Tobacco Bill: Why Government Needs to Stay Out of Business

Here is a flashback to a post I wrote in April 2008.

The final bill passed Thursday (it is not materially different that the previous bill above) and cheers were heard from many in the Tobacco industry. That ought to have been clue #1 that this was not as advertised by those in government.

It essentially creates a government sponsored Tobacco Cartel in the US that cannot be broken into by outside players. Personally, I do not care either way. I am no longer an Altria (MO) shareholder, preferring to hold my Phillip Morris International (PM) share received in the spin off from Altria.

The government can't kill Tobacco as they rely on it too much for tax revenues. As a matter of fact, states who are receiving master settlement money have already mortgaged their future selling bonds based on that revenue. The final bill mandates the FDA cannot remove nicotine from cigarettes, so they will still be just as addicting. The bill "reduces advertising" it claims. So what? They hardly advertise now? But, hey, at least the warning labels will get bigger because we know people pay attention to those... yeah...

This bill will only serve to strengthen Big Tobacco in the US and considerable expense to US tax payers and is yet another example of why government needs to stay out of business.

Disclosure: Long PM

Comments

[wassercom:]

There appears to be no Opposition Party in this country, as only a handful of Republicans voted against this monstrosity.

Jun 15 08:24 AM

[jackooo:]

How will we save "our children"? The government will save "our children"! Where are the parents? You know! The ones that get the write off at tax time on the kids.
This is parent responsibility not the government's responsibility.

Jun 15 03:12 PM

[optionsgirl:]

The govt is burning the cigarette at both ends. They are taxing the smokers unmercifully while relying on those tax revenues. When MO came out in support of this bill, it seemed clear they'd benefit. Long MO and still liking it!

Jun 15 03:23 PM

[stink726:]

Nice article and I enjoy reading all of your articles. And I agree there should be less gov't intrusion into the business world.

IMO, the acceleration of gov't involvement with big and small businesses is very worrisome. Yes, business needs some regulation and guidelines. But the fed gov't doesn't need to run and/or control businesses.

Jun 15 03:23 PM

[User 422955:]

Government is substantially involved in business and has been at least since FDR "saved capitalism." Business is substantially involved in government through lobbying, campaign contributions, and appointments of business people, or their friends and allies, to policy making executive branch positions. This reciprocal involvement is clearly visible from the jobs taken by retired and defeated politicians of both parties.

I agree that it is a bad bill. I would prefer if it hadn't been passed, much less introduced. Todd and the other commentators have it backwards. This is an example of business (MO) being involved in governing.

Jun 15 09:36 PM

[scribe:]

No one in the mainstream media has thought to ask the question: Why now? Waxman has been pushing for FDA regulation for a very long time, so why would PM/Altria go for this NOW?

I believe it's because some very real alternatives to traditional, pre-made tobacco cig's are now available: Smokeless tobacco tabs and e-cigs. I discovered the Ariva tabs back in early March - story in the WSJ on the new smokeless products. Decided to try them, with no real plan for quitting, but it's been 96 days smoke-free. And, if I fall off the wagon, I'll go to the mall and buy an e-cig.

AND, if not, then I still have all the "roll your own" supplies - boxes of pre-made paper tubes with filters, a tabletop machine with a slide injector, and big bags of tobacco are still relatively cheap - about $25 to make a carton.

A Marlboro is nothing more than a particular kind of tobacco. A "light" - a certain kind of filter. And home mades are much cleaner - no additives or fillers, just pure tobacco. Taste better, too.

So, no wonder, PM feels threatened. They will use the FDA to try to force the tabs and e cigs off the market pending "testing." The FDA has already blocked the importation of some e cigs from China. Do a Google search, e cigs are catching on like mad.

Perfect example of human ingenuity and the free market coming up with viable solutions.

The states and the Federal government have been killing off their tobacco cash cow with the combo of excessive taxes and draconian smoking bans.

Considering the potential for greatly reduced harm from the new products, it will be interesting to see how they try to justify keeping them off the market "for your own good." :)

Jun 15 10:00 PM

[User 435353:]

MO IS PLAYING MONOPOLY-MO supported the legislation and probably lobbied for it.
I'm putting my money on the fact that MO is using this tax to buy out Reynolds. MO/Altria owns Kraft, Nabisco, etc. and can allocate the tax expense through the food industry to keep their tobacco prices competative. In 1997, almost half of MO's profits were not from tobacco sales. So watch for inflation in food prices.
Reynolds, of Camel Joes does not have a market outside of tobacco. They're going to get killed with this tax if they can't keep their prices down. So Reynold's profits will probably suffer.
I'm expecting MO to make an aggressive bid for Reynolds in the near future. Obama/Congress is getting played like bandits.

Jun 22 11:38 PM