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OCR Page 1 of 55Tobacco-
Hatch bill
THE WHITE HOUSE
WASHINGTON
June 26, 1998
MEMORANDUM FOR THE CHIEF OF STAFF
FROM:
Bruce Reed
Elena Kagan
SUBJECT:
Analysis of Hatch-Feinstein Tobacco Bill
The Hatch-Feinstein bill is a somewhat strengthened version of the original (June 20th)
agreement between the state attorneys general and the tobacco companies. As compared with the
June 20th agreement, the bill includes: (1) slightly higher base payments; (2) stronger lookback
surcharges; (3) provisions to protect tobacco farmers (essentially adopting Lugar); and (4) a
spending plan that largely mirrors the one that we and Sen. McCain devised. Though still
considerably smaller than the McCain bill, the Hatch bill would lead to a fairly significant price
increase -- about 69 cents per pack from annual payments and 25 cents per pack from lookbacks -
- which would produce a significant (approximately 40%) decline in youth smoking.
One serious shortcoming of the Hatch bill is its FDA provisions, which fail to provide the
FDA with all the authority it is claiming under current law (a claim, of course, now in litigation).
The bill's lookback provisions, though much strengthened from the settlement, are also subject to
criticism, principally on the ground that they do not include a company-specific component and
are abatable on a showing of good conduct. Less significantly, the bill contains a limited
antitrust exemption and leaves all enforcement of its environmental smoke standard (which is
quite strong) to the states. Finally -- but most important from the standpoint of trying to amass
votes - the bill includes all the liability protections of the settlement to which the public health
community objected: a $5.5 billion annual cap on liability combined with a ban on punitive
damages and class actions.
Although few Democrats believe that the Hatch bill could pass the Senate as written, a
fair number remain open to the possibility of negotiating with Hatch to try to produce a
strengthened bill. As usual, the major hurdle in any negotiation of this kind would be the issue
of liability protection. This memo, after providing a more detailed analysis of the Hatch bill,
discusses briefly whether -- and, if so, how - we should engage in such discussions.
I. Summary of Hatch-Feinstein
A. Overall Cost and Price Per Pack
The charts Hatch distributed earlier this week dramatically exaggerated the cost of the
McCain bill - and to a lesser extent exaggerated the cost of his own. Hatch's analysis erred in
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