The Fall of Big Tobacco
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  • Part Two: Small-Town Blow Exposed Cigarette Industry's Soft Spot
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    Tobacco executives at hearing
    Tobacco executives swear to tell the truth at a 1994 congressional hearing. They testified that smoking is not addictive and, according to an industry pollster, "saw themselves portrayed as bandits."
    (File/By Ray Lustig – The Washington Post)
    First of three articles

    By Ceci Connolly and John Mintz
    Washington Post Staff Writers
    Sunday, March 29, 1998; Page A1

    While cadging a ride to California on the U.S. Tobacco corporate jet one day recently, Newt Gingrich delivered a most unwelcome message to his hosts: Their long ride with the GOP was over. No longer would the GOP automatically represent the industry's interests as it presses its fight to win a long-term truce in America's tobacco wars.

    "You guys have screwed us," the House speaker lectured the group of tobacco lobbyists aboard the plane, according to industry officials. "The Republican Party has been saddled with tobacco."

    This time, said Gingrich, he wouldn't allow President Clinton to demagogue Republicans on the tobacco issue in the same way he had outmaneuvered GOP leaders on the budget in 1995.

    "I will not let Bill Clinton get to the left of me on this," he said.

    And as for getting Congress to give them a break on the lawsuits that threaten to strangle the industry, Gingrich added: "We're not going to support anything the industry's for."

    In the last five years alone, the industry has contributed $15 million to the Republicans, as well as countless rides like this one. But the chastened lobbyists had to stifle their outrage at Gingrich's ingratitude. They knew the speaker's outburst reflected reality. It was merely the latest sign of how far they've fallen.

    The industry's friends and foes alike agree that Big Tobacco is in big trouble. The once-mighty makers of cigarettes have seen a vast reservoir of political support evaporate at the same time their opponents have found new weapons with which to attack them.

    For the industry – essentially the five companies that make most of the country's tobacco products – this new reality has created an urgent need to make some kind of a deal with the government, giving away money and future customers in return for some legal protection.

    For the industry's opponents – from President Clinton to the American Cancer Society – it means a historic opportunity to reform the nation's smoking habits, especially among teenagers. But for the hard-core enemies – those who believe Big Tobacco is never to be trusted – it means a chance to cripple a business that once seemed untouchable.

    Those three camps are now focusing on Capitol Hill, where the future of tobacco could well be decided over the next few months – and key decisions may begin happening as soon as this week.

    The outcome is anything but certain, promising only one of the more byzantine Washington battles in recent history. Congress has the final say, and its members may not have the stomach in an election year to cast votes curtailing a national vice, a product used by 50 million people. Tobacco's economic impact is apparent in the approximately $15 billion in cigarette taxes paid annually and the jobs it generates – 662,400 in 1994, according to the most recent industry figures. On the other side of the ledger, tobacco remains the leading cause of preventable death in the United States, claiming more than 400,000 lives each year and almost $100 billion in direct and indirect medical costs.

    Lawmakers must settle thorny constitutional, public health and tax issues that have divided them before. Then there are the political questions: How sincere are the companies about changing their aggressive marketing? Are they desperate enough to make more concessions? Will additional revelations of deceit by the companies kill chances for a deal? Will Democrats destroy prospects for compromise with demands to punish the industry? Will Republicans rescue tobacco in the last reel?

    And no one is quite sure whether the White House will ultimately invest the political capital necessary to make a deal happen, or just batter the Republicans for letting it wither.

    "We still don't have the cover of either the White House or the Republican leadership," said one company executive, lamenting the industry's weakened political position.

    More clear is how all the parties arrived at this moment of possibility. While the cigarette business long enjoyed a reputation of invincibility in courtrooms, state legislatures and Congress, in truth its power diminished steadily during the 1990s because of a dramatic shift in public opinion. Now a huge majority of Americans – polls place it between 70 and 80 percent – mistrust the cigarette companies, viewing them as greedy executives profiting from kids.

    This three-part series looks at how that change in public perception has led to the fall of Big Tobacco: how an insular industry decided to go from stonewalling to conciliation; how a collection of clever Mississippi lawyers pioneered a new kind of lawsuit that for the first time made cigarette makers contemplate bankruptcy; and how an unlikely trio of Clinton administration officials exploited the companies' new weakness to persuade the president to regulate tobacco as a drug. The stories are based on interviews with industry executives, government officials and lawyers directly involved in the events, most of whom were willing to speak only if they weren't identified.

    The story they tell is how those twin fears – multibillion-dollar court judgments and a federal crackdown that tobacco executives worried could lead to an outright cigarette ban – prompted the industry to make a deal.

    "We were naked to the world," recalled one cigarette executive.

    Last spring, the industry reached a settlement with state attorneys general and trial lawyers that contained substantial concessions. Now Big Tobacco is fighting tall odds to get Congress to embrace the settlement. The essence of the deal is a trade-off: Cigarette companies pay $368.5 billion over 25 years while strictly curtailing their marketing and advertising and, in exchange, are shielded from major lawsuits.

    The reason to make a deal, its supporters say, is because even in their weakened state, the tobacco executives still have leverage. All sides agree that the only effective plan for cutting youth smoking is both to raise the price of a pack of cigarettes and to restrict ads. The industry has the constitutional right to advertise, however, and says it will stop only if it gets legal protection. If Congress refuses, the companies say they'll be forced to slug it out in court – and continue their aggressive marketing.

    Ironically, it could come to that, say those who have followed the saga, because the tobacco executives' misjudgments may have finally caught up with them.

    "I think it's too late," predicted one executive closely involved in last summer's settlement.

    There's no doubt that the industry was unprepared for the fact that it suddenly had lost clout on Capitol Hill. Even the companies' closest political allies over the last century, the dozens of tobacco belt legislators from both parties, now won't help because the deal doesn't protect the farmers who grow tobacco. But most surprising, and most damaging, may be the late-blooming critics in the upper reaches of the GOP.

    At a Republican congressional leaders' meeting on Jan. 26 in the Members Room of the Library of Congress, Gingrich shared his new-found contempt of tobacco with his lieutenants. The Georgian said the party needn't feel bullied into granting the industry's pleas for legal liability limits, attendees recalled.

    Then, shooting a grin at his deputy, Majority Leader Dick Armey (Tex.), he declared: "We can just tax the hell out of them."

    It was a statement that would have been inconceivable even a year ago.

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