Here’s my proposal: have the Feds buy up all the manufacturers of cigarettes, cigars, snuff, chewing tobacco, and all other tobacco products. Ditto for all importers of same. Ban all new entrants into those businesses. Have them all keep on doing what they’re doing, except for one thing: the Federalized manufacturers and importers would cut out all advertising, product placement in movies and TV, and so forth. (Allow retailers to continue to advertise as they do now.) Eventually discontinue brands that are losing money.
The Federal government would probably break even, or pretty close to it, as the businesses would continue to be profitable for awhile - especially in the absence of advertising expenses. But over the long run, tobacco use would surely decline, as the lack of advertising resulted in fewer new smokers, which would be a boon to the public health.
I know that, in the current political climate, this is a pipe dream (heh). But aside from that, whaddaya think?
The only reason smoking might decline is that if the gov’t took over the tobacco industry, quality would plummit, delivery would be sporadic, and prices would skyrocket.
Plus, the states might have something to say about this. Why is it a federal and not a state issue?
You are also assuming that the gov’t should determine whether or not people smoke. Most Americans would not agree, even though only about 25% or less are smokers.
The only reason smoking might decline is that if the gov’t took over the tobacco industry, quality would plummit, delivery would be sporadic, and prices would skyrocket.
Plus, the states might have something to say about this. Why is it a federal and not a state issue?
You are also assuming that the gov’t should determine whether or not people smoke. Most Americans would not agree, even though only about 25% or less are smokers.
Do we the people (through our duly elected government officials) then acquire the associated legal liability, or do we claim sovereign immunity and let the puffers take the short stick?
Could turn out to cost more then expected.
Would the then tobacco manufacturers renege (sp) on the lawsuit that brings money into the state coffers.
I think your premise creates as many questions as it solves.
I had sort of the same idea, but for airlines, sort of like Amtrak only for airlines, but I failed to work out all the details.
And I suspect the government would do about as good a job at running the tobacco industry or airline industry as it’s done with Amtrak. 30 years of not breaking even and billion dollar bailouts is hardly something to emulate.
RTF:
I’d also like to add: What problem are you trying to solve? Seriously, it’s not clear to me.
Yeah, let’s have the government take over all our pet hated industries to run them into the ground.
To reduce tobacco addiction, by ending tobacco advertising. The fairest and most effective way to do that is to buy up the industry, rather than by forcing them to operate in an environment that would lead to the tobacco companies’ being worth a lot less than they are today.
Companies advertise because it works. My thesis is that the absence of advertising would work in the other direction: that the absence of tobacco ads on billboards, in magazines, on NASCAR cars, etc., would result in tobacco products having a lower presence in young people’s awareness, hence they’d be less likely to try the stuff in the first place.
Philo - presumably the tobacco companies’ liability is built into their market value, and the Feds would assume existing liabilities as well as existing assets.
SenorBeef, Dewey: care to offer actual rebuttals?
FWIW, I’d be interested in a separate thread about it if anyone’s claiming that the government has run Amtrak into the ground.
I really don’t want my government to be in the business of knowingly preying upon people’s addictions and, y’know, killing them. Thanks but no thanks.
Why don’t you offer some evidence that the government is competent to run a consumer enterprise? Amtrak hasn’t broken even in thirty years. Why do you think it would be any different for tobacco companies?
You’ve also got a huge fifth amendment problem. You’ll have to compensate all the shareholders of those companies.
RJ Reynolds Tobacco has a $2.86 billion market cap, and that’s after recently hitting a 52-week price low.
Other companies are part of larger conglomorates, so it’s a little trickier. Phillip Morris, for example, is owned by Altria Group, with a $85.2 billion total market cap. There are lots of ways to split out the tobacco sector; let’s use net revenue (just because it’s the first thing I noted in their annual report). According to their most recent annual report, domestic and international tobacco sales represented 59.1% of net revenues; domestic sales alone accounted for 23.5% of net revenues. Based on domestic sales alone, the portion of their market cap attributable to domestic tobacco is $20 billion.
Now do the same equation for all the other tobacco companies and you’ll get the picture: the government would have to come up with a lot of scratch to compensate the shareholders.
Can’t they just “nationalize it”. Don’t “they” do this all the time? Kind of like the Kramer method of “writing things off”, from Seinfeld (you just "write them off).
No “They” can’t just nationalize an industry. That would be a blatant violation of the 5th Amendment to the Constitution. The government has no right to take private property for public use without just compensation. The government does have the right to force you to turn over your property–eminent domain–but it MUST compensate you for it.
Amtrak was formed from the pieces of an industry that was going under fast. There just might be a slight difference between this and a business that’s still a serious revenue-producer.
To call that a “huge fifth amendment problem” is a bit absurd. That would be appropriate language if such a takeover was of dubious constitutionality due to the Fifth. But all you’re doing is invoking the Takings Clause, which is not a problem; it’s just the cost of doing this takeover; that’s all.
So the two biggest (or at least the two best known) tobacco companies are worth about $25B between them. Let’s ballpark the entire industry at between $50B and $100B, then.
The latter is about 29% of Bush’s recently-passed tax cut. We could afford that, even if we weren’t getting any of it back. And for some years into the future, there would be a profitable revenue stream, even if revenues decreased due to whatever combination of (a) success in reducing demand for tobacco products, and (b) bad management. My expectation is that eventually decreased demand would result in revenue being outpaced by expenses, even with good management.
But suppose the Feds run the tobacco business into the ground. What’s the worst that can happen?
The answer is this: cigarettes get smuggled in from other countries. That’s it.
Actually, there probably wouldn’t be much of that, since the Feds would be running the importers as well, and that’s an easier business to simply find good managers and let them run it. So good-quality foreign-made cigarettes, etc. would be available legally in the USA; price differentials would be the only reason to smuggle.
And if smuggling happens, again, so what? The smugglers can’t advertise, so the demand reduction resulting from the absence of advertising still happens. Eventually the Feds stop producing domestic cigarettes, and only import smokes and chaw from abroad. And for that $100B investment, we substantially reduce a much bigger health problem. Works for me.
Me neither. Alas, we’re too late.
Between the issued bonds, potentially to-be-issued bonds and the revenue streams that support them (or the states’ coffers (hah!) in cases where there hasn’t been issuance), the several states now have a direct stake in the credit quality of tobacco companies.
Oops.
Wow. Was my sarcasm that hard to see? I’ll try to be more ridiculous and add more smiley faces next time.:):)
IIRC, manny, a number of states have sold their rights to the income stream from the settlement to private investors in exchange for a lump sum up front. Those states no longer have a stake in the well-being of the tobacco industry.
But I’m sure they’re a minority of the states, and the rest of them are in exactly the position you describe.
I think you’re mistaken on a whole bunch of grounds. I don’t think the government can afford to pay for competent management. I don’t think the government is particularly good at making hard economic decisions (as evidenced by Amtrak – if they had any sense at all, they’d drop transcontinential passenger rail and focus exclusively on commuter rail systems)
But more than anything, I think you’re mistaken when you say that tobacco adverstising has any kind of serious effect on people choosing to smoke. It might affect what brand they elect to purchase, but it doesn’t affect their decision to light up. I mean, really – after decades of photos of blackened lungs and asinine Truth commercials, do you really think advertising has any appreciable impact on making the decision to smoke?
That was an actual rebuttal. Perhaps too subtle.
Using your logic, one can nationalize and socialize any industry under the guise that the industry [insert pet issue here.]
We should nationalize lumberjacking because those poor trees need to be saved, etc.
Forcing privately owned entities into government ownership is so ridiculous antithetical to the way the system works here that I’m surprised you seem to think it’s a reasonable and modest proposal. To do so for the specific purpose of running the industry into the ground is even worse.
People have worked their entire lives building up these businesses, investing from them, etc. Not only is the idea of the government nationalizing any industry repugnant, but the idea that you’d throw away all that hard work and investment because you happen to dislike smoking as a pet issue is absurd.
And, er… am I an oddball for saying that this idea is just absurd flat out? You all seem to be debating the technical issues involved - is no one else disgusted that someone wants to have the government forcibly take over businesses because someone has a pet issue against tobacco - something that’s entirely voluntary?