There is an old political saying: money is the mother’s milk of
politics. The more money a politician can spend, the more likely he is
to remain in office, and if that money doesn’t have to come from the
taxpayer, but can be taken from criminals or from politically incorrect
businesses, so much the better. That’s why every politician, except
those from the tobacco states, jumped on the bandwagon to sock it to the
tobacco industry. After all here was a large industry that was killing
people, which had very, very deep pockets.
As the anti-tobacco litigators began winning their fight against “big
tobacco,” many wondered how the tobacco industry would pay the $206
billion bill due to the cities and states. Well, the answer was simply
soak the consumer by increasing the price of cigarettes by 50 cents a
pack. Not satisfied with getting cash from the tobacco companies the
anti-tobacco forces increased their demands. They wanted the industry to
pay to encourage people to stop smoking. As those ubiquitous
anti-smoking billboards began to spring up along the highways, the cost
to the industry grew even greater. After all, politicians appeared to
have a bottomless well from which to extract dollars.
Well, now economic reality is rearing its ugly head; the economic
principle of correlation between price and consumption came into play.
There is a bottom to the well, even though government bureaucrats and
politicians didn’t think so. According to an
AP story in the Boston
Globe, last year there was a nine percent reduction in tobacco shipments, which has led to states taking a billion, yes that’s billion, dollar reduction from anticipated revenues in the month of April. In fact some are anticipating a $20 billion dollar reduction in the original figure of $206 billion over the next 25 years. As a result some states, Georgia, Virginia, Louisiana, and North Carolina are already looking into selling their anticipated revenues to investors at a discount. Those states are doing what many in business do regularly — sell their receivables for cash now.
In reality those states may not obtain a decent price for the tobacco windfall receivables. According to the Louisiana State Treasurer John Kennedy, “… every day we wait and more bad news comes out about the tobacco industry, the price goes down.” In addition the Justice Department, not content with slowly strangulating the industry, “is suing to recover billions the government says it spent on smoking-related health care.”
In addition, the tobacco restitution dollars, which in theory were to pay for health related costs, is being used for other purposes. Those dollars are being used for tax reduction, road and bridge construction, water projects, schools, new jails, and even for the lawsuits resulting from illegal activity by members of the Los Angeles Police Department’s Rampart division. Last February
Mayor Richard Riordan suggested, “that Los Angeles set aside its share of the national tobacco settlement — up to $300 million — to cover lawsuits brought by victims of the city’s police corruption scandal.
“This is the best use of these dollars,” Riordan said at a news conference. “Though we have no way of knowing the dollar amount, we must expect and prepare for tens of millions of dollars of liability.”
It’s also a fact that none of the 46 states have any plans to share the dollars with the injured smokers. So here come the lawyers again. According to the
New York Times, it is now on to the second round of tobacco wars and it’s the states against the Medicaid recipients, who became ill as a result of smoking.
According to G. Kendrick Macdowell, a lawyer at the Washington firm of Patton Boggs, which is coordinating the new round of cases with lawyers from around the country, “These are cases about the least fortunate and most vulnerable in our society who exhausted their savings to become eligible for Medicaid, who assigned their claims to recover expenses to the states and who are entitled to a portion of recovery under federal law.”
Even if all he says is true, does he really believe anyone will collect? After all, lawsuits take years to settle, which means very few Medicaid patients will be alive to collect what little is left after the lawyers take their “share.” Rest assured Joe Taxpayer will again be footing more legal bills when the states, municipalities, and federal government fight to keep those tobacco company dollars from victims.
But the story gets worse. According to an article by Thomas C. O’Brien and Robert A. Levy in the May 1st edition of the
Journal, the November 1998 Master Settlement Agreement was written to “carve out a protected market” for Philip Morris, Reynolds, Lorillard, and Brown & Williamson. Those companies were very aware that they would have to raise prices to cover that $206 billion bill and made sure that any other tobacco companies that did not participate in the agreement could undercut their prices.
The WSJ goes on to allege that the agreement violates antitrust laws and both the Commerce Clause and the Compacts Clause of the U.S. Constitution. The authors point out that no one in government is likely to challenge the agreement. Everyone from the Clinton administration, to the states’ attorneys general, to the legions of lawyers on both sides has a vested interest in maintaining the agreement. The irony is that the entire $206 billion will be paid by millions of smokers, the supposed beneficiaries of all these lawsuits.
According to O’Brien and Levy, “Meanwhile, the settlement has led to massive shifts of wealth from millions of smokers to trial lawyers. Predictably, part of that multibillion-dollar booty has already started its round-trip back into the political process — to influence state legislators, judges, attorneys general, governors, mayors, and maybe some federal officials. With all that money in hand, the political influence of trial lawyers will grow exponentially. And with every passing day, the agreement becomes more firmly entrenched — cementing the relationship between trial attorneys and their allies in the public sector.”
Those same attorneys are now hard at work trying to do the same thing with the firearms’ industry. So far they only got a “settlement” from one company, Smith & Wesson, and they are now attempting to wiggle free. But make no mistake about it, they have learned their lessons well and won’t give up their financial and political payoff.
This kind of collusion between business, trial attorneys, and politicians makes overnight stays in the Lincoln bedroom look like child’s play. The tobacco wars have created an interrelated legion of lawyers and politicians who understand how to work the system so they can enrich themselves with impunity, while undermining our laws and the Constitution in the process.