[Pages S5247-S5269]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

NATIONAL TOBACCO POLICY AND YOUTH SMOKING REDUCTION ACT

The PRESIDING OFFICER. Under the previous order, the Senate will
proceed to S. 1415, which the clerk will report.
The assistant legislative clerk read as follows:

A bill (S. 1415) to reform and restructure the processes by
which tobacco products are manufactured, marketed, and
distributed, to prevent the use of tobacco products by
minors, to redress the adverse health effects of tobacco use,
and for other purposes.

The Senate resumed consideration of the bill.
Pending:

Gregg/Leahy amendment No. 2433 (to amendment No. 2420), to
modify the provisions relating to civil liability for tobacco
manufacturers.
Gregg/Leahy amendment No. 2434 (to amendment No. 2420), in
the nature of a substitute.

Mr. McCAIN. Mr. President, I note the presence of the Senator from
Massachusetts who wishes to speak. I will yield the floor in just a
minute, because I don't want to have him delayed, because I know he has
a schedule. Of course, I note the presence on the floor of the sponsor
of the pending amendment, Senator Gregg of New Hampshire.
Mr. President, I thought yesterday we made good progress. We have
addressed the issue of attorneys' fees, although I don't believe that
will be the final consideration of that issue since there are some very
strongly held views on it. But we did have good and vigorous debate on
that issue.
Yesterday, also, I think the parameters of this legislation were
determined to a significant degree when the Ashcroft amendment was
tabled. Then the majority of the Senate decided that we would not
remove these fees that will be imposed on the tobacco industry as part
of this legislation and settlement.
On the other side, when the Kennedy amendment was rejected, also the
majority of the Senate declared its position at $1.10, which was
approximately where the price of a pack of cigarettes would be.

[[Page S5248]]

Today, we will address the Gregg amendment, which will have to do
with another important part of the bill. And that is the cap on the
amount of payments that the tobacco companies would make on an annual
basis, which I intend to discuss at more length, because I am not sure
that this Senate understands, one, the exact meaning of that and the
implications of removing it, because, very frankly, the implications of
removing it will mean much higher costs to the taxpayers and to the
consumers at the end of the day.
Finally, after that issue is resolved, we intend to take up one of
the other major portions of this proposed legislation. And that is the
agriculture portions of the bill, and, of course, there are extremely
strongly held views on that particular issue.
Mr. President, I believe at the end of today we would have
addressed--the Senate--admittedly from time to time in somewhat
prolonged fashion, the major issues pertaining to this legislation.
I am pleased with the progress we have made so far. Apparently, we
may not be able to complete action on this legislation before going
into recess. But hopefully the realization will set in that we have
addressed by the end of the day the major portions of this bill. And we
could then conclude consideration of this legislation upon return.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Massachusetts is recognized.
Mr. KENNEDY. Mr. President, did my friend and colleague want to make
a statement? I know the floor manager is on his feet.
Mr. KERRY. No. I thank our colleague. I will reserve my comments.

amendment no. 2433

Mr. KENNEDY. Mr. President, the Gregg-Leahy amendment raises very
fundamental questions:
Why would we consider giving a group of the worst corporate villains
in America special protection?
Why would we want to make it more difficult for those who have been
injured by the tobacco industry's wrongdoing to collect damages?
Why should Congress impose a liability cap which will have the effect
of redirecting dollars away from smoking victims and into industry
coffers?
I have heard no convincing answers to these questions from the bill's
proponents.
More than one year ago, when news of the settlement negotiations
between the state attorneys general and the tobacco industry first
became public, I expressed my opposition to restricting the liability
of tobacco companies. On April 25, 1997, I came to this floor and spoke
out against giving the tobacco industry any special protection:

It would be unconscionable to deny people poisoned by
tobacco their day in court. Each year, millions of Americans
learn that they have a disease caused by smoking. In too many
cases, it is beyond our power to restore their health. We
must never permit the tobacco industry to extinguish their
right to justice as well.

We have come a long way in the last year. The deal with the industry
that was announced on June 20th would have given tobacco companies de
facto immunity from suit. In fact, its provisions were designed by the
industry to erect enormous barriers in the path of smoking victims
seeking compensation. It would have banned all class action suits,
which are often the only effective way individuals can litigate against
corporate giants. In fact, it prohibited any aggregation of claims. It
would have also banned all punitive damages. If ever we have seen an
industry against which punitive damages are warranted, it is the
tobacco industry. It would have prohibited all litigation by health
insurers, such as Blue Cross and Employee Health and Welfare Funds,
which incur enormous costs treating tobacco induced illnesses. It would
have prevented the introduction of crucial evidence by tobacco victims
suing the industry. It would have given absolute immunity to the parent
companies of cigarette manufacturers even though those companies are
where most of the profits go and the real decisions are made. It would
have extinguished all future governmental suits against the industry.
And, it would have imposed an annual ceiling on the liability of the
tobacco industry. It was truly a draconian litany.
Fortunately, these liability restrictions were so extreme that they
produced a great public outcry. Public health experts and victims'
rights advocates expressed their outrage at this enormous injustice.
During the past year, there has truly been a national awakening on
this issue. The American people focused on what the tobacco industry
has done as never before. The dramatic revelations of corporate
misconduct which have emerged from the industry's own files have truly
shocked the national conscience. The harshest indictments of the
tobacco companies are written in their won words, long kept secret, but
now revealed for all to hear. From a 1981 Phillip Morris strategic
planning document:

Today's teenager is tomorrow's potential regular customer,
and the overwhelming majority of smokers first begin to smoke
while still in their teens . . . Because of our high share of
the market among the youngest smokers, Phillip Morris will
suffer more than the other companies from the decline in the
number of teenage smokers

From an R.J. Reynolds Tobacco Company document entitled ``Planning
Assumptions for the Period 1978 to 1987''.

Evidence is now available to indicate that the 14 to 18
year old group is an increasing segment of the smoking
population. RJR-T must soon establish a successful new brand
in this market if our position in the industry is to be
maintained over the long term.

Company records also detail elaborate efforts to chemically treat the
nicotine in cigarettes to make it even more addictive than it naturally
would be. All the while, these same companies were telling the American
people that smoking is just a matter of free choice.
All of the special industry protections contained in the settlement
were included in the Commerce Committee bill when it was first
introduced. To the Committee's credit, in the final days before the
markup, the prohibitions on class actions and punitive damages were
removed. In the negotiations which produced the Manager's Amendment,
the provisions granting immunity to corporate parents and affiliates
was finally deleted and many of the evidentiary restrictions were
removed. It is now time for the Senate to strip this legislation of the
remaining vestiges of these special protections for Big Tobacco. While
the remaining special protections may be less extreme, the principle is
the same. This industry should not in any way be shielded from the long
overdue rendezvous with accountability which awaits it in courthouses
across America.
Title XIV of the Manager's Amendment provides the industry with an $8
billion per year liability cap limiting the companies financial
exposure for both past and future misconduct. I object to any special
protection for the industry. I believe the tobacco industry is not
entitled to any liability cap. But, I especially object to this
particular cap which applies to liability for future as well as past
wrongdoing. One of the most important purposes of the civil law is to
deter misconduct.
Capping liability for future wrongdoing reduces that deterrent and
encourages tobacco companies to continue their misconduct. This
industry of all industries, based upon its unparalleled record of
corporate irresponsibility, should be subject to tougher standards,
certainly not more lenient standards, than other companies. Yet, a more
lenient standard is exactly what Title XIV will provide for the tobacco
industry.
Consider the significance of the protection which a liability cap
will give the tobacco companies. It provides them with an absolute
ceiling on the amount of money they will have to spend each year to
compensate their victims. This industry which conspired for decades to
conceal the enormous health damages inherent in smoking. This industry
which manipulated the nicotine in its products to make them even more
addictive. This industry which targeted generations of our children for
a lifetime of addiction and early death. There can be no justification
for sheltering this industry from the legitimate claims of those who
have been injured by its deadly product.
To the extent that the proposed liability ceiling is ever reached, it
will have the effect of transferring dollars which rightfully belong to
victims into the industry's corporate coffers. We are giving preference
to CEOs and shareholders above the victims of tobacco

[[Page S5249]]

induced illness. That cannot be justified. It is ironic to hear some
proponents argue that the ceiling is so high it will never be reached.
If that is true, it is unnecessary. If it is reached, it will inflict a
second injury on those already injured by this industry's gross
misconduct.
There is another serious problem created by the current Title XIV.
The language it uses to settle the state cases is far too broad. It
does for more than resolve current claims arising from state
expenditures for the treatment of citizens suffering from tobacco
induced illness. As written, it could prohibit state and local
government from bringing future actions to enforce public health
standards and consumer protection laws. It could prevent state and
local government from effectively policing future tobacco industry
conduct. If this provision is not revised, it will tie the hands of
state and local government, and allow the tobacco industry to escape
effective regulation.
The Gregg-Leahy amendment will remove all of these special limits on
industry liability from pending legislation. Congress does not need the
consent of the tobacco industry to legislate meaningful protection for
America's children. Our sole concern must be what the public health
requires, not what the industry desires. The deal with the industry
which Title XIV contemplates would set an appalling precedent. It will
undermine the moral authority of the federal government as protector of
the public health. Today the Senate should declare that it will not
allow the tobacco industry to escape its long overdue rendezvous with
accountability.
Mr. President, I yield the floor.
Mr. KERRY addressed the Chair.
The PRESIDING OFFICER. The Senator from Massachusetts.
Mr. KERRY. Mr. President, I will speak at greater length at a later
time, but let me just say with respect to two of the concerns that were
expressed by my colleague from Massachusetts, the Senator expressed the
notion that the managers' amendment has left an ambiguity with respect
to preserving addiction claims and also preserving the ability of
States to bring future enforcement actions against the tobacco
companies.
I would assure the Senator that it is neither the intention of the
Senator from Arizona nor myself that that be the case. It is our
understanding that the language in the managers' amendment is clear
with respect to the fact that we do preserve addiction claims, and we
also preserve the right of the States to bring future enforcement
actions. If there is any ambiguity about that, I know the Senator from
Arizona and I would be only too happy to accept an amendment of
clarification to make it clear that neither of those are in fact the
intent. So I think that that is an issue that can be dealt with
exceedingly easily. The larger issue, sort of the question of whether
there is a shield or not, is something that I will address a little bit
later.
At this moment I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. KERRY. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. KERRY. Mr. President, let me say, for the benefit of colleagues
who were anxious to speak on this issue, that this is a good time.
There is nobody here at this time seeking recognition, so we invite
Senators who were particularly anxious to try to address this question
to come to the floor and do so.
I want to try to clarify, if I can, what this amendment does and what
it doesn't do, because I think there is a misunderstanding here. I
think it is absolutely vital that when the Senate votes on this, we
vote with clarity as to what the impact will be.
Some people have come to the floor suggesting that this is a shield
for tobacco companies and that it is an unwarranted shield for tobacco
companies. I think the Senator from Arizona and I would stress, as
strongly as either of us knows how, that there is no shield here for
tobacco companies. Tobacco companies will be liable. They will be
liable under any circumstances under this bill. There is only one
circumstance in this bill by which they might be limited in the amount
of a 1-year payment. That is not a limit on liability. That is a limit
on how much of their liability they would pay in any 1 year. But if the
liability were more than that payment for 1 year, the payment carries
over into the next year. So, in effect, there is no limit on liability.
There is simply a rollover process by which a fixed amount, on an
annual basis, is arrived at.
Why does that component of the bill exist?
Let me emphasize, there are two parts of this bill. If the opponents
of the so-called cap, of an annual cap, if they were to prevail here
today, what they would succeed in doing is stripping this bill of the
one invitation that it offers to tobacco companies to come into the
tent, if you will, and be part of the solution of how we are going to
reduce smoking among teenagers. If you strip out that cap, what will
happen is we will return to the status quo. We stay in the position
where tobacco companies are merely being sued. We get no cooperation
with respect to any of the advertising restrictions, any of the
document depository, any of the health programs that will help our kids
reduce smoking. We get none of that cooperation, and we guarantee that
there will be a challenge on the look-back provisions. We guarantee it.
If people think stripping that out creates a stronger bill, to leave
us in a situation that we have been in for all the last years--which is
simply endless lawsuits that produce no cooperative effort and
ultimately result, at least to this date, in no winnings in court--I
would have a hard time understanding how that is a better situation.
The fact is that all of the concerns that people expressed about
immunity have been addressed between the time of the tobacco company
settlements and the time the Commerce Committee brought a bill out of
committee.
Let me clear up that understanding as strongly as I can. When the
settlement was agreed to, back in June of 1997, it contained sweeping
immunities for the tobacco companies. Those are gone. There is no
longer any elimination of class actions. Tobacco companies will
continue to be subject to class actions. There is no longer an
elimination of punitive damages. Tobacco companies will be subject to
punitive damages. There are no longer any restrictions on the
aggregation of claims, which means different individuals could come
together, one lawyer representing them--you can aggregate the claims
and come in with a larger claim. That is now permitted. And there are
no restrictions on third party claims. They are now permitted.

So, as reported by the Commerce Committee, the bill contained certain
other immunities. Those are gone, too. Parent companies and affiliates
are no longer shielded from liability. Advertisers, attorneys, and PR
firms are no longer shielded from liability. Addiction and dependency
claims against the tobacco industry are preserved, including claims
where addiction is the only injury alleged and claims where addiction
is the basis of a broader claim relating to the manifestation of a
tobacco-related disease.
There are no longer any restrictions on the type of evidence that is
discoverable or admissible, and all limits on the industry's
obligations to produce documents have been removed. The ability of
plaintiffs to maintain actions in State courts and grounded in State
law is preserved. And, finally, there is no longer any exemption for
tobacco companies from the Nation's antitrust laws.
All of that is gone, Mr. President--gone. They have been totally
exposed. And that is one of the reasons, I might add--you know, when
you look at the price of $1.10, and you look at the settlement in
Minnesota, if you extrapolate the settlement in Minnesota and the
settlement in Mississippi, if you add up the potential of all the
settlements in the country, you come out with an amount of money that
is exactly or almost exactly where we are with respect to the $1.10.
The fact is the tobacco companies are settling cases now at a rate that
basically accepts the $1.10. They are not fighting about price because
they know ultimately that is a price they can bear. What they are
fighting about is the liability. That is the reason these millions of
dollars are really being spent.

[[Page S5250]]

That is the real bone of contention here.
The fact is, they are offered two choices in this bill. They don't
have to participate, in which case the situation the Senator from New
Hampshire wants is exactly what will exist. They will be subject to
suits, endless suits. That can happen. But, if they choose to try to
come into the tent, as we have said --and we have no way to force them
into the tent. There is no way we can do that. So my fellow Senators
have a choice. You can either leave them out there subject to lawsuits,
subject to all of this litigation without any cooperation. Or you can
decide maybe there is something sufficiently good that we, the
Government, can get in exchange for their participation, for which we
are willing to tell them only one thing: You are not going to pay more
than $8 billion in any 1 year. It doesn't let them off the hook. It
doesn't say they don't have to pay. It doesn't say they are not liable.
It doesn't give them immunity. It simply restricts the amount of money
in any 1 year.
What is it worth getting for that restriction for not having any more
money in 1 year? We settle the State actions and we give them that $8
billion cap. That cap is importantly indexed to inflation, so there is
not some sort of reduction in the purchasing power or in the value of
that. It will rise with inflation and it will increase according to--at
least 3 percent we have had each year and perhaps more, if the CPI is
higher than 3 percent.
I think it is important to make it clear--there is no concession in
this bill unless the tobacco companies decide to be involved. And that
is a critical component. The tobacco companies would have to come in
and sign a protocol, sign a consent decree, and they would agree to
abide by the provision of the payments. Most important, they would
agree to abide by the look-back assessments.
I would like to just run through the look-back assessments, because I
heard the Senator from Utah yesterday on the floor--the Senator from
Utah was pointing out to everybody how unconstitutional are the look-
back assessments. The look-back assessments are a dramatic way of
engaging the tobacco industry into compliance with the things we want
them to do.
The tobacco industry accepted, they are the ones who helped come up
with the look-back agreement. The look-back agreement was in the
original settlement with the attorneys general. So they have accepted
it once already. They have shown their willingness to come in and live
by the standard of the look-back agreement.
What the look-back agreement says is that they must meet a target for
the reduction of underage tobacco use. These targets are the same as
those they agreed to in the June 20 agreement.
The targets are as follows: In 3 years, there must be a 15-percent
reduction. In 5 years, there must be a 30-percent reduction. That is
for cigarettes. For smokeless tobacco, it is 25 percent. There is a 50
percent reduction over 7 years and 35 percent for smokeless.
Over 10 years, the tobacco companies are agreeing that they must
reduce teenage smoking by 60 percent. That is what this bill is about.
This bill is an effort to reduce teenage smoking, and here we are
trying to get the tobacco industry to specifically accept
responsibility to be part of the process of doing that. You can't order
them to do it. They are certainly not going to do it if all we do is
leave them out there subject to endless lawsuits.
There ought to be some incentive that says to those companies, ``Come
on in and be part of the solution,'' and the look-back provisions are
that. But the look-back provisions also say that if the industry
doesn't meet the target, they will pay $80 million for each percentage
point missed between 1 and 5. They will pay $160 million for each
percentage point missed between 6 and 10 percent, and $240 million for
each percentage point missed above 10 percent. That is not a bad
penalty. That is not a bad assessment. That is an assessment based on a
target that they agree to meet, and if they don't meet the target, they
pay a regulatory fee accordingly.
Mr. President, you can't get them to do that unless they agree. If
you don't want them to challenge it and to tie us up for years in a
court challenge that would not do what we want to do to reduce smoking,
then, Mr. President, you have to find some way to bring them in.
I say to all of my colleagues, yesterday on the floor of the U.S.
Senate, there was a lot of hue and cry about how kids are going to lose
out per 10 cents that we didn't raise the price, and if we had raised
the price by 40 cents, we were going to save another 240,000 lives and
people were deeply concerned about that and are deeply concerned about
that.
Those people who were concerned about that should not come in and
vote to leave the tobacco companies in a position where all they are
going to do is litigate lawsuits over the next 10 or 15 years, because
during those intervening years, those numbers of kids are the kids who
are going to be the victims. It is much more intelligent, it seems to
me, to get the tobacco companies to be part of the solution in a way
that reduces the level of smoking so those kids are, in fact, saved. I
think that is a critical choice here.
What we do in this bill is ask the tobacco companies to come in and
do things that we have absolutely no right to get them to do without
their cooperation. Let me be specific.
A participating company, if they consented, would come in and make a
significant up-front payment. They would abide by far broader
advertising restrictions than those that were contained in the 1997
settlement. They would be required to create a document depository,
where all those people who are going to sue in the future would have
access to the documents that have come out of all of the tobacco
litigation or out of their existing files. And they would agree--and
this is the most important thing, Mr. President--they would agree not
to challenge the provisions in the bill. They would agree to abide by
these provisions, notwithstanding any future court decision on their
constitutionality.

I ask my colleagues to, again, measure that. If the tobacco companies
sign an agreement not to sue in the future, not to challenge any of the
advertising restrictions that we can't achieve unless they agree, that
is an enormous step forward.
Those advertising restrictions are as follows: There would be a
complete ban on human images, on animal images and cartoon characters.
There would be a ban on outdoor advertising, including stadia and mass
transit. There would be a ban on advertising over the Internet. And
there would be a ban on payments to glamorize tobacco use in media when
such use would be appealing to minors.
There would be a ban on payments for tobacco products placement in
movies, TV programs and video games, and there would be severe
restrictions on point of sale advertising of tobacco products.
All of those things--all of those things--none of which could be
achieved without the consent of the tobacco companies, we would gain as
a result of just one thing: allowing them to know the level of their
exposure and liability on an annual basis. It seems to me that is an
enormous gain for the children, it is a gain for us putting together a
responsible approach to reduction of smoking, and it is certainly a
gain for the Congress, which would then have constructed a piece of
legislation that had a chance of passing.
It seems to me what we have here is a fundamental choice: If we want
to put together a piece of legislation that can pass or whether we are
going to come out here and put ourselves in the position of simply
bashing tobacco because that is the feel-good position.
I might add that in addition to the advertising restrictions, they
would also abide by the look-back provisions. The look-back provisions
will almost certainly be challenged. They won't be challenged, and even
if they were challenged by someone else yet found unconstitutional, if
the tobacco companies come in and sign a consent decree and a protocol,
they must abide by that. If the tobacco companies at any time in the
future were to violate that protocol, violate any component of this
act, they would lose the cap on the annual liability payment. They
would suffer the full exposure, just as they would if they don't
participate.
The final comment I make to my colleagues is very simple. This is a
clear, clear choice. Under the managers'

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amendment, no tobacco company gets any liability restriction, any cap,
any restraint whatsoever unless they decide to give up their rights on
the first amendment, unless they give up their rights to challenge,
unless they agree to abide by every component of the act.
We have a fundamental choice here, whether we are going to be
reasonable in the approach to try to bring them into the tent, or
whether we are going to try to abide by something I think most people
would feel would be destructive to this legislation as a whole.

I reserve the remainder of my time. I know others want to speak at
this time.
Mr. McCAIN addressed the Chair.
The PRESIDING OFFICER (Mr. Smith of Oregon). The Senator from
Arizona.
Mr. McCAIN. Mr. President, I note the presence of the Senator from
Washington, as well as the Senator from Oklahoma, who have very strong
and important views--especially the Senator from Oklahoma has very
strong views on this issue. I will not, then, make my remarks in order
that they may be heard. I, again, encourage other Senators who would
like to speak on this amendment and the bill to come over. I yield the
floor.
Mr. GORTON addressed the Chair.
The PRESIDING OFFICER. The Senator from Washington is recognized.
Mr. GORTON. Mr. President, perhaps a brief review of history as to
how and why we find ourselves in the position we are in in this debate
is an appropriate point at which to begin.
Over the years, the Congress has delicately paced around the outer
edges of the controversy over tobacco, encouraging certain voluntary
limitations on advertising, particularly by television, requiring
certain warnings to be included on packages of cigarettes and on
advertising, but never getting to the heart of the issue of the
desirability or the lack of a desirability of tobacco.
Those limitations can be looked at as either a glass partly full or
one largely empty. It is clear the major tobacco companies have
attempted to remain profitable by creating, through advertising and
peer pressure and in any other method that they could, a constantly
increasing supply of new smokers, almost all of whom have begun smoking
with the conscious knowledge of its adverse impact on their life
expectancy and on their health, although when they began young this was
not something that was at the forefront of the thoughts of youth.

Nevertheless, in the United States of America, over the course of the
last 20 or 30 years, we have seen a dramatic reduction in the number of
men and women who smoke. We, as Americans, probably smoke less than
almost any other country in the world.
Various individuals and groups have sued tobacco companies as a
result of the adverse impacts of smoking on health. Almost without
exception, those individuals have lost those in connection with that
litigation.
All of this had us in a situation that was almost stable until a
group of State attorneys general and private lawyers came along with a
new theory, that damage was caused not just to individual smokers but
to the treasuries of our States and, by extension, to our own Treasury,
through Medicaid primarily, through Medicare, and through the expenses
of taking care of tobacco-related health problems, that these damages
totaled in the billions of dollars. And, as a consequence, most of the
States of the United States brought actions against tobacco companies
to recover those losses to their States.
Some, as you know, Mr. President, acting independently, have already
won that litigation by settlement or otherwise. The bulk of them,
almost a year ago, reached an agreement with the tobacco companies for
what is almost certainly the most massive judgment or change in
practices that has ever taken place in this country--close to $400
billion in payments, dramatic and voluntary restrictions not only on
advertising but on various other forms of promotion, a set of goals for
lessened teen smoking, and a myriad of other ideas.
A part of that settlement is involved in the amendment before us
right now, because that settlement purported to protect the tobacco
companies against some forms of litigation, although not all forms of
litigation. Those protections have been abandoned or rejected by this
bill in return for certain other, less significant limitations on the
annual liability of tobacco companies to individual litigation.
But, Mr. President, the centerpiece of the agreement with the State
attorneys general, without whose work we clearly would not be debating
this issue here today any more than we have for the last 10 or 20
years, the centerpiece of that agreement was its voluntary nature. As
the eloquent Senator from Massachusetts, who is managing this bill on
the other side of the aisle, pointed out, advertising restrictions,
upfront payments, document collections, and probably the look-back
provisions, are all provisions of that agreement that cannot
constitutionally be imposed on the tobacco companies by law.
As a consequence, we are faced with a delicious challenge. We can
make all the heroic antitobacco statements and speeches that we wish,
we can pile on to a greater extent than even the most radical bills
that have been introduced into this body, but we cannot force tobacco
companies, as long as they are engaged in a legal business--so far, we
do not have a bill that would absolutely prohibit the use of tobacco--
we can pass whatever legislation we wish, but we cannot force them to
abandon their first amendment rights; we cannot violate the
Constitution of the United States.
So in the ultimate analysis, we are either going to pass a bill that,
however reluctantly, with however much grumbling, the basic tobacco-
product manufacturers will accept and follow, or we are simply going to
create another bonanza for lawyers in challenging some of the basic
provisions of this legislation, in challenges that, by and large, are
almost certain to be successful. We may have voted ``antitobacco,'' but
we will not have succeeded in a truly antitobacco result.

At this point, the tobacco companies have rejected the acceptance of
the so-called McCain bill. Perhaps more narrowly, they have rejected
the McCain bill as it was reported from the Commerce Committee. Many of
the changes that have been made in the bill that is before us are
designed, it might well be, as a result of gaining their acquiescence.
This amendment, if it is passed, will clearly and necessarily result in
their rejection of the entire package.
Personally, Mr. President, I believe what we ought to do is in effect
to ratify, with some toughening, the agreement that the attorneys
general of the various States made after long and careful negotiation
and litigation. And we will have the opportunity to do that, or come as
close as we can to doing that, when we deal with the amendment that
will be proposed by my colleague from Utah, Senator Hatch.
But this bill, the McCain bill in its present form, is, in my
opinion, a responsible approach toward this problem. I believe that we
must deal with the agricultural elements of it, the payments to tobacco
farmers, payments that I think are infinitely too high, with the total
preservation of the present tobacco program that is included in the
Ford provisions, but we will be dealing with that next.
I believe a significant portion of the money that the Federal
Treasury is going to get from this ought to go to tax relief for the
American people rather than into other Government-run programs.
But these are elements of this bill that we will debate at some point
in the future. They are not elements that will result in the rejection
of the bill by those at whom it is aimed on the grounds of the
Constitution. This amendment is. Personally, as I say, I would prefer
the provisions on litigation that are contained in the attorneys
general bill. It may be that at some point or other we will move back
in that direction.
I am convinced, however, that the amendment that is before us now
will destroy any chance of our passing successful antitobacco
legislation. Legislation that balances the constitutional rights of
those organizations with which we disagree must significantly increase
the cost of a pack of cigarettes but not beyond the point where we
create a huge black market of contraband cigarettes, a point that I
believe would have been passed, exceeded, by the Kennedy amendment
yesterday, and a package that can result in something ultimately
acceptable to the

[[Page S5252]]

American people, to the courts, to those who manufacture cigarettes,
with the net result that we will reduce, though we will never
eliminate, cigarette smoking.

I believe that the Senator from Arizona, Senator McCain, who did not
seek but was given this assignment, has carried it on in a highly
credible fashion with a far greater degree of success than I would have
predicted when he started. I think he deserves the thanks, the
gratitude of all Members of this body, and to a large extent, at least,
our support. I am convinced that he deserves our support on this
amendment because this amendment will destroy any chance of being truly
successful in getting antitobacco legislation through the Congress, and
through the President's signature, in a way that will meet the goals
that all of us share.
The PRESIDING OFFICER. The Senator from Oklahoma.
Mr. NICKLES. Mr. President, I am going to make fairly lengthy remarks
dealing with the contents of the bill. First, let me just state my
respect and admiration for Chairman McCain. He is a very good friend of
mine in the Senate. One of the things we have a pleasure of doing in
the Senate--we are not a very big body--so we get a chance to know each
other sometimes pretty well. I have had the pleasure of working and
knowing Senator McCain since he came to the Senate. He is a very good
friend of mine. He will still be a good friend of mine.
I don't like his bill. I don't like the procedure by which the bill
is being considered, and I was involved in the procedure. Senator Lott
asked me to head up the task force to try to put this bill together.
Senator McCain, and the Commerce Committee, had a lot of jurisdiction
over the bill, probably more than any other committee. Also, he had to
deal with the issue of whether or not we are going to have a limitation
on liability for tobacco companies.
Probably the most important issue is whether the attorneys general
package will either pass or not pass, it is very pertinent to the
amendment that the Senator from New Hampshire has pending before the
Senate today. Are we going to give a limitation on liability to tobacco
companies? We don't do it for other companies, with very, very few
exceptions. I think we did it for the airline industry for a small,
targeted area, but, by and large, we don't do this for any industry in
America. We don't do it for pharmaceuticals. We don't do it for people
who make heart valves, and so on. A liability limitation was in the
attorneys general's package that they dumped on Congress, that they
signed off with the administration. The administration agreed with that
package, the so-called $368 billion 25-year package. That was handed to
Congress and they said, ``Here, go pass it.''
I told some of my colleagues from the outset I don't think we will
pass legislation--nor do I think we should--that will put a total
limitation on class action lawsuits. If you are using in tobacco, you
can't have a class action lawsuit against tobacco companies? That is
what the attorneys general's package was going to do. In exchange for
that, tobacco companies were going to pay about $15 billion a year.
That was the so-called deal.
They didn't consult very many people in Congress, and I thought at
the time they are going to have a hard time passing that restriction on
liability. If they don't have that, they don't have a deal. Frankly, as
this process evolved and the Commerce Committee marked up the bill,
they struck some of the liability protections on exemption from class
action suits, and instead came up with a cap--which is kind of a back
end way of trying to do somewhat the same thing. The tobacco companies
said, wait a minute, you have increased the price, you have increased
the penalties, you have increased everything, and you gave us very
little legal protection--this cap. Anyway, the tobacco companies said
that is not good enough, there is no deal, we are not going to abide by
it.
The only way this could conceivably be in the Commerce Committee
instead of the Finance Committee is we say there will be payments of
fees in lieu of protection for liability. But it didn't work out that
way. So then we had a referral to the Finance Committee. The Finance
Committee struck out this fee structure, which I think is a disaster. I
see my friend and colleague from Nebraska here is also on the Finance
Committee. I will go through, and it will take some time, but I will go
through how the tax is computed or the fees are computed in this bill,
and just say that it won't work very well.
I also want to say I concur with the objectives of trying to reduce
teen smoking. I don't want teenagers to smoke. I have four kids. One
out of my four smokes, and he happens to be 28 years old. He started
when he was in high school. I really wish that he didn't smoke. I grew
up in a family--both my parents and all my brothers and sisters--all of
them smoked. My mother has had lung cancer and emphysema, very
critical. She still is a survivor, but it is a very serious problem. A
couple of my brothers and sisters had a hard time quitting. They did
quit. They were able to do it. One in my family didn't have that hard
of a time of quitting. I am trying to get my son to quit and I have not
been successful. I wish that he would. I really wish that he would.
When you look at the use of tobacco products, you can see that it is
pretty significant. This chart shows anybody who has ever used
cigarettes in their lifetime, kind of an unusual statistic. I guess I
would fall into it because I know I smoked one or two cigarettes when I
was in junior high--probably never a full pack. But I guess, if
somebody said, did you ever smoke a cigarette, I would have to say,
yes, sometime in the 8th grade. So I would be in the 70 percent
category--you might notice from this chart that usage went down a
little bit in the last few years. Frankly, under the Clinton
administration it started going up.
Marijuana use has also gone up--and I am more concerned about drugs
than I am smoking. I will make that evident in a moment. But marijuana
use, which was up to 60 percent and has fallen down to about 33
percent, fell almost every year through the 1980s until, frankly,
President Clinton was elected. Then it has gone up and it has gone up
in a skyrocketing fashion. As a matter of fact, I will insert in the
Record this chart. I tell my friend and colleague from Nebraska that
marijuana use in 1992 among 12th graders was 11.9 percent. Last year,
it was 23.78 percent --100 percent increase of marijuana use among high
school seniors. That is a staggering statistic.
This is marijuana use by people categorized as ``frequent users'' who
have used it in the last 30 days. You can see on the chart that this
has jumped up. You also see tobacco use has gone up. Cigarette use has
gone up. In 1992, cigarette consumption among seniors in high schools
was 27.8 percent. In 1997, it was 36.5 percent, an increase of about a
third. That is a big increase. You could go all the way back to the
1960s as to who uses cigarettes on a frequent basis or in the last 30
days, and it was very constant for decades, until frankly, the Clinton
administration. And during these 5 or 6 years, it has gone up a third,
the biggest increase that we have seen.
You might also note, and this is more troubling to me, that marijuana
use had gone down for frequent users, down to only about 11 or 12
percent in the early 1990s. And now it is more than double and is up to
about 24 percent. Now, that bothers me. And I cannot help but think a
lot of people, when they are just going after tobacco and how terrible
it is, are fairly silent about drug use, drug use that is habitual,
drug use that is illegal, drug use that is deadly, drug use that leads
to lots of other crimes, lots of other problems.
Why only the attention on cigarettes? Why only the attention on
cigarettes? We are going to have some amendments which will have
significant attention on drugs. I had a town meeting during the Easter
break in Oklahoma--I had several--but I had one in Shawnee, OK, a
middle-class town. This town meeting happened to have a lot of high
school students, a lot. I told them we were debating the cigarette tax
issue and I just asked how many smoked, and hardly any hands went up.
I said, ``Well, let me ask you a question. Congress is contemplating
raising tobacco prices by $1.10, maybe $1.50. Would that make any
difference for those of you that raised your hands?'' The answer was,
``No, we don't smoke that much.'' Maybe they would smoke

[[Page S5253]]

on a weekend or at a party. They said it would make no difference. That
is an informal survey; it is not scientific. But some claim that
scientists say if we raise this tax, we are going to reduce teen
smoking. I am not sure that is the case. I think when you ask the
question if somebody smoked in the last 30 days, that means one
cigarette or two cigarettes. I am not sure you are going to have an
appreciable reduction because you raise prices a dollar. Maybe there
would be some. Maybe it would be a component in reducing teen smoking,
but some people are acting like it is the whole battle. I disagree with
that. I don't think it would work.
As a matter of fact, I am kind of amused because now we hear
everybody say our objective is that if we raise these prices, these
taxes, spend all this money and run this massive campaign, we will be
successful and we can reduce teen smoking by 60 percent. If you are
against this, you are for tobacco companies and you are against kids. I
reject that outright. I don't like smoking. I don't like teen smoking,
especially. I don't like to see kids smoke. But that doesn't mean you
have to sign onto a program that spends hundreds of billions of
dollars.
I looked at a statement of Secretary Shalala when she announced new
FDA regulations with David Kessler in August of 1995. They came up with
a lot of new regulations. I don't agree with a lot of them. I think
they are overly intrusive. But whether I agree with them or not, they
stated in those regulations they thought they could reduce children and
adolescent smoking by 50 percent within 7 years. Wait a minute. We are
talking about spending hundreds of billions of dollars in addition to
these FDA regulations to it to 60 percent? So these massive price and
tax increases might decrease smoking another 10 percent in addition to
what they are already doing in FDA? I am not so sure.
That tells me that people are sometimes pretty loose with statistics.
Maybe these surveys don't mean as much as some people think. Maybe this
question of, ``Did you smoke in the last 30 days?''--maybe that is one
cigarette. I am not sure. That is one of the questions.
My point is that I don't want kids to get addicted to smoking. We
want to do some things to discourage that. I am concerned when I see
that drug use has doubled; marijuana use has doubled under this
administration amongst high school seniors. That bothers me a whole lot
more than the 33 percent increase in teen consumption tobacco. I happen
to be a parent; I have four kids. If you tell me that maybe they smoked
a cigarette once, or if they were using marijuana on a regular basis, I
would be a lot more concerned about the marijuana. I don't want them to
do either, and we should discourage both. But to have a campaign and
have this massive effort to attack tobacco and be silent on drugs, I
think, is absurd and it should not happen.
We should have a campaign against teen smoking, but we should not
raid taxpayers in the process. We should not spend hundreds of billions
of dollars. If you ask people, ``Do you want to reduce teen smoking?''
you are going to get a favorable poll that says 90 percent say yes. If
you say, ``We are going to reduce teen smoking, and we are going to
spend hundreds of billions of dollars and pass the largest tax increase
in years. Do you still think we should do it?'' They are going to say,
``What?''
I think there was a poll that said 70 percent of the people thought
Congress is doing this more to spend money than to help kids. They know
this is more about a money grab, a big ``cookie jar,'' than about
reducing teen smoking. Look at the costs. I happen to be kind of a
numbers cruncher. I am on the Budget Committee and the Finance
Committee and I think numbers are important.
I am going to talk about this bill quite a lot this morning. I looked
through this bill, and in this bill there is no mention anywhere of a
$1.10 tax increase. I am going to tell the press there is no mention of
a $1.10 per pack tax increase in this bill. They mention it in the
committee report, but the committee report is not the law. So how much
does this bill cost? I stated repeatedly that it costs more than a
$1.10; and it does cost a lot more than $1.10. People will say, wait a
minute, where did you get the figures? I got the figures from the bill,
not from Senators' statements or from reading The Washington Post or
The New York Times, where the headline was ``Senate to Stay With $1.10
Tax Increase.'' There is not a $1.10 tax increase in this bill; there
is a lot more. It is going to cost consumers a lot more. Is it going to
cost tobacco companies a lot more? I don't think so.
As a matter of fact, I put on this chart the gross tax increase on
consumers in billions of nominal dollars. These new taxes cost
consumers, but do they cost tobacco companies? Not a dime. Let me go
through a couple of the provisions, Mr. President. Before I do, I will
submit the chart I have already discussed about the increase in use of
marijuana and also cigarettes into the Record.
I ask unanimous consent to have the chart printed in the Record at
this point, along with another chart regarding the national tobacco
settlement trust fund.
There being no objection, the charts were ordered to be printed in
the Record, as follows:

12TH GRADERS USE OVER 30 DAYS
------------------------------------------------------------------------
Class of Marijuana Cigarettes
------------------------------------------------------------------------
1980............................................ 33.7 30.5
1981............................................ 31.6 29.4
1982............................................ 28.5 30
1983............................................ 27 30.3
1984............................................ 25.2 29.3
1985............................................ 25.7 30.1
1986............................................ 23.4 29.6
1987............................................ 21 29.4
1988............................................ 18 28.7
1989............................................ 16.7 28.6
1990............................................ 14 29.4
1991............................................ 13.8 28.3
1992............................................ 11.9 27.8
1993............................................ 15.5 29.9
1994............................................ 19 31.2
1995............................................ 21.2 33.5
1996............................................ 21.9 34
1997............................................ 23.7 36.5
------------------------------------------------------------------------

NATIONAL TOBACCO SETTLEMENT TRUST FUND
[Gross tax increase on consumers in billions of nominal dollars]
----------------------------------------------------------------------------------------------------------------
Maximum
Initial Annual potential Grand
Year payment industry lookback total
payments assessments
----------------------------------------------------------------------------------------------------------------
1999.............................................................. 10.00 14.40 ........... 24.40
2000.............................................................. ......... 15.40 ........... 15.40
2001.............................................................. ......... 17.70 ........... 17.70
2002.............................................................. ......... 21.40 4.40 25.80
2003.............................................................. ......... 23.60 4.52 28.12
2004.............................................................. ......... 24.31 4.64 28.95
2005.............................................................. ......... 25.04 4.77 29.80
2006.............................................................. ......... 25.79 4.89 30.68
2007.............................................................. ......... 26.56 5.03 31.59
2008.............................................................. ......... 27.36 5.16 32.52
2009.............................................................. ......... 28.18 5.30 33.48
2010.............................................................. ......... 29.03 5.45 34.47
2011.............................................................. ......... 29.90 5.59 35.49
2012.............................................................. ......... 30.79 5.74 36.54
2013.............................................................. ......... 31.72 5.90 37.61
2014.............................................................. ......... 32.67 6.06 38.73
2015.............................................................. ......... 33.65 6.22 39.87
2016.............................................................. ......... 34.66 6.39 41.05
2017.............................................................. ......... 35.70 6.56 42.26
2018.............................................................. ......... 36.77 6.74 43.51
2019.............................................................. ......... 37.87 6.92 44.79
2020.............................................................. ......... 39.01 7.11 46.11
2021.............................................................. ......... 40.18 7.30 47.48
2022.............................................................. ......... 41.38 7.50 48.88
2023.............................................................. ......... 42.62 7.70 50.32
---------------------------------------------
Total, 25 years............................................. 10.00 745.67 129.88 885.55
=============================================
Total, 5 years.............................................. 10.00 92.50 8.92 111.42
=============================================
Total, 10 years............................................. 10.00 221.55 33.41 264.96
----------------------------------------------------------------------------------------------------------------
Annual industry payments are adjusted for the greater of 3% or CPI-U beginning in year 6. This estimate does not
include potential increases or reductions in industry payments resulting from changes in the volume of tobacco
sales.
Lookback assessments would be initiated after year 3 if underage tobacco use is not reduced by specified
percentages. The maximum lookback assessment of $4.4 billion is adjusted for inflation. Does not include an
estimate for brand-specific lookback assessment.

Source: S. 1415 as modified on the Senate floor.

Mr. NICKLES. Mr. President, I am also going to insert a table that
shows new tax assessments and penalties that are in this bill. The
national tobacco settlement trust fund is what I am going to talk about
now. This is the trust fund, the big kahuna. There are a lot of other
taxes, penalties, but this is the bulk of the money. If a person was
interested, they could look at this provision in the bill. If you go to
page 179, it talks about the trust fund. You can see on page 181 that
it says tobacco companies, in the first year, pay $10 billion. Then on
page 182, it says--in the first year, you also pay $14.4 billion. That
is the reason why the first year payments are $24.4 billion on my
chart. It doesn't say anything about a $1.10 tax, or any other tax. It
says, industry, you pay $24.4 billion. I have heard some people say,
well, we are going to raise the tax gradually to $1.10. It starts out
at 65 cents. The only mention of a per pack tax is in the committee
report. It starts at 65 cents and ends with $1.10.
I am just telling you that those numbers don't add up. I have told
this to my colleague from North Dakota, and maybe he will believe me by
the time I finish this presentation. The bill

[[Page S5254]]

doesn't mention $1.10. We are passing a bill, not a committee report.
We are passing a bill. The bill says in the second year the companies
will pay $15.4 billion. The third year is $17.7 billion, then $21.4
billion, and then $23.6 the fifth year. Thereafter, it is adjusted for
inflation. That is where these numbers come from. These numbers are
adjusted for inflation. At a minimum of 3 percent, regardless of
whether there is any inflation or CPI, whichever is greater. The bill
says a minimum, so I put in the 3 percent.
Now, some of my colleagues and the administration said this bill
raised $516 billion. That number is in the committee report. The
committee report embarrasses me. I am embarrassed by the work that the
Commerce Committee put together, but frankly I shouldn't really blame
them. I want to blame the administration because, frankly, they wrote
the bill. It wasn't the Commerce Committee; it was the administration.
The administration-drafted report even has a section that says payments
will be no greater than $516 billion. That is hogwash. As a matter of
fact, I have a letter from OMB that says you only compute $516 billion
if you deflate the industry payments to constant 1999 dollars. That is
where they get $516 billion. Those are constant 1999 dollars. They make
it look a lot smaller than it is.
Frankly, that is not the way we do accounting in the Senate. The bill
says, here are the payments and they are adjusted for inflation, and,
frankly, these are conservative because I will tell you that sometime
in the next 25 years, you are going to have more than a 3 percent
inflation rate. We know that. So I am going to tell you that the $755
billion in industry payments over the next 25 years is conservative. It
is much more conservative than what will actually happen. I will also
mention that I didn't add look-back assessments. The administration,
when they said $516 billion also didn't add the look-back. Then, they
increased the look-back to $4.4 billion when they rewrote the bill over
the weekend. The administration rewrote the bill over the weekend, not
the Commerce Committee or the Finance Committee. The Finance Committee
reported out a bill and some amendments and said, let's scrap this
industry payment nonsense and come up with a tax increase. I didn't
support it--a $1.50 tax increase--but at least it was honest.
This bill is very misleading. These industry payments are very
deceiving. We ought to be ashamed of ourselves. I will talk about the
look-back provisions in a minute. I didn't even add the look-back, yet,
but if you add the look-back at another $130 billion the total tax
increase is $885 billion. These are just the facts. These are the facts
that you get if you read the bill--if you read the bill on page 182,
page 183 and page 184.
Then you find out that they did a lot of other silly things in this
bill. I guess silly things maybe to protect certain constituents or
certain parts of the industry. But, if you think you are passing a
$1.10 tax on all tobacco, you will find out that they exempted some
companies. They exempted some companies. I thought excise taxes were
excise taxes, like excise taxes on gasoline--the Federal excise tax is
on all gasoline, made in North Dakota and Oklahoma. Except perhaps for
gasohol. I don't think we should exempt gasohol. But we do. But this
bill exempts certain companies from the tax. If their sales are less
than 1 percent, they pay no tax. What does that mean? You already have
a 24-cent Federal excise tax on cigarettes. Everybody pays it. There is
no exemption on that. Congress has already increased that in the future
to go up to another 15 cents. That is going to be 39 cents. Everybody
pays that. But this committee said for this additional tax or fee some
companies need not pay. Think about that.
Everybody else is going to have to pay this. Let's say the tax is
$1.10. I think it is much more than that. But most companies will have
$1.10 additional cost put on their products, and some companies won't.
That makes sense, doesn't it?
I also looked at the tax increases on other products. I would love to
have a sponsor of the bill explain to me how they did this. Take a
product like snuff. I calculated the tax increase on snuff, that little
round package, you know, you put a pinch between your check and your
gum. The tax increase on snuff is over 3,000 percent. That is a
significant tax increase. Right now it is 2.7 cents per little can, and
it goes up to 85 cents. That is a pretty good increase. Maybe 85 cents
is the right amount. But I will venture to say nobody in here knows
that. That little can costs about $3 and something. That is a pretty
good hit.
We at least ought to know what we are doing. I don't think anybody
here knows what they are doing.
Then we find in the bill that some smokeless tobacco companies, small
manufacturers, are getting a smaller tax increase, 60 cents. For most
of the snuff people, the people who make these little round things, we
are going to increase their tax by 82.5 cents. But for some people we
are only going to increase it 60 cents, because they are small, or
maybe because their Senator said, ``Hey, they are not part of the
problem, they are not very big. They sell less than 150 million
units.'' I thought we were interested in children's addiction. So we
are going to give this company a 20-some-cent advantage over other
companies? That is in the bill. That is on page 185, if anybody cares
to look at it. I wonder how many of us really looked at this bill.
Excise taxes, if they are going to be on snuff, should apply to
everybody. But we didn't do that in this bill. I say ``we,'' the
Commerce Committee. The Finance Committee did tax everyone, and in
proportion to the tax on cigarettes. Finance said, ``Let's scrap all
this industry payment nonsense and have an excise tax.''
I am going to show you that this tax is a lot more than one dollar
and a dime. And I don't think there is any question it is more than a
dollar and a dime. Yet, people are still under the facade that this is
$1.10. Why? Because OMB said it is, and Treasury said it is. I don't
think that is the truth. The bill says, here is the amount of the
industry payment, pay it. Not everybody has to pay. One company made a
deal, and said, ``Hey, we have already settled. So we are not part of
the problem. So we don't have to pay the excise tax.'' They have a much
better deal. It is worth hundreds of millions of dollars. We are
getting ready to pass it. I don't think that makes sense. I think we
ought to be ashamed of ourselves the way we are legislating.
There is a reason why we have committees of jurisdiction. And we
violated it grossly. I thought maybe we fixed it when the Finance
Committee took this bill. But, obviously, the Commerce Committee and
the administration said, ``No, we don't want to do that. We like what
we have.'' I will tell you why. Because they are going to get more
money, in my opinion, than they would get at $1.50.

I was halfway tempted to vote for the amendment of the Senator from
Massachusetts amendment to raise the tax to $1.50. If you had a real
tax at $1.50, I think it raises less money than the figures we are
talking about. Maybe I am wrong. The press is going to report $1.10 and
$1.50. That is what the press reports. I think this payment scheme
equates to more than $1.50. This chart shows $40 billion or $50 billion
per year in the future. Guess how many packs are sold a year? About 24
billion packs a year. If you have a $1 tax, assuming you had no
reduction in consumption, you are talking about $24 billion. This bill
is in that neighborhood already in the first year--not just the fifth
year. We are talking about the first year. That is going to be about a
$1 tax paid for 1999. You have the $10 billion initial payment. That
equates to about $1 a pack. The tax on snuff and smokeless, and so on,
doesn't raise a lot of money cumulatively, but it is a huge tax
increase.
On chewing tobacco, the tax goes from a very small two-and -a-quarter
cents per 3 ounce pack of chewing tobacco to over 40 cents--almost 41
cents. That is a 1,711-percent increase in one fell swoop. That is a
big hit. I think it is a nasty habit. If you want to tax it and
eliminate it, maybe that is what some people are trying to do. But we
at least ought to know what we are doing. I would venture to say that
maybe a lot of people in the Senate don't.
I want to talk a little bit about the look-back provisions. I think I
heard Senator Hatch, and others, say that the look-back is
unconstitutional. I think he is right. I will tell you, I am not a
constitutional scholar. I will not

[[Page S5255]]

enter that debate. I will tell you, it is unworkable. I heard somebody
say the industry has signed off on the look-back provisions. I have not
been talking to the industry, but I am pretty sure they are planning on
contesting them on constitutional grounds. And they are pretty
confident--at least that is what my staff tells me--that they would
win.
What does the look-back do? It could raise a lot of money. And
evidently the administration thinks this is real money and it is going
to happen because they increased the amount to $4.4 billion over the
weekend. The look-back grew by over 10 percent over the weekend. It is
much higher now than when it passed out of the Commerce Committee.
That is interesting. How does it work? If a person was interested,
they could look on page 106 of the bill and find the look-back section.
This is kind of interesting. How does this work? Is this going to be a
real incentive for companies to curtail smoking? I found out these
provisions are very interesting. They start on page 103 of the bill and
go through to page 109. I will just talk about this for a second.
The look-back says the Secretary--talking about the Secretary of
Treasury--shall conduct a survey to determine methodology and the
percentage of all young people who use a type of tobacco product within
the last 30 days. It says ``a type of tobacco product within 30 days.''
He is going to take a survey, a poll.
A lot of us are in the political business. All of us in the Senate
take polls. The Secretary of the Treasury is going to take a poll. Keep
in mind that of all tobacco consumption, only 3 percent of it is done
by teenagers. Keep in mind that it is against the law for teenagers to
smoke in every State. It is against the law to smoke if you are less
than 18 years old. He is going to take a poll and find out how many are
trying tobacco. These numbers are going up. Maybe they did it once, or
more. They are going to take a poll. The poll is going to also specify:
``Did you use tobacco?'' and ``What brand did you use?''
Then there is a complicated formula. But if a tobacco company's
numbers don't come down, then we are going to be subject to special
assessments.
I should mention more about the poll--this is interesting. Every poll
that I have ever seen has pluses and minuses. There is a range of plus
or minus 4 percent. This cannot be entirely accurate, because they are
not going to ask every teenager age 11 through 17, ``Did you smoke?''
That wouldn't be too cost effective. They might do it maybe for that
reason.
On page 106, it says, the survey is deemed conclusively to be proper,
correct, and accurate for purposes of this act. They deem their poll
whenever they happen to take it to be accurate.
That is interesting. I just think of the games that could be played
with that.
Let's see, if they took their poll around the Fourth of July, there
may be a greater instance of tobacco use on the 4th of July, or maybe
the Memorial Day weekend, or maybe the Labor Day weekend when people
are going to the beach. If they want to jack the penalties up, ``Let's
take the poll then.''
I just fail to see that this is a good way to do business. If the
company doesn't meet the underage tobacco use goals as outlined by this
bill, then there would be significant penalties--very significant
penalties, up to about $4.4 billion, and indexed for inflation. So on
my chart the totals increase rather significantly to $130 billion.
Those aren't tax deductible.
Is that really workable?
Then there is another section.
There is an additional look-back assessment on brand-specific
underage tobacco problems. If you look on page 112, which talks about
if they miss their percentage share, tobacco companies could have an
additional surcharge of $1,000 per teenager.
The amount of the manufacturer-specific surcharge for a type of
tobacco product for a year under this paragraph is $1,000 multiplied by
the number of individuals for which such firm is in noncompliance with
respect to its target level reduction.
So we have target-level reductions. It starts out at 15 percent. It
gradually increases to 60 percent. They are going to take a survey and
find out what brand of cigarettes this youngster is smoking. So in this
random survey, if a bunch of kids say, ``Yes, I had a Marlboro,'' mark
them down, and for every child they determine smoked that brand of
cigarette, they are going to assess the company another $1,000.
Now, I find that to be ludicrous. There are hundreds of brands of
cigarettes--hundreds, and so we are going to have the Department of
Treasury conducting this poll asking teenagers did you smoke. And if
you did, what brand? And it may be they can remember the brand, maybe
they can't. Maybe they smoked one cigarette; maybe they bummed a
cigarette; maybe they don't tell the truth; maybe they don't respond;
or maybe whatever. We are going to be assessing penalties to the tune
of $1,000 for every teenager deemed by this poll to have used this
particular product.
That is ludicrous. I want to warn my colleagues. I may not have the
votes, but I am going to probably try and strike that. If we don't
strike that, it is going to come back to haunt you. You are going to be
embarrassed because we put language in here that says this poll was
deemed to be accurate and therefore whatever the Secretary says is law
and as a result here is your penalty. We have determined that there are
10,000 youngsters in the age category who are using your brand and they
are age 17 or less, and therefore we are going to sock it to you.
This doesn't make sense. If you want to figure out ways to punish
tobacco, to fine tobacco, do it. But this is not the right way. This is
not workable. You should trash this whole thing and say, if you want to
increase tobacco tax $1.10, do it. Do it tomorrow. This thing phases it
in over five years.
My point being, if you are going to try to reduce consumption, you
want to have a sticker price shock. You don't phase it in over 5 years.
They will never see it. They won't know it. It won't make the reduction
in use. It won't get consumption down. It won't be effective.
Wow, what did we do. We raised hundreds of billions of dollars, but
did we achieve our objective? I don't think so. What did we do? Maybe
the objective was to raise billions of dollars so we would have a lot
of money to spend. Maybe that's the case. I don't know. I hope not.
Mr. CONRAD. Will the Senator yield for a question?
Mr. NICKLES. I have a lot to say.
Mr. CONRAD. I understand. I don't want to interrupt the Senator. I
just want, if I could for the purposes of the Record, if nothing else,
and maybe for the education of both of us, to ask just one question.
Has the Senator, in the numbers that he has displayed on the chart,
made any volume adjustment?
Mr. NICKLES. Let me go to that, and I appreciate the Senator's
comments because I knew the bill's proponents would say my numbers
don't assume a volume adjustment.
The administration, when they did their projection to come up with a
$516 billion price tag for this bill, they did no volume adjustment.
When the AGs came up with their price tag for the settlement, they
didn't do a volume adjustment. And finally, we discovered that the
White House changed the volume adjustment threshold in this legislation
over the weekend. That bothers me a lot. That was changed Sunday or
Monday night. And that bothers me a lot.
Let me conclude. I know what my colleague is going to say. Let me
take you through this a little bit further.

The volume adjustments, the formula that passed out of the Commerce
Committee says the industry payments will be reduced by the volume. If
there is a reduction in sales, we will reduce the tax. Again, in
calculating the costs of their own bills, both the $516 billion current
dollar estimate and the $755 billion nominal dollar estimate, they
didn't calculate the volume adjustment.
Now, what happened Sunday and Monday night was a humongous tax
increase that nobody knows about because the volume adjustment was
triggered not when sales dropped below 100 percent of 1997; it is
triggered when sales drop below 80 percent of 1997. So you get no
volume reduction unless you reduce total consumption to below 80
percent where we are today. So I am not sure there will be a volume
adjustment ever.

[[Page S5256]]

Now, I do not know if my colleague caught that. In the original
Commerce bill, it says we will take these figures on my chart and we
will reduce them, if there is a reduction in volume of sales. We will
have a CPI increase, and we will have a volume decrease, and so maybe
the figure will stay close to $23 billion. If volume went down 3
percent and CPI went up 3 percent, maybe you could take this figure,
$23 billion, for all future years.
Well, what they did in the stealth of the night of Sunday or Monday,
they said, oh, we are going to change that. We are not going to give a
volume adjustment unless they reduce total consumption to below 80
percent of where it was in 1997. Wow.
Now, this is getting too complicated. Most of our colleagues aren't
going to follow it, and I don't want to get too bogged down in the
minutia, but that is a big tax increase. That means you are not going
to have reductions. You may never have a reduction.
My point being, that the way you do volume adjustment, the real way
is to have a direct excise tax on the product--very clean, very simple.
You don't have to argue about whether or not you are talking about
constant dollars, inflated dollars, whether you are talking about
volume adjusted. If you have an excise tax per pack, if you sell less
packs, so what. You have accomplished your objective. You have done it.
This is the worst method to tax we have ever imposed in the Federal
Government that I can find. This is so convoluted, so distorted, so
deceptive, so contrived say we are raising taxes $1.10 and not do it.
If our colleagues want to be honest, they would say let's scrap all
this and let's make the tax $1.10, and then you have an automatic
volume adjustment. You have an automatic volume adjustment. Because if
you purchase less, then that will happen.
Let me just mention, too, the volume adjustment section, just for my
colleagues'----
Mr. CONRAD. Will the Senator--
Mr. NICKLES. I really don't want to. I have a lot to go through and I
want to finish this. I am this far and I have a lot more to go. So I
will be happy to talk to you in just a minute. But I want to run
through several things, and I don't want to get too bogged down on that
one particular thing.
Mr. President, let me just touch on a few other things. And I mention
that, Mr. President, and I will guarantee you that not one Member,
maybe not any Member, certainly not more than two members of the
Commerce Committee or the Finance Committee knew anything about that
change in the volume adjustment, and it is a big change. It is
different than the committee reported bill. And, again, I am troubled
by these games. I am troubled by people saying, oh, here is what the
bill says and then to play games maybe late at night, Sunday night,
Monday night, and have this bill written by the administration. This is
not a Commerce Committee bill. This is an administration bill.
I think it cries out for change, and the change should be this, I
tell my colleagues. The change should be to call a tax a tax. Senator
Lautenberg introduced a bill that said let's have a $1.50 tax. That is
what the Finance Committee passed. Whatever the tax is, whether it is a
$1.10 or $1.50, whatever, we should pass the tax increase per pack
plain, simple, clean, and not play this game of, industry, you pay in
all these hundreds of billions of dollars, and maybe we will give you
some reductions if consumption comes down, but we are going to have
penalties if X, Y, Z brand doesn't go down as much as we think it
should go down among certain people. That is absurd, and that is what
we have, all based on polling that they deem to be accurate. That makes
no sense, no sense whatsoever.

Let me go on through a few other points. I am going to try to speed
the pace up. There are tobacco distributor licensing fees, brand new;
there are nonpayment penalties, there are document good-faith payment
penalties; there are antismuggling penalties; and then we get into new
spending. So all this is on the revenue side. This is on the tax side.
This humongous tax bill, I don't care what period you are looking at,
this is a bigger tax bill--gross, net, any figure you want to use--a
bigger tax increase than the tax cut we passed last year. Maybe that
will help put it in perspective.
Last year, in a bipartisan manner, we passed $500 tax credit per
child. This year, for 1997 it is $400. We passed that. We reduced
capital gains from 28 percent to 20 percent. That is one of the reasons
you have seen Federal revenues grow by over 10 percent this year. It is
because we cut capital gains. People like that. People have more
financial transactions, and you are not taxing those transactions so
much. It raised a lot of money for the Government. We reduced estate
taxes by increasing the exemption. We provided IRAs. We did a lot of
good things in the tax bill, a lot of good things.
Guess what, this tax increase overshadows it. This tax increase
overshadows it, and it is paid for, the strong majority of this is paid
for, by individuals making less than $30,000, $40,000 a year. This is a
tax increase on low-income people. It is a humongous tax increase. It
is bigger than all the tax cuts we gave last year, than all the tax
cuts. So that should concern people.
My colleague, Senator Gorton of Washington, said we should have some
tax relief. We are going to have a humongous tax increase; we should
have some relief.
We are getting to the spending side now. This is one of the problems
that bothered me. I told my colleagues from the outset, I will work to
pass a good bill to reduce teenage consumption of drugs and tobacco. I
will. I will not support passing a bill that spends hundreds of
billions of dollars so government can grow. We grow government in this
bill like there is no tomorrow. This bill has government growing from
the State level, government growing from the Federal level, government
growing at almost any excuse. And the administration wrote every bit of
it.
Did they consult the Appropriations Committee? Did they consult the
Budget Committee? No way. We made a little improvement. In the bill
that passed the Commerce Committee, this was all off budget and it
wasn't subject to an appropriation. All of that was an entitlement. We
changed it. Now, only half of it is entitlement. The States are
entitled to 40 percent. That is an entitlement. We can't touch that.
And then the farmers are entitled--under the bill from the
administration and Commerce Committee, farmers are entitled to $28
billion.
I know Senator Lugar is going to have an amendment to reduce that,
but in both cases those are entitlements. In both cases we are spending
billions of dollars. I have a problem with that. I don't know how I can
go to my farmers and say those tobacco farmers are going to be entitled
to get maybe $18,000 an acre on this buy-out, and of course they can
continue producing tobacco after we buy them out. We will buy their
quota, but, yes, they can continue producing tobacco forever. I have
trouble with that.
I have trouble with, Who is going to get most of this money? Let's
see; let's figure out who is going to get the money. I mentioned my
mother had emphysema and lung cancer. Does she get any money? No. Do
victims get any money? No. Government gets money. Who gets money? Do
victims of cancer and smoking-related disease and problems get money of
out of this? No. Who gets the money? States get the money. The
Government gets the money.
Where are they going to use the money? The bill says the States get
40 percent of the money, and they are going to get at least $196
billion so they don't sue the tobacco companies. Four have done it and
settled. More power to them. Congratulations.

Who is going to benefit from that? I guess the States do. They get
some money. In the State of Florida, out of an $11.3 billion, the trial
attorneys get $2.8 billion. That is 24.7 percent. In Texas, they had a
$15.3 billion deal; the trial attorneys get $2.2 billion.
We had an amendment the other day to limit it. Maybe it was too low.
I am going to tell my colleagues, you are going to have another chance.
But we are going to give a few individuals, maybe 50 individuals or
something, we are going to make them multimillionaires, maybe
billionaires? We have had some of these people working the halls of
Congress. These guys, some of them have chances to become billionaires,
with a ``b.''
And I am all for people making money, I think that is great, but we
should not do it raising taxes on consumers making under $25,000. We
are

[[Page S5257]]

getting ready to do it, and I will tell my colleagues, if we pass this
and if somehow you are successful--and I don't think you will be--but
if some forsaken way you are successful getting this through conference
the way you have it set up right now, you will be more than
embarrassed. You will be reading about individuals making hundreds of
millions of dollars, trial attorneys making hundreds of millions of
dollars off this deal. And you had your hands on it? I would be
embarrassed, and I think that you would. I think we are going to fix
it.
I noticed the Senator from North Carolina was here, and he tried to
fix it with one amendment. It didn't pass, but my guess is we have some
other ideas. I think we will fix it before it leaves the Senate. If we
don't fix it before it leaves the Senate, we will fix it in conference.
If we don't fix it in conference, I hope we don't have a bill. I hope
we don't have a bill anything like this. And, again, I reiterate my
position, I think we can come up with a bill that will be good to curb
teenage smoking and consumption of drugs and tobacco. But I do not
think we have to come up with a scheme that spends either $500 billion
or $755 billion or $885 billion. I don't think we have to do it. I know
we don't have to do it.
Some people are saying, ``I am reading a poll and''--I don't care
what the poll says. Let's do what is right. Let us try to curb teen
smoking. You don't have to do all of this.
The FDA came up with their regulations 2 years ago, and they said
their regs alone were going to reduce consumption by 50 percent. There
is not a lot of difference between 50 percent and 60 percent, except I
see hundreds of billions of dollars being spent in the process. So, let
me talk about that. I talked a little bit about the money going in. I
am telling you, there is a lot more money going in than people have
mentioned. If they say there is only a dollar and a dime, let's pass an
amendment and say here's a dollar and a dime, and I guarantee these
figures will shrink. They will shrink.
Mr. CONRAD. Will the Senator just yield on that point?
Mr. NICKLES. No, I won't yield. I am going to continue or I will
never get done, and then I will be happy to yield for a question.
The spending side of this equation, I mentioned it has a couple of
entitlements. The States get 40 percent of revenues. We tell the
States: You have to spend half of it as the Clinton administration
decreed. You have to spend half as they said. It must be on children's
health, child care, child welfare, substance abuse, education,
children's health insurance--any of their little social programs that
they like. Granted, the Clinton administration wants to expand the
welfare state. So they say, here, States, we know that you initiated
these lawsuits and you were winning some of them, but, since now we are
going to take this over and federalize it, you have to spend the money
the way we want.
So the bill restricts half of the state money and says: States, you
spend it in a welfare-acceptable or child-acceptable manner as the
Clinton administration dictates that it be spent. And then they say:
States, you can spend the other half any way you want to. So that is
the way we are going to increase government in the States. States,
congratulations, here's your money. In exchange for that, we are going
to limit your ability to sue the tobacco companies.
I can see why the companies walked away from this deal. They made a
deal with the Clinton administration and the administration broke it,
and they can still be sued in lots of areas. Oh, well, there is an $8
billion cap. I can see a race to the courthouse.
I am going to support the amendment of the Senator from New Hampshire
to strike protections for the tobacco companies. Some people say, if
you are opposed to this bill, Senator Nickles, you must be in favor of
the tobacco companies. This bill does the tobacco companies a big favor
by limiting their liability to $8 billion a year. The tobacco companies
are saying they are not even part of it. Why should we give them an $8
billion limit of liability? Why?
I don't see any reason to do that. I agree with the Senator from New
Hampshire. So I am not going to give the tobacco companies the
protection they really want. Why give it to them? It is the proponents
of the bill who are trying to do the tobacco companies a big favor, not
some of the opponents.
(Mr. FAIRCLOTH assumed the Chair.)
Mr. NICKLES. Mr. President, what about the money? Now we are talking
about money. The States are going to get 40 percent of this amount, and
they can spend half as they want, and the other half is spent as the
Clinton administration wants.
They can spend it on public health--and we are all for public health.
That is going to get 22 percent. So we are going to grow a lot of
government in that area. Health-related research, we are all for that.
Farmers' assistance, we are going to make farmers millionaires. Maybe
these farmers were thinking about selling their property last week.
Now, they hear Congress is getting ready to pass a bill and they say,
``I might get 4, 5, 10 times what the property is worth if I hang
around.'' It would be interesting to see what is happening on tobacco
farm prices right now in North Carolina, Kentucky, Virginia and other
places, because Congress is going to pay them billions of dollars.
We are going to pay them so much--not per acre--per pound of quota,
and we are going to make a lot of them a lot wealthier than they have
ever been.
Guess what? When we are done paying them they can still grow tobacco.
We can buy their farms cheaper than what will be paid under these two
proposals right now. We can buy the land, have the Government take over
the land and turn it into a park. I shouldn't say that out loud,
because somebody is going to propose it.
We are going to make people very, very wealthy because they hold a
document called an allotment. It goes back to the New Deal. If you
believe in free markets, it is just totally wrong. Yet, we are going to
compensate them; we are going to buy them out.
Let me go through some other new spending provisions.
There is a Medicare preservation account. Frankly, that is important,
but I tell my colleagues, it wasn't in the Commerce Committee bill. It
wasn't in the Finance Committee bill. It appeared Sunday or Monday
night, and I object to that. I object to the administration coming in
and saying, ``Oh, we have some new ideas here,'' as they did with their
volume adjustment.
We have child care development block grants. This is very
interesting. This was put in the Commerce Committee bill, and I
objected to it. One, they don't have jurisdiction over child care
development block grants, but they were putting it in anyway. They are
not the committee of jurisdiction on that. I don't know if they know
anything about it. They put the money in. The Finance Committee took it
out. Guess what? The Clinton administration put it back in. I am
troubled by that.
Then, I find they did some other things. They changed formulas for
child care programs. I wonder if my colleague from North Dakota knows
that. They changed the formula. We have a State match formula for
Medicaid. The match in most States is 50-50. In some States, it is 70-
30. This bill now reduces that State match for child care to 20
percent, because they want more child care money spent and more
individuals to qualify for it. The States actually have more money now
in this program than they know what to do with. People were not taking
advantage of it, so they reduced the State participation down to 20
percent.
The Federal Government for child care, with this increase, is going
to pay four times as much as the State pays for it. That is an
entitlement. That is a change, and the Commerce Committee has no
jurisdiction over that. They did it. They also have report language
that says, ``Hey, let's spend about $4 billion per year on this
program.'' This is a 25-year bill. That is $100 billion. It was just
added. Does anybody know it? Like I said, it was in, it was out, now it
is back in.
They changed the Medicaid provision, which is wrong. They put in a
brand new children's health care provision, which basically reopened
the welfare bill. The bill would add $25 billion for States to do
Medicaid outreach on children's care. We debated welfare. We passed the
welfare reform bill. Now, the administration is coming through

[[Page S5258]]

the backdoor on the tobacco bill saying, ``Let's expand the welfare
bill.''

They did it in the middle of the night. It did not pass the Commerce
Committee. They didn't ask anybody in the Finance Committee who worked
on welfare reform--not one person, not staff, not anybody. They just
put it in.
They also put in a provision that allows for presumptive eligibility
outside the cap funding for children's health care. Last year, we
passed children's health care, a $24 billion. We increased cigarette
taxes to do it. I thought it was too much. I didn't support it, but we
passed it. It is now the law of the land.
Guess what they did in this bill? They just put in this new language.
It was not in the Commerce Committee bill. It was not in the Finance
Committee bill. The administration put it in. It sickens me to know
that the administration thinks they have the ability to rewrite this
bill. It may have Senator McCain's name on it, but it is the
administration's bill. Now, they are opening up the welfare bill, and
they are opening up the kid care bill we passed last year for a massive
expansion. These new provisions are estimated to cost $400 million per
year. They open up the balanced budget agreement. That was part of our
balanced budget agreement package that we negotiated and fought so hard
for. Again, they cannot find enough people to qualify for the money
under the language that we already have, so they are trying to figure
out new ways to spend more money.
We have new programs for cessation and other treatments, Indian
Health Service, education prevention, counterads, which incidentally, I
will support. This paltry bill is spending hundreds of billions of
dollars. Do you know what it spends for countereducational ads to
discourage the consumption of tobacco? Mr. President, $500 million a
year. Big deal.
Everybody says, ``Hey, we need to pass this bill so we can reduce
teen consumption of tobacco.'' So $500 million out of a total of about
$20 billion dollars almost every year. All the rest is for other
Government spending; in some cases, any Government spending.
The national educational effort to convince people that smoking can
bring about cancer is pretty small out of this total package.
It has an Institute of Medicine study, National Institutes of
Health--all of these are getting pro rata shares of money that would be
authorized--Centers for Disease Control, National Science Foundation,
National Cancer Clinical Trials. That program wasn't in anybody's bill.
The administration put that in either Sunday or Monday. They have money
in here for a State retail licensing program, State grants, of $200
million a year. It is on page 118 of the bill.
I will just tell my colleagues what this does. I am embarrassed that
we would put language in that allows this to happen. But I want my
colleagues at least to know it so that maybe they will agree with me. I
will have an amendment at some point to strike some of this language.
The State retail licensing program codifies that portion of the FDA
regulations. It provides for $200 million a year and, basically, it
codifies the FDA regulations dealing with selling tobacco. That is on
page 119. It says:

Shall prohibit retailers from selling or otherwise
distributing tobacco products to individuals under 18 years
of age, in accordance with the Youth Access Restrictions
regulations promulgated by the Secretary.

Let me mention what that one little paragraph does. That paragraph
says we are going to set up a whole mechanism to find out whether or
not retail establishments are selling tobacco to teenagers. Maybe you
say, ``Hey, I don't want retail establishments selling to teenagers.''
So how are they going to do it? There is $200 million which they give
to the States in block grants. The States have to contract to set up
inspection teams to do random inspections across the country to find
out whether or not they are complying.
What if they don't comply? The fines and penalties are very, very
significant. I looked it up. The fifth noncompliance the penalty is
$10,000. For the sixth there is an even greater penalty; it is not just
monetary.

So the Federal Government is going to train these inspectors. They
are going to go out and do random audits. And I just have to think,
what are we doing? How far are we going in this Government police
business? In the committee reported bill there would have been so many
inspections per State. Each individual State had a list of how many
inspections. I will talk about this later, because I plan on having an
amendment on it. But I say on the floor today, I believe, there have to
be 4,000 inspections--smaller States less, bigger States more.
The bill was mandating thousands of inspections where these people
would be going by and seeing if somebody is purchasing cigarettes.
Guess what? It is not just purchasing under age 18; they are checking
to see if the establishment is checking IDs for people up to age 27. So
you are in noncompliance if you are a gas station and you sell
cigarettes to somebody who is 26 years old. That is a violation if you
do not check their ID. You are in violation of these Federal
regulations if you do not check their ID.
Now, I am going to have a different speech talking about FDA
regulations. But my point is, this bill sets up a $200 million new
program to give money to the States. The States monitor this as we deem
appropriate on the Federal level. I find that to be absurd. And the
Federal Government, with its wisdom, says, ``We believe you should
check everybody aged 27 or less. If you don't check them, you are
subject to fines of up to $10,000.''
Wow. Now, think of that. You have some burly Marine who is 25 years
old from the Marine camp in North Carolina who comes in, and he says he
wants a pack of cigarettes, and you can tell he is more than 18 years
old. And you are going to ask this guy, ``Oh, I can tell you're a
sergeant major, but we want to check your ID"? I don't want to ask him
to do that. But you could be fined up to $10,000. That is in the FDA
reg.
We are getting ready to codify the FDA regs. We are getting ready to
deem the FDA regs as law, which is a very bad idea. The FDA can come up
with regs. They cannot write law. They cannot write law. Their regs, in
my opinion, are unconstitutional. We just cannot deem something
unconstitutional as law, as this bill would propose to do, whether it
be in advertising or otherwise. Just to give you an example, the FDA
regs said it was unlawful for tobacco companies to develop advertising
gimmicks such as a hat. I have a staff member who has a hat that says
``Marlboro'' on it. Heaven forbid, what outlandish behavior. We have
the Federal Government saying, ``You can't have a hat that has
`Marlboro' on it or `Winston' ''? Give me a break. And there are
penalties for noncompliance with that.
The FDA came up with some outlandish regulations. We are just going
to deem those regulations as law? We are the legislative body. I think
we should clarify what FDA can do. I don't mind regulating nicotine. I
do not mind giving FDA some additional authority if we clearly define
it, but Congress should define it. We should not just take their regs
and say, ``Here. Whatever you've said is fine. It's law, no matter what
court cases are already decided.'' Wait a minute. If they went too far,
they breached the Constitution, we are just going to deem it as law?
That is not good legislation. That is just doing whatever FDA wants.
Again, this administration wrote the bill. But we should not adopt
those provisions. We are the legislative branch. We are the equal
branch of the administration. Why let them write this bill? Why help
them pass a bill which has no tax relief, spends hundreds of billions
of dollars, and its impact on smoking is very questionable?
Mr. President, there is a lot of new spending. I am going to submit
for the Record several specific references. I have heard people say
this bill has 17 new agencies. It has a lot more than that.
Mr. President, I think I have mentioned all these. I will run through
this other list in a minute. It has Indian tribe enforcement grants,
Indian tribe public health grants, tobacco farmer quota payments,
tobacco community grants, farmer opportunity grants, tobacco worker
transition program, USDA operation of tobacco program, international
tobacco control awareness effort--brand new; it was not in either bill,
was not in the Commerce Committee, and was put in by the administration
Sunday or Monday.

[[Page S5259]]

Compensation to tobacco vending owners: That was in the Commerce
Committee bill. Let me just touch on that for a second. Everybody knows
the FDA regs say we are going to ban vending machines. Well, if
Congress wants to ban vending machines, Congress should do it. And then
you say, ``Well, wait a minute. Shouldn't we compensate the vending
machine owner?'' It is logical. As a matter of fact, the Constitution
says you should not confiscate somebody's property without just
compensation.
What do we do in this bill? We set up a corporation. And the
corporation is to deem what is just compensation. I have had people
come in and lobby me--some of them are very good friends --and say,
``Boy, we need this in there.'' I say, ``What kind of compensation are
you talking about? How much do those machines cost?'' ``Well, they
might cost $1,500, $2,000, $2,500, something like that.'' ``How much do
you envision taxpayers paying you for that machine?'' ``Well, we're
kind of thinking maybe $8,000 or $10,000, something along those
lines.''
That troubles me. ``Well, we were going to make money off that
machine for the next several years, and we would like to have the
present value of the future earnings of that machine since you're
taking it away from us.'' Maybe they have a legitimate argument, but
that bothers me. It is the same argument that we are going to be making
on tobacco farmers. Are we going to be giving them the future value of
the earnings potential of that farm for a long number of years? I do
not want to do it. And I love my friends from the tobacco States, but I
do not want to do that. I do not want to do it on vending machines
either. I just think that is a mistake.
We are getting ready to pay--if we allow this legislation to go
forward,''such sums as necessary.'' We are going to be spending lots
and lots of money.
This bill has a section in it, Mr. President, called ``asbestos trust
fund.'' Now, I raised this with my colleague, the Senator from Arizona.
The bill that was reported out of the Commerce Committee contained a
$21.5 billion asbestos trust fund, originally funded separately by the
tobacco companies. I objected to that, and so they agreed to fund it
out of the larger trust fund. Then the Finance Committee struck it
altogether and said if we are going to set up a new compensation
program, we should look at it more closely. And if we do it for
asbestos, shouldn't we also do it for black lung? Shouldn't we do it
for brown lung? And shouldn't we do it for textile mills? Shouldn't we
do it for any other number of lung diseases related to occupation?
I do not think you can stop just with asbestos. I think you have to
look at black lung, you have to look at brown lung, you have to look at
all of them. So the cost of this, the $21 billion, could grow like
cancer, and would. I made these points in the Finance Committee. We
struck it in the Finance Committee. This was never a request by the
administration, and never a request by the Commerce Committee. Then it
was put back in by the Commerce Committee anyway; it is back in.
They delete the authorization language and so on, but they authorize
Congress to spend tobacco money whenever Congress passes an asbestos
bill. You can tap into the fund an unlimited amount of money. It does
not say $21.5 billion, it just opens the door. I think that is grossly
irresponsible.
Does that mean I am not sympathetic to somebody who had asbestos
problems and also is a smoker and had lung cancer and has a problem?
No. I am very sympathetic. But I am also looking at what we are doing
here. And we are in the process of expanding a program greatly out of
control.
It has money in it for the Veterans Affairs' tobacco recovery fund--
not specified; wide open; no limit to how much it could cost.
Is has an attorney fee arbitration panel. I touched on this before.
This arbitration panel is a three-member panel, with no limit as to how
much this would cost. I heard some people say, ``We can't do that.''
Now, wait a minute. Everything else has limits. I am going to submit
this list of programs for the Record, but we have about 30-some-odd
guidelines on how this money should be spent.
But we are going to leave a blank check in here for attorney fees?
Now, give me a break. Congress is in the process of raising these
taxes, putting this money in the fund. Congress is also responsible for
spending the money: ``Here, States, here is how you spend it. Here is
how you must spend it. Here is how we're going to spend it. And we can
place restrictions on what attorney fees should be.
Right now if we pass this bill, the clear winners are trial
attorneys. The clear losers are consumers, low-income smokers. They are
the losers. The trial attorneys are the victors. They are the winners.
They win big time. They become millionaires--billionaires, maybe in
some instances. And the losers are the people who see their total
Federal tax liability increase by 44 percent if they make less than
$10,000. They are the losers. They are big-time losers. Are we going to
fix it? I hope we will fix it.
Mr. President, I ask unanimous consent to print in the Record
attorney fees from the States of Mississippi, Florida, Texas, and
Minnesota.
There being no objection, the material was ordered to be printed in
the Record, as follows:

STATE SETTLEMENT TOTALS/ATTORNEY FEES
------------------------------------------------------------------------
Total
(dollars
State in Fees
billions)
------------------------------------------------------------------------
Mississippi....................... $3.4 $250 million
(7.3%)
Florida........................... 11.3 2.8 billion
(24.7%)
Texas............................. 15.3 2.2
(14.4%)
Minnesota......................... 6.6 450 million
(6.8%)
------------------------------------------------------------------------

Mr. NICKLES. There is a Scientific Advisory Committee, there is a
National Tobacco Free Education Advisory Board. That concludes this
list. And we haven't found them all yet. Since we also added the Lugar
amendment, there are several provisions, some of which are similar but
not near as extensive or as expensive as that provided in the Commerce
Committee bill. It adds a tobacco community's revitalization trust
fund, it adds a tobacco quota buyout, block grants, tobacco farmer
assessment, and so on.
I want to be fair on both sides of the tobacco argument. You add all
that together, you have 30-some new programs funded in this bill. You
have hundreds of billions of dollars funded in this bill. You have
trial attorneys who, in all likelihood, will make over $100 billion out
of this bill--$100 billion out of this bill.
I ask unanimous consent to have printed in the Record new taxes,
assessments, penalties, and new spending authorizations.
There being no objection, the material was ordered to be printed in
the Record, as follows:

What's New in the White House tobacco bill
NEW TAXES, ASSESSMENTS, & PENALTIES

National Tobacco Settlement Trust Fund............................ Funded by the net revenue from $102 billion
in deductible industry payments over 5
years, ($885 billion over 25 years),
increased for inflation, increased/
decreased for volume, subject to
appropriation except state share and farmer
money, Section 401, 402, and 403, page 179.
Lookback assessments--industry wide............................... Up to $4.4 billion per year beginning in 3rd
year, increased for inflation, not
deductible, Section 204(e), page 106.
Lookback assessments--brand specific.............................. $1,000 per underage user above specified
reduction targets beginning in 3rd year,
increased for inflation, not deductible,
Section 204(f), page 109.
Tobacco distributor licensing fees................................ Secretary may set fee level to cover costs
of registering tobacco manufacturers and
distributors, Section 1139, page 384.

[[Page S5260]]

Non-payment penalties............................................. Prime interest rate plus 10% of unpaid
balance after 60 days late, Section 406,
page 190.
Document good faith penalties..................................... $50,000 per violation, Section 908, page
258.
Anti-smuggling penalties.......................................... $10,000 per violation, Section 1137, page
377.

NEW SPENDING AUTHORIZATIONS--GENERAL ALLOCATION OF FUNDS
State Litigation Settlement Account............................... 40% of net revenues, adjusted after 10 years
to equal $196.5 billion over 25 years, sent
to states without appropriation,
distribution formula to be determined by
states, 50% may be spent on anything, 50%
must be spent on children's health, child
care, child welfare, substance abuse,
education, and children's health insurance,
Section 451(a), page 192 and Section
452(b), page 200.
Public Health Account............................................. 22% of net revenues plus all of lookback
assessments, subject to appropriation,
Section 451(b), page 194.
Health & Health-Related Research Account.......................... 22% of net revenues, subject to
appropriation, Section 451(c), page 197.
Farmer Assistance Account......................................... 16% of net revenues for 10 years, then 4%
until $28.5 billion cap, Section 451(d),
page 198.
Medicare Preservation Account..................................... Excess industry payments for 10 years, then
12% of net revenues, Section 451(e), page
199.

NEW SPENDING AUTHORIZATIONS--SPECIFIC PROGRAMS
Child Care Development Block Grants............................... Such sums as may be necessary, committee
report recommends $4 billion per year,
state-match reduced to 20%, Section 1161,
page 385, and Section 452(d) page 202.
Children's health care............................................ $25 million for states to do Medicaid
outreach for children's health care, and
allows funding for presumptive eligibility
outside of capped funding for children's
health care, Section 452(f), page 203.
Cessation and other treatments.................................... 25%-35% of the public health account, 90% of
which is block granted to the states,
Section 451(b)(2)(A), page 194 and Section
221, page 129.
Indian Health Service............................................. 3%-7% of the public health account, Section
451(b)(2)(B), page 194.
Education, prevention, counter-ads, international................. 50%-65% of the public health account,
Section 451(b)(2)(C), page 195.
FDA enforcement, state licensing, smuggling....................... 17.5%-22.5% of the public health account. Of
that amount, FDA receives 15% in 1st year,
35% in 2nd year, and 50% in 3rd year,
Section 451(b)(2)(D), page 195.
Institute of Medicine study....................................... $750,000, Section 451(c)(2)(A), page 197.
National Institutes of Health..................................... 75%-80% of health research account, Section
451(c)(2)(B), page 197.
Centers for Disease Control....................................... 12%-18% of health research account, Section
451(c)(2)(C), page 198.
National Science Foundation....................................... 1% of health research account, Section
451(c)(2)(D), page 198.
Medicare Cancer Clinical Trials................................... $750 million over 3 years from health
research account, Section 451(c)(2)(E),
page 198.
State retail licensing program--state grants...................... $200 million each year, Section 231, page
118.
Compliance Bonuses for States/Retailers........................... $100 million each year, Section 232, page
128.
National Medal of Science......................................... CDC funding to be used to establish a
National Medal of Science, Section 454,
page 207.
Indian tribe enforcement grants................................... Amount not specified, Section 603(d)(3),
page 222.
Indian tribe public health grants................................. Amount not specified, Section 603(e), page
223.
Tobacco farmer quota payments..................................... $1.65 billion entitlement per year for 25
years, Section 1011(d)(1), page 491.
Tobacco community grants.......................................... $10.5 billion entitlement over 25 years,
Section 1011(d)(3), page 491.
Farmer opportunity grants......................................... $1.44 billion entitlement over 25 years,
Section 1011(d)(5), page 491.
Tobacco worker transition program................................. $25 million entitlement per year, Section
1011(d)(4), page 491.
USDA operation of tobacco program................................. Such sums as may be necessary, Section
1011(d)(2), page 491.
International tobacco control awareness effort.................... $350 million through 2004 and such sums as
necessary thereafter for grants to
individuals, corporations, or other
entities, Section 1107, page 361.
Compensation to tobacco vending owners............................ Such sums as may be necessary from general
fund or tobacco fund, Section 1162, page
386.
Tobacco vending reimbursable corporation.......................... Section 1162(b)(2), page 387.
Asbestos trust fund............................................... Authorizes such sums as necessary for future
enactment of an asbestos trust fund,
Section 1201, page 402.
Veterans affairs tobacco recovery fund............................ Not specified, Section 1301, page 403.
Attorney fee arbitration panel.................................... Section 1403, page 438.
Scientific advisory committee..................................... Section 906(e)(2)(B), page 49.
National Tobacco Free Education Advisory Board.................... Section 221 of the bill, new section
1982(b), page 148.

ADDITIONAL ITEMS IN THE LUGAR AMENDMENT

Tobacco Community Revitalization Trust Fund....................... Funded with such sums as necessary from the
National Tobacco Settlement Trust Fund,
Section 1511, page 450.
Tobacco quota buy-out............................................. Payments of $8 per pound of quota owned, or
$4 per pound of quota leased for
production, paid over 3 years, Section 1515
& 1515, page 452.
Rural economic assistance block grants............................ $200 million per year for 4 years in block
grants to states, Section 1521(a), page
454.
Tobacco farmer assessment......................................... Marketing assessment set by the Secretary to
cover the annual costs for federal
administration of extension, inspection,
and crop insurance related to tobacco.

Source: S. 1416 as modified in the Senate (5/18/98).

Mr. NICKLES. Now, are we going to pass that? I know I saw an ad by
Dr. Koop saying we need to. I love Dr. Koop. I know he is very sincere.
But I don't think you have to spend hundreds of billions of dollars to
go after teenage consumption of tobacco or of drugs. And I think we
should go after both. I think we would be grossly irresponsible if we
don't go after both.
I am concerned about the cost of this bill. I told my friend and
colleague from Arizona that I have the greatest respect for him but I
don't have great respect for this bill. I think this bill is one of the
worst pieces of legislation that Congress has considered since the
health care dictates of the President and Mrs. Clinton several years
ago. That bothers me. I don't think we should pass it in the Senate. I
told my colleagues I am not going to just stand back and throw rocks at
it. I will try to make some improvements.
I read a list of the sections, and I don't think there should be an
asbestos section. I may have an amendment to delete it. I don't think
we should have the massive industry payment system. I am going to try
to talk my colleagues into replacing it with a simple excise tax. Raise
it $1.10, so you know exactly the amount. I am not comfortable with the
fact that some people are saying it is $1.10, but it raises more money
than that, so maybe they will have more money to spend. There is no
doubt in my mind that these payments, and you divide that out by the
number of cigarettes sold, if you are selling 24 billion cigarettes,
you realize this will raise a lot more money than $1.10. We are talking
about big money. We are talking about it every year.
The tobacco settlement was originally, when fully implemented, about
$15 billion a year. This bill starts at $24 billion, and by the year
2002, assuming the kickback comes in, $30 billion. That is a lot of
money--3,000 percent

[[Page S5261]]

increase in the tax on smokeless tobacco and so on.
Maybe people don't care. I care. I care about the procedure. I think
some of my colleagues from the tobacco areas were upset about the
procedure. I think when you are dealing with the agriculture section,
that should have come out of the Agriculture Committee. Commerce
Committee is not supposed to write the agriculture section. And
Commerce Committee is not supposed to write the tax section. And they
did both and they did a crummy job on the tax section. This is the
worst tax law I've seen. If we pass it, it would be the worst tax bill
Congress has passed. With all due respect, it wasn't even done by the
Commerce Committee. It was done by the administration. President
Clinton didn't want to use the word ``tax'' so he thinks they hide it
by using the word ``fee,'' but it is not a voluntary fee.
If tobacco companies were in agreement with this, this would be
voluntary, it would be a fee, and in return they get some liability
protection, and that is what they negotiated with the attorneys
general. Maybe that would work. This is not voluntary. There is no
provision that says if the tobacco companies don't like the fee, they
don't have to pay it. There is no provision like that. So it is a tax.
Congress has the power to tax, but if we are going to tax, let's tax
right.
The cigarette excise tax right now is 24 cents per pack. It is going
to 39 cents by 2002. This bill purports to raise it another $1.10, so
that goes to $1.49.
So for my colleagues who are trying to push the tax to $1.50, it will
be $1.10 by the year 2002 under this bill, plus indexed for inflation.
So maybe you have a lot more than you really realized.
Let me take you through the numbers again. The tax on cigarettes
today is 24 cents per pack. Congress, last year, I believe, increased
that tax 15 cents--24 and 15 is 39 cents. That is already law. This
bill adds to that, purportedly, another $1.10. A $1.10 on top of the 39
cents is $1.49. So the Federal excise tax on tobacco, at a minimum,
will be $1.49 in the year 2002, plus it is indexed for inflation
forever. This is indexed at inflation, or 3 percent--whichever is
greater. Never had an index that I know like that. I don't know that
that makes sense, but we have it in there. Why do we have it in there?
So we put more money in the pot so we have more money to spend. I don't
think we should do that.

What should we do? We should work together to come up with a
responsible package. I am willing to do that. I think this bill goes
way too far.
I haven't touched the regulatory side of the bill. I will save that
for another speech, and hopefully maybe the FDA section will have some
common sense come into it. We don't want to give this unbridled
authority to the administration. Don't we want to preserve for
ourselves, the legislative branch, the authority to write law? Or are
we going to take a massive menu of FDA regs and say they are deemed to
be law, although a court said part of them is unconstitutional. I don't
think we should do that. I will save the FDA section for another
comment and another time.
Now I am talking primarily about the financial impact of this bill.
Let's work on a bill that will do a couple of things. Let s work on a
bill that will try to educate youngsters that using drugs or using
tobacco is a very serious problem. Let's try to reverse this trend that
happened, frankly, in the last 6 years, during the Clinton
administration, where marijuana use doubled among high school seniors,
where tobacco use is up 35 percent among high school seniors. Let's try
to reverse that through some public education. Let's try to get some
workable restrictions that are constitutional. Let's try to put some
responsibility back on young people. Let's try to maybe give the States
the encouragement to enforce the law.
It is against the law in every State in the Nation for people under
the age of 18 to smoke. So if they enforce the law, we don't have this
problem. Now, maybe they are not enforcing the law. But certainly this
little operation we have here where we are going to have the Federal
Government spend $200 million a year to go around and have all these
people inspecting to see if the convenience stores are checking IDs up
to people age 27 is absurd. That is not going to work. It will build
resentment. We need to say, States, what can you do to enforce the law?
Maybe all the enforcement should go not to just the person selling the
tobacco product. I am all for the States, if they find somebody selling
tobacco or alcohol, frankly, to that minor, there should be significant
penalties. That is the reason the laws are on the book. They should
enforce the law. The penalties should not be just on the person selling
but on the person buying or the person consuming. There are laws if you
are driving under the influence, you get a DUI, they can take your
license away. Maybe we should have restrictions and penalties on the
consumer if they are breaking the tobacco consumption laws. Maybe it
would be a financial penalty, maybe it would be that they have to do
community service. Maybe they have to clean up a park. Give the States
some flexibility to put some penalties on the consumer.
One of the reasons I didn't smoke is because I had a football coach
who said, you smoke, you are out of here. Everybody else in our group
understood that there was a penalty, there would be a price to be paid.
So let's put it back on the individual. Let's turn it around. We can do
some things like that.
What I see here is a massive effort to conceal, disguise, slide in
under the radar screen, a very big tax price increase. And the way it
is done is going to have minimal impact on reducing consumption among
teenagers because we slide it in stealthily. It starts at 65 cents and
over 5 years it is $1.10, according to this nonsense. Are we going to
do it so gradually there is no sticker shock, so there won't be any
impact anyway? The Finance Committee said, if you are going to increase
the tax, put it up front, that, to me, is at least more honest. Do a
tax, do away with the nonsense of hundreds of billions of dollars in
industry payments. The tax is 24 cents now, so it's going to 39 cents.
If Congress has the votes to do it, make it another dollar, add it on,
vote on it. I probably won't vote for it. But do it honestly. The way
we have here is so misleading and deceptive.

Instead we are going to talk about volume reductions, and we are
going to talk about inflation adjustment and about these payments, and
I am going to bring up the point that some companies don't have to pay.
If smokeless companies produce less than 1 percent, they are exempt. So
what are we going to do? We are going to put penalties, big assessments
on some companies; but a new startup company doesn't have to pay this
$1.10 assessment. That is a big advantage. I have a feeling that this
bill is going to cause new companies to crop up all over the place.
I think the arguments made by the Senator from Utah and others about
having a black market are very real. These commodities aren't that hard
to smuggle or hide. I think if you put in this kind of incentive, you
will have the same thing happen as it did in Canada and in other
countries in Europe. You are going to find a lot of contraband, a lot
of hidden stuff, and people smuggling tobacco like they used to be
smuggling liquor. There is a lot of money to be made in the process. If
they are smuggling tobacco tax free, there is money to be made. And
there is money to be made in drugs. Smuggling under this bill is
illegal. But the financial rewards will be very lucrative. If a person
figures out the value of a truckload of cigarettes, you will realize
that there is a real incentive if a person can get around the law and
paying these taxes. The taxes are going to be greater, certainly, than
the product.
I stopped in a gas station last weekend just to see what tobacco
prices were. I didn't know; I don't buy tobacco. There were some
cigarettes selling for $1.24 a pack, and another for $1.84, and another
for $2.02. People say most of them are about $2. The more popular
brands were the higher-priced ones, closer to $2. That is with the
tobacco tax of 24 cents. If it goes up another 15 cents--this bill
purports to take it up to $1.10, and that is without the look-back
penalties. If you add that back in, you are looking at probably close
to a $2-per-pack tax that is in this bill. So taking a product right
now that sells from $1.24 to $2, you are going to add $1.50 to $2 in
taxes very shortly on consumers. Is that going to be an incentive for
people to smuggle cigarettes and get around the law? I believe it is.
Certainly, there is incentive.

[[Page S5262]]

I hope they won't be successful. I don't want to set up a black market
or encourage that type of activity, but I am afraid we will be doing
it.
Finally, Mr. President, let me just say that I am disgusted about the
procedure. I don't say that very often. I am part of the leadership,
but I am disgusted by the fact that you have one committee, the
Commerce Committee, writing the finance portion, writing the
agriculture portion, and they didn't do a very good job. I am disgusted
by the fact that the bill changed and the administration rewrote the
bill over the weekend. They didn't consult the Commerce Committee, or
the Finance Committee, or the committees of jurisdiction dealing with
welfare, child care, the committees that wrote those laws, people that
had the staff and the experts who knew what they were talking about.
The administration put in a lot of their wish lists. I am disgusted by
the fact that we would set up a whole new trust fund and say it is
limited to $1.10 tax, when it is not.
Let's be honest with people. This is not the way to pass legislation.
The Commerce Committee is not a tax-writing committee. They did a
crummy job. I am disgusted. The tax on one can of Skoal will be one
level, and on a competitor it would be 30 percent less. I am disgusted
by the fact that one cigarette company is not going to have the excise
tax that another cigarette company is going to have. Wait a minute,
this is a national excise tax, but some companies don't have to pay it
and some companies do. That is not the way you do business. I don't
care if you are small or large. Excise taxes are supposed to be across
the board. They didn't do that.

I am also disgusted by the fact that we would end up passing a bill
to allow trial attorneys to make $100 billion over the life of this
bill--probably $4 billion a year over the course of this bill. That
bothers me a lot. That reminds me of what motivates this bill and it
reminds me of the movie ``Jerry McGuire,'' where someone is screaming,
``Show me the money.'' That is what is driving this thing. It is not
just about curbing teenage smoking. That is a great public relations
campaign, and I will stand with anybody to try to curb teenage smoking
and drug use. I emphasize ``drug use,'' because there is silence in
this bill about that. We are not going to pass a bill, if I have
anything to do with it, unless we have a significant effort to combat
not just cigarettes but also marijuana and other illegal drugs that are
much more hazardous, dangerous, and deadly.
I think this bill needs a lot of work. My guess is that it is
probably not fixable with just a few amendments. I don't think we
should be in a real rush to pass it. I have spent the last three nights
staying up past 1 o'clock reading this bill, trying to understand how
it works. I still have a lot to learn about this bill. Before we pass
the biggest tax increase, the biggest spending program considered by
Congress in years, I think we ought to know a little bit more about it.
So I urge colleagues to do their homework, consider serious amendments,
not frivolous amendments to string this bill out for a long time, but
to make it better.
We are legislators. We are trying to pass law. My opinion is that
this is a bad bill that needs to be improved significantly before we
let it become law. I will reiterate my statement that I will work with
any colleague, Democrat or Republican, to try to fashion a bill that
will reduce teenage consumption of drugs and tobacco. But I don't think
we have to spend hundreds of billions of dollars to do it. I don't
think we have to turn over massive amounts of power to bureaucrats to
do it. So I look forward to working with my colleagues to try to make
that happen in the next few weeks as we consider this legislation.
Mr. President, I yield the floor and I suggest the absence of a
quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. CONRAD. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Roberts). Without objection, it is so
ordered.
Mr. CONRAD. Mr. President, I was seeking to ask the Senator from
Oklahoma some questions about the numbers he was displaying about the
revenue generated by this bill, because the numbers he was displaying
are not the official forecasts by the Joint Tax Committee of what this
bill will raise. His numbers that he was displaying here are much
higher than the numbers that are in the official forecast. Generally,
when we debate a bill on the floor of the Senate, we debate based on
common numbers. We debate based on the official forecasts. The Senator
from Oklahoma has chosen not to do that. He has chosen to take other
numbers that are much higher and different. The major difference
between those numbers is that the bill calls for a volume adjustment
that is not contained in the Senator's figures.
The volume adjustment appears very clearly in the bill at page 189,
No. 2, ``Volume Adjustment.'' I will not go through the technical
details. But the volume adjustment provides for, if volumes of
cigarettes consumed declined because of an increase in price, the price
increase will be adjusted downward. The numbers of the Senator from
Oklahoma do not contain that volume adjustment. The fact is both Joint
Tax and the Congressional Budget Office assume there will be a
reduction in volume of about one-third, and any volume reduction beyond
a 40-percent volume reduction will result in a lowering of the price
increase.
Again, the Senator's numbers did not include those figures. The
numbers he was using are not the official forecasts for this bill. They
are at great variance from what has been provided by the Senator and
are the official forecasts of what this bill will raise made by the
Joint Tax Committee.
I want to point that out because I think it is important to set the
Record straight.
At this point in the record, I ask unanimous consent to have printed
in the Record the Joint Tax Committee's estimates of what this bill
will raise.
I also would like to enter into the Record at this point page 189
from the bill that points out the volume adjustment provisions which
the Senator from Oklahoma neglected to advise the Senate are not
contained in the numbers which he displayed for our colleagues.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Congress of the United States,

Joint Committee on Taxation,

Washington, DC, May 19, 1998.
Hon. Daniel Patrick Moynihan,
U.S. Senate, Washington, DC.
Dear Senator Moynihan: This letter is in response to your
request for a revenue estimate of the manager's amendment to
S. 1415 offered May 18, 1998.
In order to complete the estimate of the manager's
amendment to S. 1415, we assumed that the base payment for
years beginning in 2003 and thereafter is $23.6 billion
before the volume and inflation adjustments.
Our estimate presents the net revenue effects of the
manager's amendment to S. 1415. These net amounts differ from
the gross payments required under the manager's amendment for
several reasons. First, the general tobacco industry payments
are converted to fiscal year payments. Second, the general
tobacco industry payments are reduced by an income and
payroll tax offset in the same way that net receipts from an
excise tax are calculated. Third, the higher price for
tobacco products resulting from the proposal reduces net
receipts generated from present-law tobacco excise taxes
because of reduced tobacco consumption. Finally, because the
proposal is expected to supercede most of the State-by-State
settlements that are implicit in the Congressional Budget
Office baseline receipts forecast, much of the negative
indirect effect of the anticipated State-by-State settlements
on receipts is reversed.
We estimate that the manager's amendment to S. 1415 will
have the following effects on Federal fiscal year budget
receipts:

[In billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year--
------------------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 1999-02 2003-07
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. General industry payments... 15.4 11.0 12.5 12.7 13.2 13.8 14.3 14.8 15.4 51.5 71.5
2. Look-back assessment \1\.... ......... ......... ......... ......... ......... 1.0 0.6 4.0 3.1 ......... 8.7

[[Page S5263]]

3. Total of S. 1415 as amended. 15.4 11.0 12.5 12.7 13.2 14.8 14.9 18.8 18.5 51.5 80.2
General industry payments per
pack \2\...................... $0.76 $0.89 $1.06 $1.11 $1.24 $1.28 $1.32 $1.36 $1.40 ......... .........
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ This net revenue reflects the effect of reduced excise tax receipts because of the assumption that the penalty excise tax payments are passed
through in the price of tobacco products.
\2\ Presented on a calendar year basis and without regard to look-back assessments.

Note: Details may not add to totals due to rounding.

I hope this information is helpful to you. If we can be of
further assistance, please let me know.
Sincerely,
Lindy L. Paull.
____

Volume Adjustment Provision

(2) Volume adjustment.--Beginning with calendar year 2002,
the applicable base amount (as adjusted for inflation under
paragraph (1)) shall be adjusted for changes in volume of
domestic sales by multiplying the applicable base amount by
the ratio of the actual volume for the calendar year to the
base volume. For purposes of this paragraph, the term ``base
volume'' means 80 percent of the number of units of taxable
domestic removals and taxed imports of cigarettes in calendar
year 1997, as reported to the Secretary of the Treasury. For
purposes of this subsection, the term ``actual volume'' means
the number of adjusted units as defined in section
402(d)(3)(A).

Mr. NICKLES addressed the Chair.
The PRESIDING OFFICER. The Senator from Oklahoma.
Mr. NICKLES. Mr. President, my colleague is making my argument for
me.
In the first place, I am consistent. The administration, and Senator
McCain, said this bill would only cost $516 billion. Guess what? They
don't make a volume adjustment on that estimate. Instead, they used
constant 1999 dollars.
I have a letter from OMB that was trying to refute my argument, but
basically they made it for me. OMB says inflated nominal dollar
industry payments would equal $755 billion over 25 years. That is
without the look-back penalty. By way of comparison, the equivalent
estimate which the State attorneys general are proposing is $539
billion in nominal dollars. Like the private analysis, these estimates
do not included volume adjustments. There is a reason they do not
include volume adjustments. It is because it is hard to figure.
My point is that everybody here has heard the attorneys general group
discussing the $368 billion figure that the administration signed off
on. When they use the $368 billion, they do not take into account any
volume adjustment. No one knows what the volume adjustment is going to
be.
I will show my colleague a table from the Joint Tax Committee. I have
been trying to figure out what these industry payments really are. How
much of a tax increase is it? I have hounded Joint Tax for an estimate,
and we have a letter and report from them dated yesterday. If this is
not the one the Senator printed in the Record, I will insert it in the
Record at the conclusion of my statement.
In the first place, they show the total revenues on the top line
which, frankly, are consistent with the revenues that I showed on my
chart. It is shown in calendar years, according to the bill on certain
pages which provided for a payment of $24.4 billion, $15.4 billion,
$17.7 billion, and so on.
Mr. McCAIN. Mr. President, will the Senator yield for an
administrative question, not a substantive one?
Mr. NICKLES. The Senator is throwing me off track.
Mr. McCAIN. About the schedule.
Mr. NICKLES. I will be finished shortly.
Mr. McCAIN. I thank the Senator.
Mr. NICKLES. I want to make sure people understand. I am not sure my
colleague from Arizona knows what was done.
Mr. McCAIN. I was not trying to interfere.
Mr. NICKLES. I understand; no problem. I bragged on the Senator
before.
But I want to talk a little bit about the volume adjustment. I am
very familiar with the volume adjustment because I have been trying to
figure out what they are doing with it.
Also the Senator from North Dakota tried to repudiate my number of
$755 billion. I am telling you that is the same number OMB came up
with, and they didn't volume adjust it, and they didn't volume adjust
the $368 billion.
I want people to know that I am consistent with what was done before.
In addition to inflation, the bill that was reported out of the
Commerce Committee was to have a volume adjustment. If you sell less,
there would be less tax. So you have some reduction. But they do not
know exactly what that would be.
What was rewritten by the administration on Sunday or Monday is that
there will be a volume adjustment if and when volume gets less than 80
percent of last year's level. That is a big change.
Under the bill as originally written, the volume adjustments don't
kick in until the sixth year. Then you would have some reduction. They
say you will get a reduction if and when you reduce consumption below
80 percent down here.
My point is there is no volume reduction for the first several years,
and after that you are guessing. But the volume reduction must be lower
than 80 percent. To get any volume reduction whatsoever, you must
reduce consumption total by more than 20 percent. It used to be that
you only had to reduce it 1 percent to get a 1-percent reduction. Now,
you have to reduce 21 percent to get a 1-percent reduction. It may be
that they will never get a volume reduction as a result of that change.
I don't know.
But my point being is that, one, we are being consistent in our
analysis of the cost of the bill, as it pertains to OMB, as it pertains
to the Attorney General.
I want people to know what the facts are. The fact is the bill says
it has a CPI adjustment. The facts are that OMB said they used constant
1999 dollars to get $516 billion. I read it in the committee report.
This is absurd. It said total payments shall not exceed $516 billion.
That is not in the bill. It doesn't fit. It doesn't work.
If you use nominal dollars, as we use in every other budget
projection, and you put a 3-percent kicker in, that is how you get up
to $755 billion.
Then you can add the look-back assessment. One could say there will
not be a look-back. Why was all this effort to add a look-back. I heard
colleagues say on the floor that look-back is almost maybe 50 cents. I
will tell you the look-back is a disaster. If anybody wants to raise
tobacco prices another 50 cents, do it honestly. The look-back rests on
the Secretary of Treasury taking a poll and saying, ``Did we meet our
objectives? We want to reduce consumption by teenagers by a certain
percentage. Did we make it? If we didn't make it, what happens then?''
If they miss it by a certain percent, there is a fine. If they miss it
by a bigger percent, there is a bigger fine. That raises about $4
billion.
Then, they go to brand specific look-back assessments. This is
absurd. They say they are going to, in the same poll, find out whether
these youngsters buy X, Y, or Z brand. And if they smoke that brand,
and that brand does not meet that target, there is a $1,000 penalty.
For every teenager they identify that smoked more cigarettes in that
particular percentage, then there is a $1,000 fine.
That is not really workable, and it needs to be fixed. It needs to be
cleaned up. It needs to be deleted and then raise the tax whatever you
want to raise it. Be honest. Tell people we want to raise taxes. The
first year it is going to a dollar a pack. Just raise it a dollar a
pack. Say next year, instead of 24 cents, it is going to be $1.24. Just
do it. That would be the honest way. This thing is more than deceptive
and, in my opinion, probably won't work.
Mr. President, I yield the floor.
Mr. CONRAD addressed the Chair.
The PRESIDING OFFICER. The Senator from North Dakota is recognized.
Mr. CONRAD. Mr. President, I am just going to repeat the point. I am

[[Page S5264]]

sorry to have set off my colleague from Oklahoma.
The simple fact is the numbers he has displayed here are not the
official forecast for what this bill will raise. They just are not.
They are dramatically higher than the official forecast before this
body by the Joint Tax Committee, which is the forecasting service we
all use. And so the numbers that he has presented to our colleagues, to
anybody else who is listening, are numbers that are not the official
forecast of what this bill is going to raise.
Mr. NICKLES. Will the Senator yield?
Mr. CONRAD. No. I asked repeatedly for the Senator to yield to me. He
repeatedly refused, so I refuse.
The point is very simple. The reason his numbers are at dramatic
variance with the official estimate of what this bill that is before
this body will raise is because he takes no account of the volume
adjustment that is contained clearly in the bill. And that volume
adjustment calls for lower payments from the companies as the use of
the product falls. Now, any economist and anybody with common sense
understands that as you increase the price of something, you sell less
of it. That is just basic. And so the legislation acknowledges that
economic fact of life.
I yield the floor.
Mr. NICKLES addressed the Chair.
The PRESIDING OFFICER. The Senator from Oklahoma is recognized.
Mr. NICKLES. I ask unanimous consent to have printed in the Record a
Joint Tax report.
Now, first I want to reply to my colleague. This joint tax report,
which I have been asking for every day, is dated May 20, yesterday.
They didn't have this information before. No one has had a chart on
what they thought the industry adjustment would be, but let me just
give the facts according to Joint Tax if you worship at that altar.
In the first place, they say the figures I have on the gross industry
payments, are accurate. They have the exact same figures that I have.
They happen to be accurate. They estimate these for the first time. We
don't have a CBO study. We don't have a GAO study. We don't have
anything from the administration showing what they think the volume
adjustment would be. No one has had volume adjustments in any of their
charts, because it is a guess. But let me just repeat what the Joint
Tax Committee has said. They say the gross figures that I have are
identical. They say the total tax on consumers over the first 5 years
is $102 billion. They say volume adjustment is $8.7 billion. So the net
over the 5 years is $93.4 billion.
So this massive change in numbers that you are talking about is not
that massive. The total amount of tax on tobacco consumers, according
to joint tax, over five years is $93.4 billion. That is pretty
significant.
So, Mr. President, I just got this yesterday, or maybe we got it
today. We got it today. And I am happy to have it submitted for the
Record. I am happy to debate facts all day long, and I want to debate
facts.
I see my colleague from Vermont who supports, I believe, a straight
excise tax. I just think you ought to do a tax. I think this scheme of
having industry payments and having look-backs and surveys and polls,
and those polls are deemed to be accurate--that is absurd, but that is
what is in this bill.
You have an automatic volume reduction if you have an honest excise
tax. Isn't that the truth? If you have an honest excise tax of $1.10
and there is less cigarettes sold, there will be less money going in to
the trust fund. It is self-fulfilling if you do it right.
This bill does it wrong. This bill says we are going to have this
formula for this money to go in, and it is indexed and there is
additional formulas if we determine a certain number of people are
using the wrong product. And so we will put that in. And then, oh, yes,
we will reduce it by volume if we determine that.
Why not just have a tax per pack, and if there is less volume, there
will be less money going into the pot. And no one will have to argue
about volume adjustment that will be determined by the Secretary to
send to these various companies, and, oh, he is going to forget to send
that assessment to some companies.
That doesn't make sense. If somebody makes a different size of Skoal
or a different size of snuff, he has a little different tax. You should
put the same tax on every pack of cigarettes, the same tax on every
brand of moist tobacco or every brand of smokeless tobacco and just do
it. And then you have an automatic volume adjustment.
Mr. LEAHY. Mr. President, will the Senator from Oklahoma yield?
Mr. NICKLES. Sure.
Mr. LEAHY. I won't take but a couple minutes.
Mr. NICKLES. I did ask unanimous consent to print this chart in the
Record.
There being no objection, the chart was ordered to be printed in the
Record, as follows:

RECONCILIATION OF GENERAL TOBACCO INDUSTRY PAYMENTS UNDER S. 1415, AS AMENDED, AND NET FEDERAL REVENUE EFFECT OF SUCH PAYMENTS ESTIMATED BY THE JOINT
COMMITTEE ON TAXATION ON MAY 19, 1998, BEFORE THE LOOK-BACK PROVISIONS
[In billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year--
Provision ---------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1998-2003 1998-2007
--------------------------------------------------------------------------------------------------------------------------------------------------------
I. Calendar Years:
1. Federal revenues from S. 1415
general tobacco industry payments
as adjusted for inflation (by
calendar years as in S. 1415)...... 10.0 14.4 15.4 17.7 21.0 23.6 24.3 25.0 25.8 26.6 102.1 203.8
2. Calendar year volume adjustment.. ....... ....... ....... ....... -3.6 -5.0 -5.4 -5.8 -6.2 -6.6 -8.7 -32.7
3. Calendar year payments........... 10.0 14.4 15.4 17.7 17.4 18.6 18.9 19.2 19.6 20.0 93.4 171.1
II. Fiscal years:
1. Adjustments:
a. Convert Federal revenues from
S. 1415 general tobacco
industry payments to Federal
fiscal years................... ....... 20.8 15.2 17.1 17.5 18.3 18.8 19.1 19.5 19.9 88.9 166.2
b. Change in net revenues from
Federal income and payroll
taxes (because of the impact of
S. 1415 general tobacco
industry payments on aggregate
taxable income)................ ....... -5.2 -3.8 -4.3 -4.4 -4.6 -4.7 -4.8 -4.9 -5.0 -22.3 -41.7
c. Change in net revenues from
present-law Federal tobacco
excise taxes (because of price
increases from S. 1415 general
tobacco industry payments)..... ....... -0.8 -1.2 -1.5 -1.9 -2.1 -2.2 -2.2 -2.2 -2.2 -7.5 -16.3
d. Net revenue effect of
replacing State by State
tobacco settlements with S.
1415 payments.................. ....... 0.5 0.9 1.1 1.4 1.6 1.9 2.2 2.4 2.7 5.5 14.7
2. Net Federal revenues from S. 1415
general tobacco industry payments
(JCT May 19, 1998 estimate)........ ....... 15.4 11.0 12.5 12.7 13.2 13.8 14.3 14.8 15.4 64.6 122.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Details may not add to totals due to rounding.

Mr. LEAHY. Mr. President, I am sure my friend from Oklahoma will
allow me to describe what my position will be on it, and I appreciate
him stating it. And I do not want to get into the debate he and the
Senator from North Dakota have been having. I was here to support, as I
have, the amendment of the distinguished Senator from New Hampshire,
Mr. Gregg. And what I have before me is an amendment that I think makes
a great deal of sense.
I said yesterday that nobody is running up to me in the streets of
Vermont and saying, ``Oh, please, whatever you do, be sure and give a
lot of immunity to the poor tobacco companies.'' Nobody in Vermont is
saying, ``Whatever you do, make sure first and foremost you protect the
tobacco companies.''
They have made it very clear that they are concerned with protecting
teenagers, concerned with protecting their children, concerned with
getting back some of the costs that we in Vermont have spent on health
care for those who have suffered from addiction to cigarettes.
But I ask, Mr. President, at the conclusion of my statement that I be
allowed to put in the Record a letter from C. Everett Koop and David
Kessler to Senator Gregg and myself dated May 20, 1998.

[[Page S5265]]

The PRESIDING OFFICER. Without objection, it is so ordered.
(See Exhibit 1.)
Mr. LEAHY. I just mention this about it. The letter very forcefully,
very eloquently makes the case why the interests of public health are
not served by giving big tobacco further special legal protection. They
write:

Special legal protections for tobacco are unfair
to patients and their families.

They write further:

Special legal protections for tobacco are bad for public
health, especially children's health.

They write:

Special legal protections for tobacco are undeserved.

And they write:

If passed, the special legal protections in the Commerce
Committee bill would be the biggest corporate giveaway in
history.

And then they say:

For the sake of public health and children's health, for
the sake of the people who are already sick and for those who
will become sick, and for the sake of holding the industry
accountable for its actions, we urge you to strip the special
legal protections from the bill.

I agree with Dr. Koop. I agree with Dr. Kessler. I agree that first
and foremost we should protect the people of this country. We should
protect the health of the people of this country. We should protect the
children of this country. And we should not be giving special limits on
legal liability to big tobacco.
I disagree with the position of the White House in trying to allow
special legal protection and special immunity for the tobacco
companies.
Yesterday, the President wrote to the Senate leaders that:

If a cap that doesn't prevent anybody from suing the
companies and getting whatever damages a jury awards will get
tobacco companies to stop marketing cigarettes to kids, then
it is well worth it for the American people.

Everybody agrees with that. What doesn't come out in the President's
letter is this bill does have provisions that will prevent some parties
from suing the tobacco industry. It does cap the total annual payments
for the tobacco industry. The liability cap may very well affect the
payment of future jury awards to tobacco victims.
So, I disagree with the White House and I disagree with those on both
sides of the aisle who would limit some of the liability of the tobacco
companies. If the tobacco companies hadn't faced unlimited liability
for their actions, we would not even be here today. If the tobacco
companies hadn't known that they could be sued, and sued successfully,
they never would have admitted some of the things that have now come
out. If the tobacco companies had not faced this, we never would have
found out the years that they had lied. We never would have found out
the internal memos where they were targeting 14-year-olds. We never
would have found out even such things as their efforts to make
cigarette placements in all kinds of movies, including, of all things,
the ``Muppet Movie.'' These are things that we have found out only
because they face that liability.
I concur with the distinguished Senator from New Hampshire. I am
opposed to limiting liability. With that, I yield the floor.

Exhibit 1

Advisory Committee on Tobacco

Policy and Public Health,

May 20, 1998.
Dear Senator Gregg and Senator Leahy: We are writing to
endorse and support the Gregg-Leahy amendment to S. 1415 to
eliminate all special liability protections for tobacco
companies. We wish you success and would urge your colleagues
to join with you in this effort.
Special legal protections for tobacco are unfair to
patients and their families.
Millions of Americans are now sick with tobacco-related
illnesses. Millions more will become sick in the future.
These are people who started to smoke at a time when the
tobacco industry lied about its products, hid scientific
studies, and shredded documents. Most of these people started
to smoke when they were children whom the industry targeted
for special marketing. To protect the industry now would
leave many of these patients, their families, and their
survivors without remedy.
Special legal protections for tobacco are bad for public
health, especially children's health.
Court oversight in the historic Minnesota suit led to the
disclosure of thousands of documents about the addictiveness
of nicotine and about the industry's plans to market to
children. Other legal actions have resulted in consent
decrees that will cut back on Big Tobacco's seduction of new
young smokers. Under the Commerce Committee bill, these state
and local suits would be impossible.
Special legal protections for tobacco are undeserved.
The tobacco industry has proven itself to be an
irresponsible corporate citizen. Extending protection to this
industry would be to subsidize and condone these activities.
No other industry, no matter how valuable to the Nation, has
such protections. We should not extend them to an industry
whose product that serves only to kill Americans prematurely.
The Senate should not provide special legal protections for
tobacco.
If an American jury finds tobacco companies owe damages,
the Senate should not overturn that verdict.
If the most skilled lawyers that money can buy cannot get
the tobacco industry out of court, the Senate should not
become its defenders.
If passed, the special protections contained in the
Commerce Committee bill would be the biggest corporate
giveaway in history.
For the sake of public health and children's health, for
the sake of the people who are already sick and those who
will become sick, and for the sake of holding the industry
accountable for its actions, we urge you to strip the special
legal protections from the bill.
Sincerely,
C. Everett Koop, M.D.
David A. Kessler, M.D.

The PRESIDING OFFICER. The Senator from Oklahoma is recognized.
Mr. NICKLES. Mr. President, I had printed in the Record this Joint
Tax table. I also want to clarify a statement. I said, all of this
money would be going into the trust fund. That was the way it was
designed as it passed the Commerce Committee initially. The Commerce
Committee now says the net revenues from this large payment goes into
the trust fund. This chart says ``Industry Payments.'' That is not
correct. It is consumers' payments. Consumers are going to be paying
every dime of this tax.
Granted, they have a section in here that says industry, companies,
you pay this amount. But they also have a section in here, on page 189,
that says the tobacco companies must pass the cost on to consumers.

. . . an amount sufficient to pass through to each
purchaser on a per-unit basis an equal share of the annual
payments to be made by such tobacco product manufacturer. . .
.

In other words, consumers, you have to pay every dime of this, every
single dime. This is not paid for by tobacco companies. This is not a
tax on tobacco companies. This is a tax on consumers. The way to solve
this ambiguity on volume adjustments is just say: ``Here is the tax per
pack, or per can or whatever it is. And then, if volume goes down,
there is less money.'' We do not do that in this bill.
I just mention, too, there is something really phony going on here.
Joint Tax--and maybe I am not being as respectful to Joint Tax as I
should be. But the way they scored this thing, as I know my colleague
knows, they take 25 percent of the revenue from excise taxes and assume
that is lost in transmission. So, if you raise $1 in tax, they assume
only 75 cents gets to where you are trying to send it. That would
usually be correct. If you were going to increase excise taxes on a
farmer, he is going to have less money to spend on other products, it
is going to slow the economy, so there would be some decline.
This assumption, I don't think, is applicable to these tobacco
payments. Maybe the government would lose some percentage, but I don't
think it would be as much as 25 percent. And the reason is the
companies, by this language, are forced, mandated, to pass on every
dime of this payment. I cannot think of any other business--if Nickles
Machine Corporation I used to run, if we had an increase in excise tax,
granted that might be in our cost of manufacturer. I might try to pass
it on in higher prices to consumers and so on. Maybe I would be
successful and maybe I wouldn't. Maybe I'd have to eat part of it.
We have language in here saying we don't want tobacco companies to
pay a dime of this. We want consumers to pay every single dime of this
part. Not the look-back. The look-back, they say, is not deductible, so
maybe they are supposed to chew on part of that. But the big part of it
is passed on to consumers.
So I want to make sure I was accurate. I think I said this money goes
into the trust fund. That was not the

[[Page S5266]]

case. The language now says the net revenues go into the trust fund.
And the net amount is really determined by the Secretary of the
Treasury. He has a great deal of flexibility, I am afraid, to say,
``Oh, well, we think, since this is all passed through, the gross
amount could be the net amount.'' He could say that this since it is
all passed through.
Maybe I am getting too technical. I just want people to know, when
you see estimates from Joint Tax that they agree that this is a $102
billion tax increase over the first 5 years. The look-backs are a
question mark. Who knows? But evidently somebody thinks it is real
money or they wouldn't be trying to jack up the look-back penalties.
And then the other variable is the volume adjustment, and no one has
had scoring on volume adjustments until today. These are purely
assumptions. I put those into the Record. So, if they were accurate,
consumers will pay $102 billion, adjusted by 8.7, so $93.4 billion over
the 5 years. So it reduces it somewhat.

For that to happen, you have to assume you are going to have volume
less than 80 percent of 1997 over that period of time. Who knows? I
don't know. But I always want to be factually correct. I may disagree
with the colleagues on substance or philosophy or motives or whatever,
but I want to be factually correct. And these numbers, I believe, are
factually correct. The volume adjustment is speculative and now Joint
Tax says it is minus $8 billion. Great. I do not agree with them that
there would be such a large loss of revenue from gross to net, because
of the language that says 100 percent of it shall be passed on to
consumers. This figure, this payment by consumers, is accurate.
Consumers, not tobacco companies, will pay the cost of this bill. I
think it is too high.
I yield the floor.
The PRESIDING OFFICER. The Senator from Massachusetts is recognized.
Mr. KERRY. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. McCAIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered. The
distinguished Senator from Arizona.
Mr. McCAIN. Mr. President, I thank the Senator from Oklahoma for a
thorough exposition of the bill. He obviously has spent a great deal of
time studying it. I, obviously, am not in agreement with a number of
his conclusions, but this kind of exposition has been very educational
and helpful to the entire Senate. I thank the Senator from Oklahoma,
not only for his in-depth knowledge of the legislation but also the
comity which has accompanied his and my relationship and difference of
opinion on this issue.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. KERRY. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered. The
Senator is recognized.
Mr. KERRY. Mr. President, I was not able to be here at the exact
moment that the Senator from Vermont was speaking. But I do understand
that the Senator suggested that a rationale for his cosponsorship of
the Gregg amendment is that he opposes ``a lot of immunity for the
tobacco companies,'' and opposes the ``protections'' that are contained
in the Commerce Committee.
I will try to emphasize again, because I think we are really either
talking past each other here or there is just not an awareness of what
is in the bill--there are no protections for the tobacco companies.
There is no protection. None. Zero protection. There is no such thing
as a lot of immunity in this bill. There is no immunity in this bill.
None. Zero immunity.
The tobacco companies will be liable to lawsuits under any
circumstances. Whether they play in the tent or they are out of the
tent, they are liable for lawsuits. The only distinction here is, if
those lawsuits are successful, how much will they be required to pay
out in 1 year? That is the only thing that is contained here that is
some kind of a limitation.
Instead of being required conceivably to pay out $20 billion in 1
year and go bankrupt so you have no payments to kids, there is a
limitation of $8 billion. So you can choose between the system that
allows you to conceivably make them go bankrupt in the court system as,
I might add, 70-plus percent of the asbestos companies did. We have
lines of people who are suing today on asbestos who will never collect
because the companies went bankrupt. In fact, there are people who want
them to be able to collect under the tobacco settlement because there
is a lot of confusion between those diseases that are asbestos-induced
versus tobacco-related.
Let's get the terms of this debate correct. We are not talking about
immunity; we are talking about whether or not, in exchange for
companies giving up their constitutional rights to advertise, in
exchange for companies abiding by the look-back provisions, in exchange
for companies agreeing not to sue in court, in exchange for companies
agreeing to be part of the document depository, in exchange for
companies being part of the effort to get our kids not to smoke, we are
going to tell them in any one year, ``You're liability is only going to
be $8 billion.''
If the court finds that you are liable for $20 billion and there is
no finding of liability next year in the court, they are going to have
to pay the difference. The $8 billion from the $20 billion means they
are still going to have to come in and pay an additional $12 billion,
and they will pay up to $8 billion in the next year.
This is rational, in my judgment, Mr. President, because if you don't
do this, then you are voting for the status quo, which is a system that
is not a system. You would be voting to say, ``OK, we've got this one
little option here that invites the companies to come in and be part of
the process, but we're going to strip that option away because we want
to show how tough we are on the tobacco companies and we're just going
to let the lawyers go sue for the next''--whatever, recognizing that,
for the last 20 years, not one lawsuit has yet produced a dime for a
plaintiff.
Obviously, circumstances have changed. We now have evidence that no
plaintiff had in those past years. I understand that. As a lawyer, I
would love to go to court with the current level of documentation, and
clearly, with the document depository, it will be a lot easier for a
plaintiff to go into court and get a judgment. But you are not going to
get that judgment in any sense of order. You are going to have what we
call a rush to the bar: First lawyers come, first served. The first
people to get the biggest judgments will be the first people paid off.
All these people coming in here and talking about the kids and
talking about how they want to have some kind of system to get the kids
to stop smoking will have abandoned those kids, because those kids are
not going to benefit during those years of litigation. That is what we
are talking about here. We are talking about whether or not we are
going to have a rational approach to this or whether we are all going
to feel good and say no liability.
I respect Dr. Koop and Dr. Kessler enormously. We wouldn't be where
we are without them. There is no question about that. But I regret
enormously that it is somehow their judgment that it is better off for
the children to be in that position where we are just going to have
these open-ended lawsuits without any incentive whatsoever to try to
get the companies to become part of the process.
There is no guarantee they will. There is no guarantee that they
will. We may well pass this legislation in its current form, and a lot
of those companies will say, ``We still think it is too punitive. We
don't want the look-back provisions. We're still going to challenge.''
This bill does not disadvantage us one iota with respect to that
choice, because we have a two-part structure where, if they don't agree
to participate in giving up their constitutional rights, in setting up
the document depository, in being part of the look-back provision, then
they can be sued under this bill in the very form that the Senator from
New Hampshire is seeking. No loss, no setback, nothing.

The choice here is between whether you are going to go with the
status quo

[[Page S5267]]

or you are going to hold out some hope that you are going to invite the
tobacco companies to be part of a process of giving up what nobody will
suggest under the law they could give up otherwise.
The Senator from Utah is one of our strongest experts on the law in
the Senate, and he knows full well how the look-back provisions may be
challenged. He knows full well how these constitutional rights cannot
be given up except by consent. You can't restrict some of the
advertising we seek to restrict unless the tobacco companies sign the
protocol. Unless you are willing to say to them something that invites
them in, they are not going to sign a protocol, and there is no
guarantee they will sign it even if you say that.
So I think the choice for the U.S. Senate is very, very clear, and I
hope colleagues will vote for common sense and not for the sense that
the status quo is somehow going to serve the interests of the country.
I yield the floor.
Mr. HATCH addressed the Chair.
The PRESIDING OFFICER. The distinguished Senator from Utah is
recognized.
Mr. HATCH. Mr. President, I thank you. I rise to oppose this
amendment. This amendment strikes the so-called ``immunity" provisions
of the floor vehicle.
First, let me say that there are no immunity provisions in the
underlying bill. The traditional definition of the word ``immunity''
is: Being in a state ``free or exempt'' from disease or taxes or civil
liability or the like. Under this definition, there is no immunity in
the Commerce Committee bill or in the amendment that Senator Feinstein
and I have developed.
The tobacco companies are not exempt from anything. They will be and
are accountable for their actions.
There are, however, in these bills limitations on liability
procedures, but these should not be confused with immunity. Under the
underlying bill, suits may still be brought. The tobacco companies
could still face a multiplicity of suits for civil liability and
possible criminal proceedings. This is not immunity by any stretch of
the imagination. Indeed, when you are required to fork over a
staggering $516 billion as the floor vehicle requires--which is really
over $860 billion according to some estimates--you are not getting a
free ride.
If this is really immunity, do you think a bipartisan group of 40
States' attorneys general and some of the leading plaintiffs' attorneys
in this country who have been suing the tobacco industry for several
years would have backed the June 20 settlement? Of course they
wouldn't. It contained, justifiably, in my mind, limited liability
provisions broader than the Commerce Committee bill, including a
limitation on punitive damages for past bad behavior by the tobacco
companies.
I am talking about some of the leading plaintiffs' lawyers in the
country-- men like Wendell Gauthier, Stan Chesley, John Climaco, Jim
Parkinson, Ken Carter, John Coale, Bob Redfearn, and Don Hildry --I
hate to leave any names out because there are literally dozens of them.
I am talking about people who have pursued to the full limits of the
law the asbestos industry, the Dow Chemical Bhopal disaster, the Dalkon
Shield, and the breast implant manufacturers, and virtually every other
plaintiffs' litigation that has taken place over the last 25 years.

And where would we be had these plaintiffs' lawyers not brought these
suits? The States themselves are represented by very capable attorneys,
attorneys general like Gail Norton of Colorado, Christine Gregoire of
Washington, Jan Graham from my own home State of Utah, and Mike Moore
of Mississippi, all of whom have worked very closely with me on this
matter.
We are talking about top people here, tough-minded public servants.
And the States also met the armies of litigators employed by the
tobacco industry by contracting with their own legal experts on the
part of the States.
Dick Scruggs from Mississippi has been in this from the start on
behalf of Mississippi and other States. Professor Lawrence Tribe of
Harvard has been hired by Massachusetts and other States.
So we are not talking about a bunch of pushovers here who will lay
down in front of the big tobacco bulldozer. These top lawyers all knew
they were fighting an uphill battle. And to date, there has never been
a penny paid to a litigant in this country due to a jury award. In
fact, there has only been one jury award to plaintiffs in the history
of the country, I believe for $750,000, and it will be 10 years before
that is paid, if it is paid at all.
I have been following tobacco litigation since my early days as a
trial lawyer in Pittsburgh, PA, when I watched one of the greatest
trial lawyers in the country, Jimmy McCardle of the law firm of
McArdle, Harrington, Feeney, and McLaughlin on Prichard v. Liggett &
Myers. It was a terrific battle publicized all over the world, as a
matter of fact. And they lost because it is so difficult to win in
these battles.
But nevertheless, once we establish this document repository, it
should be easier to prove cases that can go to jury and, I think,
increase the chances of jury awards. These top lawyers all knew that
this is uphill. I have to say, from the time that Jimmy McArdle, that
great attorney, lost, everybody else has lost since him, except for the
one Florida case that is on appeal.
Why are these cases lost? Many legal observers have noted that
American juries are very reluctant to award damages in situations where
the complaining parties can be viewed as assuming a known risk. So we
all have to recognize that the prevailing legal landscape has favored
the companies for a long time.
The 40 State attorneys general and dozens of expert lawyers, like the
Castano group, did what rational people do every day in litigation in
this country. They proposed to resolve their claims through a
settlement. And they did achieve a resolution. But they have to have a
bill passed through this Congress that is similar to what they
negotiated and brings the tobacco companies back on board, albeit
screaming, kicking, and shouting all the way.
They brought us a proposal that settled the suits and involved
massive payments and a brand new regulatory regime in return for some
limited liability restrictions. These restrictions will provide an
orderly mechanism for compensation payoffs and will provide the
companies with financial certainty.
That is exactly what this legislation should do. The bill we adopt
should help resolve these claims and do so in a manner that is in the
best interests of the health of the American people.
So not only do I oppose amendments like these, but I think the most
effective way to go about this legislation is to devise liability
provisions that address the concerns of plaintiffs in a reasonable
fashion.
When we consider this legislation, let us keep in mind that some 40
State attorneys general and some of the leading plaintiffs' lawyers in
this country have already reached judgment that a fair and rational way
to proceed, the best way to proceed, is to effectuate a national
settlement of these claims.

Every day in our country lawsuits are settled by negotiating mutually
agreeable resolutions that usually involve payments of money and with
agreements to change certain behaviors. And that is exactly the theory
behind the June 20 proposal and, I might add, the Hatch-Feinstein
substitute amendment that we probably will bring up before this is
over. So in one sense the June 20 proposal and our substitute amendment
are typical.
Of course, what makes this June 20 proposal and our bill atypical is
this approach represents the largest settlement proposal in the history
of the world; requires the largest payment of punitive damages in the
history of the world; contains unprecedented regulatory authority over
tobacco products; and, provides for a broad array of public health
programs, including public education, tobacco cessation, and counter
advertising, that is, if the tobacco companies come back on board.
If they do not come back on board, many important restrictions are
not going to happen and we will be immersed and mired in litigation for
a long time, maybe 10 years. And then the bill on the floor, if that is
the way it comes out, will likely fail dramatically as an
unconstitutional piece of legislation.
But if we adopt this settlement approach and can drag the companies
back on board, we can achieve advertising and look-back penalties far
beyond what the Constitution would allow because we would have a
consent decrees

[[Page S5268]]

and protocol contracts where the companies would voluntarily agree to
waive certain rights. But to get them to do that, there has to be some
incentive for them to do that, and that is some reasonable limited
liability provisions.
Immunity has nothing to do with it. It is limited liability we are
talking about here.
To just give one example, we currently have an FDA rule that is tied
up in the courts. This rule bans tobacco billboard advertising within
1,000 feet from public schools.
The Judiciary Committee heard first amendment experts like Floyd
Abrams tell us this rule cannot withstand constitutional scrutiny. But
if we adopt a bill that contains liability provisions based on the June
20th settlement model that can bring back the companies, kicking and
screaming all the way, we can achieve a total ban on all outdoor
billboards.
This bill on the floor will not do that. But I believe before this
battle is finished the final bill will accomplish that, or we just will
not achieve as much public health protections as we can here.
So while the FDA rule wends its way through courts--and I think there
is good reason to believe it will fail--today in Florida and
Mississippi, through the settlement limited liability approach, there
are no tobacco billboards in those States; and soon there will be no
billboards in Minnesota because the companies have agreed to stop this
advertising. Without reasonable liability limitations, there is no
reason for them to just cave in and agree on these matters.
So there are good public policy reasons to oppose this so-called
immunity amendment and favor legislation that, like mine, contains the
liability limits modeled on the June 20 agreement.
Now, while I respect Drs. Koop and Kessler--I had a lot to do with
both of them obtaining their Federal appointments that vaulted them to
such prominence--I respect them to a large degree when they are
commenting on public health matters within their expertise, when it
comes to matters touching on the civil litigation system, I have to
rely on the judgment of experts in the field, including 40 State
attorneys general and the leading plaintiffs' lawyers in this country.
As you would not go to a doctor to fix your car, so you would not go to
a doctor for a legal opinion.
I might also add that I have tried some of these cases, too, in the
past, not tobacco cases but difficult, contentious litigation. And I
think I do know what I am talking about. And I do believe that I would
like to see Drs. Koop and Kessler limit themselves to their expertise
and not try to intrude into matters that literally they do not fully
understand. As a matter of fact, in many respects they are gumming up
any possibility of getting all these public health moneys that will
help us solve some of these problems.

To be fair, although I do not favor the underlying bill, I have to
oppose this amendment. I appreciate our distinguished friend, the
Senator from New Hampshire. There is no question he is thoughtful, very
decent and a good Senator. I have a tremendous amount of respect for
him. I just happen to disagree with him on this matter.
And to be fair, although I do not favor the underlying bill, I have
to oppose this amendment as well. There is simply nothing in the bill
that would prohibit an individual from bringing suit against tobacco
companies. There is nothing in this bill that would even reduce the
amount litigants can be awarded.
All that is in the bill is an $8 billion yearly cap on the amount of
damages that have been awarded. If the awards amount to over $8
billion, the amount will be paid in succeeding years. So there is
really no limitation on liability other than that $8 billion cap. And I
have to tell you, that is not enough to get the companies back to the
table or to get the companies back to voluntarily agreeing to have
advertising restrictions and look-back provisions that work.
In testimony before the Judiciary Committee, while defending the
liability provisions of the June 20 settlement--which were even
justifiably broader than the cap in the floor vehicle--Laurence H.
Tribe, Tyler Professor of Law, Harvard Law School, demonstrated that
liability limitations provisions are legal, constitutional, and not
unique. As to his constitutional argument, he correctly asserts that
the 1978 Duke Power Supreme Court case, allows Congress to alter common
law rights such as the granting of punitive damages, and the capping of
damages.
He also pointed out that there are a slew of federal statutes that
grant limited liability to different industries and entities. The
proponents of this amendment who say that no industry has ever received
some liability limitations are just wrong. One example of a federal
liability limitation is contained in the Price Anderson Act, which
places a $560 million cap on compensatory damages in suits against the
nuclear industry. The purpose of this cap is to create an incentive for
the development of nuclear energy.
Another example is the Federal Credit Union Act, which limits damages
for lost profits and pain and suffering for losses resulting in the
liquidation of federal credit unions. Other examples include the Black
Lung benefits program, the National Swine Flu Immunization program, the
National Vaccine program, and certain provisions of both the Federal
Employers Liability Act and the Jones Act. That is just mentioning a
few.
I wish that the liability provisions in the underlying bill mirrored
the liability provisions in my bill--which is modeled on those in the
freely-bargained for June 20 settlement. Without those liability
provisions which were gained through tough negotiations between 40
state attorney generals and the leading trial lawyers and agreed to by
the industry, the industry will not participate to the fullest extent
possible in any tobacco bill program.
So I must oppose both this amendment and the underlying bill because
I think that the bi-partisan group of 40 state attorneys general and
the leading trial lawyers in this country got it right the first time.
I urge my colleagues to reject this amendment and reject the Commerce
Committee bill.
What we should do is pass legislation that closely models the
settlement proposal brought to us last year by the 40 state attorney
generals and the leading plaintiffs' lawyers in this country.
Having said all that, let me just conclude with these thoughts: There
is no doubt in my mind the only way this is ever going to work without
10 years of litigation--and 10 million more kids unnecessarily put at
greater risk--and a decision by the courts that the bill that is
currently being argued on the floor is unconstitutional, is to get back
to as close to the attorneys general agreement as we can. Yes, we can
add some money to that agreement. It can be higher than the $368.5
billion, but it should be a reasonable amount that gets the companies
back on board.
There is no guarantee by anybody that the companies are going to come
back on board, but I think there is a pretty good guarantee they won't
come back on board under the financial and other requirements of this
particular bill, or without the incentive of having some reasonable
form of limited liability.
If we can't do these things in a fair and reasonable manner, then why
in the world should the tobacco companies come back and voluntarily
agree to pay what really involves hundreds of billions of dollars, and
without some protections for them with regard to future class action
suits?
The industry has agreed that individual suits can be brought and
brought with the aid of a document repository. With all the documents,
it seems to me it would be easier to bring those individual suits. It
would be easier to recover, and in my opinion, you don't need the
punitive damages, because you will have a right to compensatory damages
which is everything that you can possibly argue before a jury except
punitive damages.
I have to say, as a former trial lawyer, I never needed punitive
damages to get high verdicts in the cases I tried, and I don't think
these plaintiffs' lawyers that we know today who will handle the bulk
of the cases in the future will have any difficulties handling
compensatory damages and getting very adequate awards for their clients
from here on in. Unlike Jimmy McArdle, who had the world to fight as
the first litigant attorney in Prichard

[[Page S5269]]

v. Liggett & Myers in the early 1960s, attorneys today will have
everything going for them because of the tobacco settlement.
This law will work if we do this right. That will be a tremendous
change from what poor Jimmy McArdle had to go through in the early days
of Prichard v. Liggett & Myers. I remember that case. I was watching it
closely. I was hoping he would win. I felt there was little likelihood
he would win in Pennsylvania at that particular time because we didn't
know then what we know today about the tobacco companies, about this
industry and about what this industry has done to entice children to
use their products.
I just have to tell you, if we keep doing what we are doing here on
the floor, we will have millions more children exposed to a greater
risk than they should and be exposed to during the course of the new
litigation which could last for 10 years or so. Some of these children
will ultimately die prematurely because of this increased risk as this
litigation proceeds.
What is really unfortunate is that at the end of that litigation you
will find that if this bill passes--the managers' amendment in its
current form--the tobacco companies will likely prevail on a number of
important matters. Then, where are we?
That means we would have let the American people down by passing
legislation that will not work. And in the end, we would have done a
lot of unnecessary harm to millions of children, and we will only have
to start all over again, and we may not have a group of tobacco
companies willing to deal at that time as they have with the attorneys
general and plaintiffs' lawyers as we had under the June 20th proposal.
I yield the floor.
Mr. GREGG. It would be my intention to respond to a number of points
made by the Senator from Utah and the Senator from Massachusetts. I see
the Senators from Nebraska and Minnesota are here. I know they have
been waiting, so I will wait for my response.

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