Orrin Hatch

Mr. HATCH

Mr. HATCH. The Senator is aware of these compelling arguments from law enforcement?

Mr. HATCH. If the Senator will yield----

Mr. HATCH. I will be happy to do that.

Mr. HATCH. Would the Senator continue to yield to me?

Mr. HATCH. I have a series of questions I want to ask. I did enjoy and appreciate the questions asked by the distinguished Senator from Texas, because he raised a lot of very important points that were brought out in the Judiciary Committee's hearings. Keep in mind, when the Treasury Department testified before the Judiciary Committee, I sent a letter to Secretary Rubin beforehand asking for the economic model they had used to justify their forecast. All they brought was a five-line chart--no model, no backup justification, no real economic analysis. We had three of the top Wall Street analysts come in and provide us with very highly thought-through analysis showing that the price of cigarettes per pack could go up somewhere between $4.68, $4.78 and $5.00 or thereabouts. And that is on the basis of the Treasury's projected $1.10 increase, not the $1.50 figure we are debating today. Now, my friend and colleague, Senator Kennedy, has made a passionate plea here for $1.50. That would mean at a minimum an additional 40 cents more on each pack of cigarettes, although it will probably be higher. That is at the manufacturer's level. That does not count all the extrapolated things the distinguished Senator from Missouri has talked about. Is that right?

Mr. HATCH. The Senator from Massachusetts has suggested that the bill increase each pack of cigarettes by $1.50 instead of $1.10. Of course, everybody knows that the distinguished Senator from Massachusetts and I share a common goal of reducing youth smoking, as evidenced by the Hatch-Kennedy bill which was enacted last year. That bill added an excise tax to reduce youth smoking and to help with child health insurance. But is the Senator aware that there is no proof that raising the price by $1.50 per pack would reduce youth smoking by 60 percent as has been alleged? Are you aware of that?

Mr. HATCH. Not any?

Mr. HATCH. Yes.

Mr. HATCH. We were going through this CBO report. I apologize to the distinguished Senator from Arizona for irritating him. I thought he had finished his remarks. I always intend to extend courtesy throughout the Senate.

Mr. HATCH. Mr. President, I ask unanimous consent that the remarks of the distinguished Senator from Arizona not interrupt our questions and remarks.

Mr. HATCH. Will the Senator yield?

Mr. HATCH. I want to personally compliment the Senator for his work on the floor. I know he has taken a lot of time and has had to give up his office work and a lot of other things to be able to join in this colloquy, but this is important. I believe his colloquy is important if we want to understand both sides of this issue on the $1.50. I want to compliment the Senator for being willing to have the fortitude, the dedication, and the drive to stand here and do this. I apologize to the rest of my colleagues for having taken as long as I have to ask these questions, but I think every question has been pertinent and to the point and every question has tried to enlighten, and that is what questions are for. That is why the rules provide for it. I thank my colleague for allowing me to do this.

Mr. HATCH. Is the Senator aware there is domestic and international evidence that such a price increase will worsen problems for law enforcement officers and lower-income taxpayers? Now our colleague from Massachusetts showed a chart of Canadian cigarette prices and youth smoking over time. Let me point out that chart also demonstrates how youth smoking is not predicted by price. Between 1979 and 1981, Canadian prices were static, but youth smoking decreased by 10 percent. Is the Senator aware of that?

Mr. HATCH. All right. Our colleague from Massachusetts also suggested we can use the Canadian experience to predict American youth behavior. If true, then American and Canadian youths smoke for the same reasons-- peer pressure and status. Many experts agree that status smoking, like $150 tennis shoes, is far less price sensitive. Even a $1.50 price increase will fail in head-to-head competition with ads like this in Sports Illustrated for Camel. Here is an attractive model smoking a cigarette--``What you're looking for'' the advertisement says. The fact of the matter is that many members of the scientific and medical communities do not see as essential a price increase of up $1.50. Is the Senator aware that after following 13,000 kids for 4 years, Dr. Philip DeCicca of Cornell University, in a National Cancer Institute funded study--a National Cancer Institute funded study, a public health study, if you will--found ``Little evidence that taxes reduce smoking onset between 8th and 12th grade''? Are you aware of that?

Mr. HATCH. Dr. DeCicca's analysis is even more compelling when you look at our principal target, those kids who never smoked. He found that the effect of price on the probability of starting to smoke by grade 12 was essentially zero, zip, zero; that price did not influence them. Children were going to use tobacco products anyway because of peer pressure and status. It had no effect. Is the Senator aware of that?

Mr. HATCH. This study is crucial because it is perhaps the only scientific study tracking the smoking behaviors of the same kids over a period of time. All other studies have relied on a cross-sectional analysis of unlike communities. Now, is the Senator aware that just a few days ago the Congressional Research Service released its updated report, ``The Proposed Tobacco Settlement Effects on Prices, Smoking Behavior and Income Distribution,'' where they carefully reviewed the scientific literature on the effects of price on youth usage? Now, let me just quote from that report. And I want to ask the Senator if he is aware of this? The findings in these studies cast doubt on the large participation elasticities that were initially assumed in formulating policies to reduce teen smoking. Perhaps this is true because while 36.5 percent of youth have smoked in the past month, only 14.3 percent of youth smoked more than 10 cigarettes each day. Experts believe addicted persons are less responsive to price. Now, let us not fool ourselves. Kids are different from adults and often unpredictable. Is the Senator aware of those facts?

Mr. HATCH. I believe the Senator will remember, if he will, that Dr. Frank Chaloupka, who testified before the Judiciary Committee, has written: ``Youth and young adults have been found to be less responsive to price than older groups.'' Is the Senator aware of that?

Mr. HATCH. Our colleague from Massachusetts showed a chart entitled, ``Cigarette Prices and Daily Cigarette Smoking Among Canadians Age 15 through 19'' which he suggested concludes the price increase caused all of the reduced youth smoking. Is the Senator aware of that?

Mr. HATCH. Let me bring to the Senator's attention, during that same period, U.S. youth smoking decreased by 40 percent. So much for that argument of the Senator from Massachusetts. Were you aware of that?

Mr. HATCH. I have one final concern about the chart displayed by our colleague from Massachusetts on tobacco use and price. That chart ended in 1991. It did not include any data since then. I want to show you this chart again. This chart shows the growth of Canadian exports to the United States. You will notice up until 1991 the growth was minimal, hardly at all. And then it moved suddenly up. The Judiciary Committee heard testimony that most of these cigarettes were smuggled back into Canada. Now, since smugglers do not seek IDs, I suspect youth were able to easily obtain bootleg cigarettes at an affordable price. Maybe this is why we have not seen the smoking prevalence rates and prices beyond 1991; perhaps that is why the chart of the Senator from Massachusetts ended there. But this is when they hiked up the excise tax in Canada. Look how the imports from Canada to the United States went up. Of course, they continued to just skyrocket because they were sending their exports to the United States and then the contraband was coming back. Only when they had to voluntarily reduce their prices did their exports to the United States go down.

Mr. HATCH. If you listen closely to the debate, you will hear some assert with mathematical certainty that we need to increase the tax on cigarettes by $1.10 a pack, or $1.50 a pack, or by $2 per pack to get the maximum health impact in terms of youth participation rates. We saw that yesterday in the arguments from the Senator from Massachusetts and the Senator from North Dakota, respectively.

Mr. HATCH. If I could finish my questions to the person who has access to the floor. And we have heard more today along those lines. Now, we will hear about the Surgeon Generals' reports, about the Institute Of Medicine report, about the Chaloupka study. Is the Senator aware of the widely-cited findings that for every 10 cents that the price of tobacco goes up we can expect to see a 7-percent decrease in youth smoking? Is the Senator aware of that?

Mr. HATCH. Let me go further. I am sorry to take so much of the Senator's time, but I think it is important.

Mr. HATCH. Despite what Michael Douglas said in the popular movie ``Wall Street,'' greed is not good, and it is especially onerous and burdensome when the greed comes from Congress itself. Would the Senator agree with me on that?

Mr. HATCH. Those figures sound impressive at first, but we need to stop and question how applicable such a study is for a complex adolescent social behavior and for the price increases we are debating today. Are there not limits to extrapolating this estimate into the price range that we are talking about today?