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02/11/98
11:06
202 347 9881
BLOOMBERG/CONUS
005
Clinton Team Says $368.5 Bln Tobacco Tab Misleading (Update2)
Washington, Feb. 10 (Bloomberg) -- The $368.5 billion tab of
the proposed settlement between the tobacco industry and its foes
would deal less of a financial blow to companies than the amount
suggests, U.S. President Bill Clinton's annual economic report to
Congress said.
`Although the figure of the $368.5 billion is often cited
as the industry's total payment, this number is misleading in
several respects, says the report, written by Clinton's Council
of Economic Advisers, led by Chairman Janet Yellen.
The report said real value is understated because the
payment will come over 25 years, giving the industry time to earn
interest on later payments and defray the cost of earlier
payments. The cost will also decline as the volume of cigarettes
sold declines, a result of the price increase the settlement
would produce.
The report concludes that the actual cost to the industry is
closer to $260 billion than $368.5 billion over 25 years.
Release of the report comes as the Republican-led Congress
is considering national tobacco legislation designed to reduce
teenage smoking. The Clinton administration said it would
prefer that Congress not pass legislation giving the tobacco
companies protection from class-action lawsuits, while leaving
the door open to some form of protection.
Vice President Al Gore will attend a press conference
tomorrow to praise a Democratic tobacco bill that would deny the
industry legal protections though he's expected to stop short of
endorsing the measure, aides said. Caps on liability for the
cigarette companies is still the biggest stumbling block to
legislation based on the June 20 settlement.
Clinton favors increasing the per-pack price of
cigarettes as one way to discourage underage smoking. He wants to
beef up the Food and Drug Administration's ability to regulate
tobacco and would like to restrict marketing to underage
smokers. So far he's left the ball in Congress's court.
Tax Increase Opposed
Senate Majority Leader Trent Lott said yesterday he could
support boosting the price of cigarettes, provided it's done
without a tax increase. ``A tax is. a tax is a tax is a tax where
I came from, and I never met one that I liked, Lott, a
Mississippi Republican, said without saying how to do it.
Others have suggested an annual payment by the industry or a
licensing fee, both of which would have the same effect as a tax.
A Federal Trade Commission analysis of the proposed
settlement raised additional, antitrust concerns, the White
House Council of Economic Advisers report said. Under the
proposed settlement the tobacco industry is given a broad
antitrust exemption to set higher prices together to curb youth
smoking.
In general, antitrust laws prohibit collusion on prices.
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"ocrText": "02/11/98\n11:06\n202 347 9881\nBLOOMBERG/CONUS\n005\nClinton Team Says $368.5 Bln Tobacco Tab Misleading (Update2)\nWashington, Feb. 10 (Bloomberg) -- The $368.5 billion tab of\nthe proposed settlement between the tobacco industry and its foes\nwould deal less of a financial blow to companies than the amount\nsuggests, U.S. President Bill Clinton's annual economic report to\nCongress said.\n`Although the figure of the $368.5 billion is often cited\nas the industry's total payment, this number is misleading in\nseveral respects, says the report, written by Clinton's Council\nof Economic Advisers, led by Chairman Janet Yellen.\nThe report said real value is understated because the\npayment will come over 25 years, giving the industry time to earn\ninterest on later payments and defray the cost of earlier\npayments. The cost will also decline as the volume of cigarettes\nsold declines, a result of the price increase the settlement\nwould produce.\nThe report concludes that the actual cost to the industry is\ncloser to $260 billion than $368.5 billion over 25 years.\nRelease of the report comes as the Republican-led Congress\nis considering national tobacco legislation designed to reduce\nteenage smoking. The Clinton administration said it would\nprefer that Congress not pass legislation giving the tobacco\ncompanies protection from class-action lawsuits, while leaving\nthe door open to some form of protection.\nVice President Al Gore will attend a press conference\ntomorrow to praise a Democratic tobacco bill that would deny the\nindustry legal protections though he's expected to stop short of\nendorsing the measure, aides said. Caps on liability for the\ncigarette companies is still the biggest stumbling block to\nlegislation based on the June 20 settlement.\nClinton favors increasing the per-pack price of\ncigarettes as one way to discourage underage smoking. He wants to\nbeef up the Food and Drug Administration's ability to regulate\ntobacco and would like to restrict marketing to underage\nsmokers. So far he's left the ball in Congress's court.\nTax Increase Opposed\nSenate Majority Leader Trent Lott said yesterday he could\nsupport boosting the price of cigarettes, provided it's done\nwithout a tax increase. ``A tax is. a tax is a tax is a tax where\nI came from, and I never met one that I liked, Lott, a\nMississippi Republican, said without saying how to do it.\nOthers have suggested an annual payment by the industry or a\nlicensing fee, both of which would have the same effect as a tax.\nA Federal Trade Commission analysis of the proposed\nsettlement raised additional, antitrust concerns, the White\nHouse Council of Economic Advisers report said. Under the\nproposed settlement the tobacco industry is given a broad\nantitrust exemption to set higher prices together to curb youth\nsmoking.\nIn general, antitrust laws prohibit collusion on prices."
}