
"The documents were part of a pattern," says Bill Novelli, president of the Campaign for Tobacco-Free Kids here. "People in the tobacco-control field knew for years [companies] had been targeting kids." But to members of Congress and the media, he says, "it came across as a revelation."
Then too, a recent rise in smoking rates among children "had a boomerang effect" on tobacco firms, Mr. Novelli says. To that he adds new legal tactics by state attorneys general in seeking redress for smoking-related health-care costs.
Tobacco's diminished stature was on display here last week when, after months of no progress, the Senate Commerce Committee finally voted out a tobacco-regulation bill, 19 to 1. The proposal, tougher than the settlement worked out last June by the tobacco companies and the state attorneys general, would:
* Raise the price of cigarettes by $1.10 a pack over five years, with the money going to antismoking and health programs.
* Add restrictions on cigarette advertising.
* Require that youth smoking drop by 60 percent over 10 years, with a penalty for failing to meet the goal.
* Cap the companies' liability at $6.9 billion annually.
* Give the US Food and Drug Administration the authority to regulate nicotine as a new class of drug.
* Provide a $29 billion fund to help tobacco farmers and displaced workers.
The Senate bill, brokered by Sen. John McCain (R) of Arizona, drew praise from the White House, but it nonetheless faces an uphill fight. Tobacco companies say the price increase would drive them into bankruptcy and warn they would take it to court. They also insist on getting immunity from class-action lawsuits, a provision included in last summer's deal with the attorneys general.
"If you wind up bankrupting companies ... that is counterproductive," says Senate majority leader Trent Lott (R) of Mississippi. "If you bankrupt them, you don't get the money."
Novelli cautions that while the industry may be down, it's not out. The 48 million to 50 million adult smokers in the US give it a powerful base, he says. Moreover, the companies make tremendous profits and represent a lot of jobs.
"Some of the things that they're saying still resonate on the Hill," Novelli says. Some in Congress "agree that the industry has rights that are being trampled. And they don't want to see those jobs go overseas."
The industry's reduced power comes in spite of big spending in an effort to persuade lawmakers to back its positions. From 1987 through 1997, the industry, its executives, and its political-action committees paid out some $30 million to candidates and the two major parties, says Common Cause, a campaign-reform group. The Republican Party got $13 million of that, compared with $3 million for the Democratic Party.
WHILE Novelli says prospects are good for a bill this year, Wallace is doubtful. "I'm very skeptical about the enactment of a comprehensive tobacco policy this year," he says. But he predicts a small increase in the tobacco tax.
Observers agree the McCain bill is the best hope for comprehensive legislation in 1998. Senator Lott says he'll bring it to the floor the week of May 25. That fight will no doubt reveal just how much clout Big Tobacco has left.