Tobacco reform bills could hike cigarette prices twice as high as claimed - which Sen. Orrin Hatch, R-Utah, says is another gloomy sign for any tobacco settlement this year.
"The public health community has attempted to move the goal posts. And the tobacco industry has attempted to take its ball and go home," Hatch complained in a hearing Tuesday before his Senate Judiciary Committee."Left in the middle are the children of this nation," he said. "We started out trying to craft a bill which would wean a generation of kids off of tobacco. Now, Congress seems more interested in playing the politics of punishment."
Hatch has constantly criticized others in Congress for adding tough provisions to bills needed for a proposed settlement of lawsuits by states against tobacco companies. With such additions, the industry yanked its support from the bills.
Hatch's committee heard testimony Tuesday from stock analysts that estimates by Congress and the administration of how much current reform bills would raise cigarette prices are way low.
Sen. John McCain, R-Ariz., has said the main Senate version he is pushing would increase costs by $1.10 a pack (and Rep. Jim Hansen, R-Utah, has said a tougher main House version he is pushing would hike them by $1.50 a pack).
But Gary Black, analyst for the investment research firm of Sanford C. Bernstein & Co., said his company figures the McCain bill will raise manufacturer's costs by $2.78 a pack - making the cost of pack increase from about $2 now to $5.06 in five years.
Martin Feldman, an analyst for Salomon Smith Barney, said he figures the McCain bill would raise manufacturing costs by $1.59 a pack - and with other taxes and distribution margins that would bring, he said cigarettes should cost about $4.60 a pack in 2003.
While Matthew Myers, general counsel for the Campaign for Tobacco-Free Kids, said such increases are good because they would decrease smoking by youth, Hatch warned that increases are so high they could bankrupt companies or create a black market for tobacco.
"At some point, the advantages of a significant price increase decline, since dramatically increased cigarette prices will no longer discourage consumption, but rather could encourage new black market opportunities as well as public disenchantment," he said.
Hatch noted that several state attorneys general and the National Association of Police Organizations have written him to oppose current bills because of the black market they could create.
And Hatch said that even more important to decreasing smoking than high prices, according to some studies, is an aggressive anti-smoking education campaign - which he hopes to fund with money from a settlement if approved.
"It would be ironic indeed if Congress imposed payments so high that industry was driven into bankruptcy, robbing us of long-term funding for an anti-tobacco program," Hatch said.
But Myers said bills now proposed "will not drive the tobacco industry into bankruptcy" - and, in fact, he says the bills should be made even tougher and clearly have an increase of at least $1.50 a pack (which he says his group does not believe they do).
He said such an increase "will not drive into bankruptcy manufacturers whose global profits in 1996 exceeded $21 billion and whose domestic profit margin was approximately 38 percent."
Hatch planned yet another hearing on the tobacco settlement on Wednesday - when witnesses were set to debate about whether current bills are constitutional.