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The View From The Ground
12/09/98
It is time once again to take off the blinders of the anointed and to put on the spectacles of the real world. Let us again focus on an important issue, not as presented by the fantasies of the compassionate and righteous, but rather by the sober 20/20 vision of the realist. It is time to enter the world of trade-offs.
Today's subject is the tobacco settlement. Let us start by restating a painfully obvious truth. I do not mean to insult anyone's intelligence, but the reality is that a progressive mindset oftentimes requires the willful ignoring of basic truths. The truth is that there is no such thing as free money. Especially government money. When a government, at any level, receives money, that money must come from its citizens. Whether it is a visible tax, a hidden tax, a lottery, a user fee, or a "settlement", every dollar that flows into government coffers must first be pulled out of a citizen's pocket. An important corollary truth is that the person whose pocket this dollar comes out of is always the individual worker and consumer. Corporate taxes, for example, are not paid by companies, they are collected by companies but paid for by the consumer in the form of higher prices. The buck, literally, stops with the individual citizen. Therefore, if we wish to understand the impact and likely consequences of any policy that involves money and the government, we must first trace the money flow.
The tobacco settlements have resulted in simply scads of money entering state coffers. If one listens to the forces of goodness and light, this money is coming out of the hide of the nefarious tobacco companies to pay for their transgressions. Well, the degree to which this has come out of the tobacco executives yacht funds is already being made clear. Cigarette prices have jumped 40 - 50 cents a pack as a direct result of the settlement. The costs, duh!, are going to be born by smokers. I will repeat until someone appears to hear it: There is no such thing as cigarette taxes. There are only smokers' taxes. And the demographics of smokers dictate that any smokers' tax is in reality a poor smokers' tax.
The bottom line on the settlement is that it represents a huge hidden tax increase on poor smokers. The additional $350 dollars a year paid by the two pack a day smoker is going right through the tobacco company to the government. The genius of it is that, for government leeches anyway, it has all the benefits of a more traditional tax hike without any of the election time consequences. The governemnt gets billions, the tobacco companies get all the blame, most Americans won't feel the sting, and many of those that will are essentially politically powerless. It is the modern, compassionate, equivalent of a school principal sending the schoolyard bully out to steal the lunch money from the ugliest, weakest and least popular kids in the class.
So, understanding the bottom line of the thing, what are the trade-offs likely to be? The most immediately evident is that the average smoker is going to have $350 or so per year less money to spend. Instead, that money will be spent by middle class bureaucrats and upper middle class public health mavens. The judgement and priorities of 40 million or so individual smokers will be superceded by that of a handful of politicans and public policy types. This may seem trivial on the surface, but it represents literally billions of dollars worth of power yanked out of the hands of the individual citizen. This is never a good thing, as it warps reality and creates a dissonance between the people and their government.
Second, guaranteed, is that an increase of this size in the difference between the cost of cigarettes and their actual value will, without any doubt, fuel a black market boom in cigarettes. Not only is this logical, but recent experience in Canada shows just how easily it can happen. As part of this we will see an increase in theft and hijackings, as the difference between what smokes cost and what they are worth will tip the criminal element's cost-benefit equation heavily to the benefit side. One more side effect will be to entice millions of otherwise law abiding Americans to shop on the illegal side of town. As the experiences of the War on Drugs and prohibition have shown, creating a substantial black market attracts the very worst elements.
Third, People will lose jobs in the tobacco industry. One of the aspects of the settlement is that it is forcing an increase in American cigarette prices, but not for foreign-brand cigarettes. Expect a boomlet in the sale of foreign brands with a corresponding drop in domestic sales.
Fourth, some people will stop smoking. They will NOT do so as a result of government programs paid for with the settlement money. They will do so because cigarettes have been priced out of their range. Some applaud this. Indeed,for some it is the entire point of the exercise. Call me old fashioned, but I see being browbeaten into changing perfectly legal behavior by self-anointed government saviors as a bad thing. It degrades democracy and weakens social bonds as we succed in pitting yet one more group against another. We are treating smokers like incompetent children.
Fifth, the government has gained a strong incentive to maintain the existence and profitability of the domestic tobbacco industry. It is now a major cash cow. This directly contradicts the above mentioned desire to force smokers to quit, but that simply shows that the government side is not a monolithic group. In reality, the Health Fascists and Government Leeches maintain distinctly differing sets of incentives.
Sixth, and for now the last, it opens the flood gates to a new and dangerous form of taxation. The lawyers and governments are already lining up the gun industry and the brewers and distillers for the same treatment. "Free" tax money is catnip to greedy and imperious tinpot dictators. Don't expect them to stop until we come to our collective senses and make them stop.