One Simple Stimulus for Both the Economy and Health

When President-elect Barack Obama takes office, he will be preoccupied with a broad range of enormous and complex challenges, including a downward spiraling economy and two wars. But some problems that might seem lower on the priority list also present relatively manageable opportunities to make meaningful progress in ways that would greatly benefit the country. One such target for saving money and improving lives is dealing with tobacco—the nation’s number one cause of preventable death and one of its greatest contributors to high health care expenditures. 

According to one of the new reports that the CDC released two Fridays ago, at least 443,000 people in the U.S. died prematurely each year from 2000 to 2004 as a result of smoking and/or exposure to secondhand smoke. It may appear that fewer people smoke nowadays than even just a decade ago, but this is an increase, not a decrease, from the number of annual tobacco-related deaths between 1997 and 2001, which was 438,000. By any measure, this is a considerable number of deaths—more than 10 percent of the 4.2 million premature tobacco-related deaths worldwide reported by the World Health Organization in 2000.

Health and financial costs resulting from smoking have also increased over the same period of time from $167 billion to $193 billion. This new total includes $96 billion in public and private health care expenditures caused by smoking and $97 billion in productivity losses. (And this latter figure only includes costs from productive work lives shortened by smoking-caused death; it does not include costs from smoking-caused disability during work lives, smoking-caused sick days, or smoking-caused productivity declines while on the job.)

There are other non-health care costs from tobacco use as well. The Campaign for Tobacco-Free Kids (TFK) estimates that residential and commercial property losses from smoking-caused fires add up to $400 million annually, while tobacco-related commercial cleaning and maintenance costs $4 billion. The total tax burden from smoking-caused government spending amounts to $70.7 billion each year.

Despite these staggering figures, the federal government is doing little to fight to reduce tobacco use. Congress has yet to enact legislation granting the Food and Drug Administration (FDA) authority over tobacco products, though last July, the U.S. House of Representatives voted 326 to 102 to approve this legislation and it currently has 60 cosponsors in the Senate. This legislation would:

• Crack down on tobacco marketing and sales to minors
• Prohibit use of terms like “light,” “mild,” and “low-tar” that mislead consumers into believing that certain cigarettes are safer or healthier
• Ban fruit- or candy-flavored cigarettes (Take a look at the advertisements for Winter MochaMint, Margarita Mixer, Kauai Kolada, Twista Lime, Midnight Berry and more)
• Require tobacco companies to disclose the ingredients of and health effects resulting from their products
• Require more prominent and more effective health warning labels on products
• Grant the FDA authority to require removal or reduction in certain harmful ingredients

For more details, take a look at TFK’s special report on “What FDA Legislation Would Do.”

The fight against tobacco has been a particularly tough one because the tobacco industry’s high level of political influence. According to the 2007 Annual Report jointly issued by the Tobacco-Free Kids Action Fund and Common Cause, the tobacco industry contributed more than $3.8 million during the 2005-2006 election cycle alone (down from the $9.4 million during the 2001-2002 election cycle) and expended over $20 million in lobbying Congress in 2005.

There are three main arguments set forth by the tobacco lobby. The first concerns smokers’ rights. The tobacco lobby argues against smoking bans and cigarette taxes by citing the consumer’s right to property and freedom to choose. Many feel that the “Anti’s” are oppressing their freedom of choice and equality. The second concerns the economic effect of smoking restrictions. Restaurant and bar associations, casinos, and tobacco producers have opposed smoking bans citing supposed negative economic impact on local businesses. Third, the tobacco industry often denies that smoking is harmful to one’s health and argues that the new line of “light,” “mild,” and “low-tar” cigarettes are safe alternatives to quitting. Smoker's Club, Inc., lists some other interesting arguments on their website.

But here are the facts—presented by organizations such as the U.S. Centers for Disease Control and Prevention (CDC), the Office of the Surgeon General, and the World Health Organization (WHO). Secondhand smoke kills, smoking bans have not had negative economic effects on businesses, and smoking has serious health consequences—no matter how you look at it. (Besides, isn’t it self-contradictory to promote “light,” “mild,” and “low-tar” cigarettes as safer options while insisting that smoking isn’t harmful to one’s health?)

President-elect Barack Obama and Senate Majority Leader Harry Reid are among the 60 cosponsors of the legislation that would grant the FDA authority over tobacco products. Enacting this legislation would present an opportunity to significantly improve the nation’s health and cut its financial expenditures, bringing us a step closer to restoring some of the billions lost.

The Obama administration could also explore several other potential policy changes to engage in the fight against tobacco. Domestically, it could increase the federal tobacco tax and use this revenue to fund national public education and smoking cessation programs. Internationally, it should stop holding out on the ratification of yet another treaty—the Framework Convention on Tobacco Control (FCTC).

The Obama administration can save both lives and money in large numbers if it keeps tobacco in its bull's eye.

Comments

[William Song]

While I agree that something needs to be done about cigarettes, there is simply no viable way that America can as a whole kick the habit due to the economical effect cigarettes have.
It is an obvious fact that cigarettes are harmful and therefore kill many people who are in the ‘prime’ of their lives. This is a hit to productivity. However, what the figure does not take into account is the possible increase in productivity from the people who replace said people who have cigarette related illnesses. While this is my only argument that is not supported by numbers it makes logical sense. Cigarette related illnesses do not occur overnight. They occur due to prolonged usage of a harmful substance. For argument sake let’s suppose that the average person who falls ill to cigarettes lies within the ages of 35-60. If they started working right out of college (age 22) that means those people have already worked 13-38 years. These people are most likely at the height of their productivity and therefore will most likely begin to suffer productivity decrease shortly afterwards. So the “$97 billion in productivity losses” can be seen as an inflated figure. The figure also does not include the fact that new people replace those who have gone. New people bring in new ideas and if young they still have increasing yearly productivity versus decreasing yearly productivity. Now if those people who had fallen to cigarette related illnesses had not fallen ill, the new people would not have been given the opportunity they now have. While there are losses associated with losing working people to cigarettes the figure should not be nearly as large as 97 billion if taken into account the additional factors.

“Health and financial costs resulting from smoking have also increased over the same period of time from $167 billion to $193 billion.”
A large amount of these costs are paid for by insurance companies. Insurance companies are a huge part of the American economy. If we cut out cigarettes from these insurance companies they might lower premiums. With lower premiums these insurance companies would have less capital to invest thus causing something similar to the credit crunch we have seen at AIG. Albeit the results would be far more manageable because AIG’s crunch was due to sudden and massive losses, while in my situation the process would be gradual. However, the final result would be similar. The overall economy would shrink. AIG should remind us just how important insurance companies are to America’s overall fiscal health.

“while tobacco-related commercial cleaning and maintenance costs $4 billion. The total tax burden from smoking-caused government spending amounts to $70.7 billion each year.”
If you believe in the republican ‘trickle down’ economic theory, then this would be the perfect example. This means it is $4 billion from corporations into the hands of the unskilled worker. The $70.7 billion from the government is like stimulus spending except that it almost completely skips over the rich and targets the lower end of the working class.

In regards to the lobbying, I completely agree that the money could be better spent elsewhere. But if you look at the overall picture the cigarette industry is important our economy. If you taxed them you would get more tax revenue, but more than likely at the expense of the overall economy. Especially at these very fragile economic times, it is probably not the best moment to target a stable pillar of our economy.

[William Song]

The views in my previous comment, however, I did not take into consideration any moral aspect that is associated with the smoking industry. Everyone knows smoking kills, but the industry still gets away with marketing such as "candy-flavored cigarettes" or "filtered cigarettes," which from personal experience only makes the smoke burn less but does not reduce the nicotine high that you feel. And I do believe our government has to have a moral obligation to stop these practices.

Also while the productivity figure might be a little bit high, it is obvious that cigarettes kill people who are most likely at their most productive. While their illness may give others a opportunity that productivity would take additional money and time to replace.

And for health care, if nobody smoked and premiums went down those who did not smoke would benefit as well. So in essence currently non-smokers are paying for those who do smoke. So while the insurance industry may suffer, I think everyone's quality of life would improve.

Finally I completely agree that taxing the cigarette companies is the very best way to combat the tobacco industry. I also agree that on a individual bases people's quality of life would improve if no one smoked.

Like any wide range plan there are hidden pitfalls from the best of intentions, but on the flip side there are also many hidden benefits as well. In my view taxing the tobacco industry now would shrink the economy, but then again I am not factoring in how the government would spend the additional revenue it gains from tobacco taxes. In these days of shrinking government revenue and increasing demand on government services a revenue boost may serve the greater good.

I think this article strikes at the critical question of moral obligation versus current benefit. Trying to bog down the tobacco industry may cause some economic shrinkage in the near future, but our government also have the obligation to protect us (sometimes even from ourselves).

However, out of all the plans to slow down the tobacco industry, taxing them is by far the best solution to a very complex problem.

[Pissed off]

If tobacco usage was the next cause of the end of the world then I am fairly confident the tobacco companies would have been shut down a long time ago! I wonder why they haven't been? Because smokers have so much power? What I see is an opportunistic society breeding hatred, greed and stealing civil liberties!