Tobacco Talks: Everybody, Back To The Table

Clinton is out to make the tobacco deal an election-year issue

Three months ago, the $368.5 billion tobacco settlement seemed likely to win the Clinton Administration's blessing and congressional approval. With good reason: Presidential confidant Bruce Lindsey had helped broker the deal, and a powerful coalition of tobacco execs, state attorneys general, and public-health advocates were on board.

But by Sept. 17, when President Clinton called for major changes to the pact, optimism about the deal's future had turned to gloom. Not only won't Congress act on legislation to enact the pact this year, but pushing the debate into the 1998 election year vastly increases the risk that the deal will ultimately go up in smoke.

Flanked by two leading critics of the settlement--former Food & Drug Administration Commissioner David Kessler and ex-Surgeon General C. Everett Koop--Clinton made clear that he was taking a stand against the industry--and signalled that he plans to make tobacco a huge issue in next year's elections. Democrats will portray Republicans as pawns of a rogue industry; the GOP will depict Democrats as lackeys of greedy trial lawyers.

Clinton and congressional leaders say they still want a bipartisan accord. But even Republicans, who have traditionally sided with the industry, are distancing themselves from the original deal. "The tobacco pact has no credibility--none whatsoever," says Representative Marge Roukema (R-N.J.). "We'd look like accomplices to the perpetration of a crime if we approved it."

At a minimum, the proposal will be significantly altered. Clinton wants greater FDA regulation of tobacco, disclosure of now secret industry documents, and increased penalties against companies if they fail to meet targets for reducing teenage smoking. Clinton also insists on further restrictions on advertising and sales of tobacco products, and more money for cancer research. To pay for his changes, the President estimated that the price of a pack of cigarettes would have to go up by as much as $1.50 over the next decade. Industry spokesman Phil Carlton says the original deal would lead to such a price boost--and meets the other broad aims Clinton outlined.

"LITIGATION LOTTERY." White House strategists believe that President Clinton has a good chance of getting his wish list, thanks to the missteps by Big Tobacco. With a history of getting its way on Capitol Hill--which has received millions in campaign donations--the industry assumed that it could ram a deal through Congress without including lawmakers in the talks early on. That soured the GOP as well as the Democrats. Hubris inflicted another wound in the form of a $50 billion tax break inserted into the balanced-budget bill with the help of Gingrich and Senate Majority Leader Trent Lott (R-Miss.). Once exposed, the House and Senate quickly voted to repeal the giveaway.

Republicans aren't abandoning Big Tobacco. Nor are they willing to give the Democrats exclusive use of the tobacco settlement as campaign fodder. Hill Republicans, for example, are making a show of efforts to try to curb exorbitant fees to plaintiff lawyers who cut the deal. "This is not going to be a litigation lottery for the enrichment of trial lawyers," vows House Speaker Newt Gingrich (R-Ga.). And tobacco-state lawmakers want subsidies for growers who face ruin because of lost sales.

In the end, it will take Clinton's leadership to get a deal back on track. For now, the President is enjoying watching Republicans squirm. Aides think he's in a win-win situation: He gets the deal he wants or a potent issue for Democrats in '98. Either way, it's bad for Big Tobacco.

Before it's here, it's on the Bloomberg Terminal.