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Bierbauer Charles Bierbauer, CNN's senior Washington correspondent, reports on events in Washington and around the globe. Noted for his expertise in presidential politics, Bierbauer has spent more years at the White House than any U.S. president except Franklin D. Roosevelt.

The Tobacco Deal: Smoke And Mirrors?

By Charles Bierbauer/CNN

WASHINGTON (April 10) -- Let's take a smoke break here, light up a couple questions and see if we can filter reality through the haze.

Can the tobacco companies back out of last year's $368 billion tobacco settlement?

Sure, they can. But dare they? In fact, RJR Nabisco CEO Steven Goldstone said he's still committed to the deal worked out by the tobacco industry, 40 state attorneys general and a couple packs of lawyers. Not that anyone should ever have thought that was the final settlement.

Why did the process break down?

"My answer is one word -- money," Goldstone said in announcing his withdrawal from the process.

It's the $516 billion anti-tobacco plan passed by the Senate Commerce Committee that frightens the cigarette manufacturers and has them pleading it will drive them to bankruptcy.

The tobacco companies know that prospect alone won't win them much sympathy. That's why they draw the image of lost jobs and failing farmers. Jobs in the cigarette factories would be lost if smoking in the U.S. actually declines and the manufacturers don't make up for it marketing cigarettes overseas. Tobacco farmers know there's not a cash crop they can grow that's as lucrative. Corn and pumpkins don't match tobacco.

But that's not why the tobacco companies were fuming this week. Congress not only added considerably to the cost, but stripped away the protection from future class action lawsuits the tobacco companies thought they were getting.

Tobacco would still have been open to individual suits, though its past record of beating those suits suggested future success. Deep pockets still have an advantage in court.

Back away from a package deal and the odds may shift. More importantly, the exposure and publicity given tobacco industry documents spelling out market targeting tactics and an awareness of nicotine's addictive nature will undercut tobacco's arguments in future suits. The Supreme Court this week turned away a tobacco appeal to keep 39,000 documents out of the hands of Minnesota officials who are separately suing the tobacco industry for $1.8 billion.

The multi-billion-dollar settlements reached by tobacco and the states of Florida, Alabama and Texas will also proceed. States which participated in the overall settlement may now pursue their own individual deals with tobacco.

Maryland's attorney general Joe Curran was quick to announce his state was "moving ahead with our law case."

RJR Nabisco's Goldstone vowed tobacco was walking away from any further negotiations. What negotiations? Senate Commerce Committee Chairman John McCain, the Arizona Republican, refused to meet with tobacco officials while he prepared his committee's bill. So is the tobacco industry crying wolf, or...

Did Congress overreach?

Wall Street tobacco analysts and Treasury Department officials told the Senate Commerce Committee it could raise cigarette prices $1.10 a pack over five years and pass a bill totalling more than $500 billion without sending even the weakest -- RJR Nabisco and Brown & Williamson -- into bankruptcy.

"If they go into bankruptcy then there would be no money to fund anti-smoking programs, and Americans will be smoking foreign cigarettes," Commerce Chairman John McCain explains in justifying the size of the bill.

It's success depends on how broad the middle ground is. McCain says there are Republicans on the right and Democrats on the left who prefer that there is no tobacco settlement. Their reasons are the partisan fodder for this year's congressional elections.

"The bill that McCain has requires my signature, and there is no chance in the world it will get my signature," RJR's Goldstone vowed.

That's true to the extent that the tobacco companies would have to voluntarily end the advertising that entices American youth to start smoking. Without tobacco's agreement, the ad ban likely would not withstand a constitutional challenge on First Amendment rights.

But Congress can go right ahead and tax cigarettes to raise the revenues tobacco would otherwise pay through the settlement. And it can spend it on anti-smoking programs, on health care, on solidifying Medicare, on reducing the federal debt, even a whole bunch of things President Clinton packed into his budget anticipating the tobacco settlement money would be there, or...

Is the White House blowing smoke?

President Clinton may have felt his own pain, as much as that of the Kentucky tobacco farmers he encountered the day after the cigarette companies balked.

"We don't have to wreck the fabric of life in your community," Clinton told folks in Carrollton, adding he would "do my dead level best to get legislation passed this year."

The president's effort is challenged from most quarters.

"The comprehensive settlement failed because the administration, while publicly praising the concept, privately dismantled it piece by piece," RJR's Goldstone charged.

White House officials had, indeed, brokered last year's settlement between the attorneys general and the tobacco companies. Then the president's budget proposal for 1999 clearly called for more tobacco money to pay for his projects than was in the deal.

On Capitol Hill, Clinton's effort is also disparaged. The administration did not actually sign on to last year's deal. There has been no subsequent administration proposal, just broad guidelines. The President has endorsed three different and varying congressional plans.

Right now, there is only the McCain plan, and it's still moving forward.

House Commerce Chairman Thomas Bliley, a Republican from Virginia tobacco country who's felt plenty of industry pressure, now has those tobacco documents in hand from the Minnesota trial. Bliley intends to release them and write a "tough bipartisan plan to reduce teen smoking."

The smoke has far from settled on the tobacco front.

In Other News

Friday April 10, 1998

Clinton Praises Northern Ireland Peace Pact
Starr To Investigate Cash Payments To Hale
Judge Extends Deadline For Starr To Justify Bookstore Subpoenas
White House Staffer Arrested

Polls:
Clinton Should Be Ashamed Of His Personal Conduct
Americans Skeptical About Social Security Crisis
Tax Code Too Complex





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