Word of caution to spendthrifts

Before states spend their portion of the $206 billion tobacco settlement, they might want to have a few words with Stan Glantz. Mr. Glantz, an antitobacco activist and professor of medicine at the University of California, San Francisco, is the author of "The Cigarette Papers," a book that tracks the history of the tobacco industry in litigation.

"This is going to go down as one of the biggest con jobs in the history of the world," says Glantz. "There are so many adjustments and offsets built into this that I think that over a short period of time, the money is going to disappear."

Glantz says there are several loopholes that tobacco companies may use to dramatically minimize yearly payouts.

* The inflation adjustments will not rise as fast as the smoking-related medical costs they are based on.

* The tobacco companies can pay less when cigarette sales drop - meaning that even if cigarette sales decline, the payment to states will decline even faster.

* If other tobacco companies that are not party to the current agreement enter the market, there are built-in cuts.

* If the federal government imposes any additional taxes on cigarettes and shares this money with the states, tobacco-company payments to the states will be reduced proportionately. This provision "essentially makes state attorney generals the active allies of the tobacco industry in lobbying Congress not to pass any additional taxes on cigarettes," says Glantz.

One common fallacy about the agreement, he adds, is that it lasts 25 years. In fact, only the payments will last 25 years - but the security afforded the tobacco industry last forever.

of 5 stories this month > Get unlimited stories
You've read 5 of 5 free stories

Only $1 for your first month.

Get unlimited Monitor journalism.