The endgame for the tobacco industry is beginning. The startling confession from Liggett Group Inc. that, yes, tobacco is addictive and causes cancer and heart disease confirms what the public already believes. That Liggett intentionally marketed cigarettes to 14-year-olds, to hook them on nicotine years before the kids could legally buy them, is especially damning--and loathsome.

The settlement between Liggett and the attorneys general of 22 states provides an opening for a single, encompassing deal between Congress and the major tobacco companies. The cost of litigation for the tobacco companies already is approaching $1 billion a year. States are hiking taxes, launching antismoking ad campaigns, and raising the legal age for tobacco purchases. Institutional investors are bailing out of tobacco-company stocks. Meanwhile, the cost of treating tobacco-related disease is in the tens of billions of dollars annually--which is precisely why states are suing to recover their Medicaid expenses. It is time to negotiate.

The rough shape of a compromise settlement is coming into view. The tobacco industry wants to cap its current liabilities and get immunity from future ones. Congress can offer to limit exposure to new claims. There is precedent for this kind of legislation. The 1986 National Childhood Vaccine Act set up a federally mandated compensation program and limited lawsuits against vaccine manufacturers who, in turn, agreed to continue making vaccine. The government absolved them of future liability for the greater good of public health. The 1969 Coal Mine Health & Safety Act works in a similar manner.

The greater good of public health is served by a comprehensive tobacco deal, as well. In return for receiving limited liability, tobacco companies would have to create a massive multibillion dollar fund for settling claims. In addition, they also would have to agree to stop peddling nicotine to kids. Any comprehensive settlement must be based on the regulation of marketing, not just regulation of the drug. Eliminating advertising to children is essential to shrinking the nicotine-addicted population, saving lives, and lowering health-care costs for the nation. In fact, the deal also should include a tax hike on cigarettes to finance antismoking ads.

Finally, the same restrictions on marketing tobacco to American kids should apply to Chinese and Russian children. The U.S. government, of course, can't enforce its own laws overseas. Asian, European, and Latin American governments have the primary responsibility for protecting the health of their own citizens. But Washington--which is quick to criticize other countries over human rights, labor practices, and the environment--cannot indulge in hypocrisy. It should jawbone tobacco companies to act responsibly overseas.

As the current craze for cigars shows, many adults freely choose immediate enjoyment over long-term health risks. That is their individual choice, and it should be preserved. But that doesn't mean the addictive nature of nicotine and its health dangers should be concealed from consumers. Nor does it mean that predatory practices to entrap youngsters should be allowed. A single settlement of this scope is unprecedented. But battling in dozens of courtrooms and wasting billions of dollars doesn't make much sense for shareholders or the public. It will be difficult for tobacco-industry executives who sat in Congress and swore that cigarettes were not addictive to now negotiate with the same legislators. But the alternative is much worse.

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