A Real Racket
Drop the lawsuit immediately.

By Jacob Sullum, a senior editor at Reason, is the author of For Your Own Good: The Anti-Smoking Crusade and the Tyranny of Public Health
June 21, 2001 8:30 a.m.

nti-smoking activists think the Justice Department's recently announced effort to settle its lawsuit against the tobacco industry is an outrage, and they're right. The only honorable thing to do with this lawsuit is to drop it immediately.

The federal government's attempt to extort billions of dollars from smokers (who would pick up the tab for any settlement through higher cigarette prices) was a transparent sham from the beginning. When then-Attorney General Janet Reno testified before the Senate Judiciary Committee in April 1997, Sen. Ted Kennedy (D., Mass.) noted that four of his colleagues had written a letter urging her to imitate the states that were suing the tobacco companies. He asked her about the possibility of recovering money spent on smoking-related medical expenses under Medicare and other federal programs. "What we have determined," Reno replied, "was that it was the state's cause of action and that we needed to work with the states, that the federal government does not have an independent cause of action." Similarly, a Justice Department spokesman told the Bergen County Record that "right now, it would seem we don't have the authority to sue."

Two years later, when the Justice Department went ahead with its suit anyway, the relevant law had not changed at all. But by agreeing to settle the state lawsuits for $246 billion, Philip Morris et al. had shown that you don't need a plausible legal theory to squeeze money out of the tobacco industry. You just need staying power, coupled with the possibility of a catastrophic damage award.

The idea that the federal government has been victimized by the tobacco companies is laughable on several counts. Since the 1960s the government has mandated cigarette warning labels and produced one report after another on the hazards of smoking, so it can hardly claim ignorance of tobacco's ill effects. During the same period it has nevertheless forced taxpayers to subsidize other people's health care, knowing that some of those people would smoke and get sick as a result. It has also participated in the tobacco trade, distributing smokes to servicemen and profiting from cigarette sales through taxes. Indeed, the federal government makes more money from the cigarette business than the tobacco companies do.

Even if the government's hands were spotless, it could not recover damages because it hasn't suffered an injury. Since smokers tend to die earlier than nonsmokers, the cost of treating tobacco-related illness is offset by savings on other forms of health care (not to mention Social Security). A 1997 study in The New England Journal of Medicine found that if everyone stopped smoking total medical spending would rise. In other words, smoking saves taxpayers money.

Finally, assuming the government had suffered an injury that could reasonably be linked to the tobacco industry's actions, there is the minor matter of finding a statute that authorizes a lawsuit. Last September, when a federal judge ruled that the Justice Department could not pursue damages under the Medical Care Recovery Act or the Medicare Secondary Payer Act, the government's lawyers could hardly have been surprised, since their own boss had reached the same conclusion. All that's left to the government's case are its claims under the Racketeer Influenced and Corrupt Organizations Act, which portray the industry's efforts to promote and sell cigarettes as a "pattern of criminal activity" and demand that the tobacco companies fork over their ill-gotten gains — i.e., all the money they've made in the last half-century or so. But if anyone is acting like a criminal organization in this case, it's the government, which has been taking protection money from the industry for years and is now leaning on it for more.