Orrin Hatch

Mr. HATCH

Mr. HATCH. I have been asking questions one right after the other.

Mr. HATCH. Is the Senator aware--and I apologize to my colleagues. I do want to get through this, because this is important. The distinguished Senator has raised these issues. He deserves a lot of credit. And, secondly, I point out that the other side had a lot of time last night and this morning to talk about their positions on this. The record should be made clear that many of their allegations are incorrect. I believe the evidence shows that they are incorrect. I think the Senator's answers to my questions will help to show that there is a dramatically different explanation for many of the charts which have been displayed here last night and this morning. Let me ask some more questions. Is the Senator aware there must be some limits to extrapolating this estimate into the price range we are talking about, because if we just straight-lined this projection to a $1.50 increase, we would have to expect that literally all youth smoking would cease? That would be news to those many countries with cigarette prices which are more than $1.50 higher than in the United States.

Mr. HATCH. I ask the Senator if he is aware of this? First, I believe both intuitively as a parent and grandparent many times over, and from examining the data, that if we raise the price of a product like cigarettes, as a general matter, we can expect children to purchase less of it--at least that is the common economic thought. But having said that, and, after all, it is a simple matter of economics that other factors are held constant. As price goes up, we can expect quantity and demand to go down. I want to take just a few minutes to look behind the actual data of some of the frequently cited studies. Is the Senator aware that a fair reading of the literature suggests we are not dealing with some sort of simple, timeless, immutable algorithm when we are dealing with the price/elasticity issue? Is the Senator aware of that? He has been making that case here this morning.

Mr. HATCH. I ask the Senator, isn't it reasonable to question that a difference between the $1.10 tax and the $1.50 will not necessarily mean 800,000 premature deaths?

Mr. HATCH. Is the Senator aware it is unclear if such an analysis is focusing on tax receipts made to the Treasury or the actual at-the- cash-register price?

Mr. HATCH. Price is undoubtedly a key factor. I hope I have reviewed some of the key data, and I ask if the Senator does agree with me that we should not overemphasize price alone and, so to speak, put all of our eggs into that one price basket?

Mr. HATCH. Would the Senator agree, in my view we can be most successful in meeting our public health goals by coming up with a ``basket'' of antitobacco policies that would include price increases, counteradvertising, public education, enhanced enforcement measures, cessation programs, and marketing and advertising restrictions that go way beyond what the Constitution would allow us to legislate?

Mr. HATCH. Does the Senator agree we should come up with a comprehensive package of mutually reinforcing policies, that if we come up with a package at all, overreliance on price strategy could be misplaced?

Mr. HATCH. Is the Senator aware that the Institute of Medicine of the National Academy of Sciences issued a report calling on the nation to take action to reduce tobacco use? Is the Senator aware of that?

Mr. HATCH. Let me ask the Senator if he is aware of just a few short excerpts from one paragraph of the 36-page report. The focus is on the need for the level of required price increases. ``Raising the prices of tobacco products is a proven way of reducing tobacco use in the short and medium terms. Price hikes encourage the cessation and thwart initiation. Higher prices have the added benefit of reducing use among people not yet addicted to nicotine, including young people whose level of tobacco consumption may be even more sensitive to price. The impact and simplicity of price hikes were the main reason for the 1994 IOM report's first recommendation of a $2 per pack cigarette tax increase.'' Now the paragraph notes that this recommendation is consistent with the Koop-Kessler report and the National Cancer Policy Board, which it notes calls for a $2 price increase before concluding with this following sentence: ``Such a price increase should also have the desired disproportionately greater impact on preventing the initiation of tobacco use among young people.'' Is the Senator aware of that?

Mr. HATCH. Let me ask if the Senator agrees. In fairly categorical language, a price hike in the $2 range is characterized as a ``proven way to cut youth smoking.'' In fact, it almost sounds like the $2 per pack comes right out of a mathematical formula. The more something costs, the less of it a kid can probably afford. In an era of $150-a-pair Air Jordans, we must allow for the possibility that what kids will do, particularly when social status is involved, can be a tricky, sometimes counterintuitive behavior that can involve a lot more than just sheer price. Does the Senator agree with me on that?

Mr. HATCH. Having set out the 1998 IOM study, I compare its tone and ask the Senator if he agrees with the April 1998 CBO report called ``The Proposed Tobacco Settlement: Issue From a Federal Perspective?'' Now, this CBO paper examines the literature and paints a far murkier picture of the state of evidence than did the IOM study. For example, the first sentence of this section, entitled ``Response of Youth'' states--and I ask the Senator if he is aware of this quote--``In contrast with the consistent responsiveness of adults to changes in price, the evidence on how young people respond is highly variable?''

Mr. HATCH. The Congressional Budget Office report: Is the Senator aware of the Congressional Budget Office report reviewing many of the same studies relied upon in the earlier 1994 Institute of Medicine study, and in the 1994 Surgeon General's report entitled ``Preventing Tobacco Use Among Young People''?

Mr. HATCH. I am concerned about what is going on on the floor right now. I am concerned about the managers' amendment. I am concerned about it ever really working, and I imagine the Senator--and this is a question--is as concerned as I am.

Mr. HATCH. It is very important to this debate, it seems to me. Does the Senator agree with me?

Mr. HATCH. It would seem to me that anybody who is intelligently watching this debate would want to consider this. Is that right?

Mr. HATCH. The CBO catalogued a wide range of elasticity and reports, ``Most findings are on the high side of the range.'' However, the Congressional Budget Office next cites two studies based on the National Health and Nutrition Examination Survey that found elasticities near zero. After summarizing the data for a series of studies, the Congressional Budget Office discussed a Cornell study that employed a longitudinal methodology as opposed to a cross-sectional analysis undertaken by most studies. It said in the Congressional Budget Office report, ``The participation elasticities that DeCicca and colleagues estimated for each followup were similar to those found in the cross sectional studies. The Congressional Budget Office considered roughly 0.5 to 0.70. However, they found that when children who were already smoking at the time of the first survey in the eighth grade were excluded from the analysis, the effect of price on the probability of starting to smoke by the 12th grade was essentially zero. Is the Senator aware of that?

Mr. HATCH. This study found, after excluding those already smoking in eighth grade, that the effect of price on the probability of starting to smoke by the 12th grade was essentially zero. The Congressional Budget Office made the following comment with respect to this study: ``Findings should be troubling to those who look forward to a large increase in tobacco prices as a foolproof means of reducing rates of youth smoking. It is possible that existing studies showing high price elasticity among teens and young adults which use similar State level adjusters may have inadequately controlled the effect of the community environment.'' Is the Senator aware of that quote?

Mr. HATCH. I agree with the Senator and ask a final question. I apologize to my colleagues for taking this time. As everybody knows, I don't take an awful lot of time on the floor. If we are going to resolve this matter, it seems to me, and I wonder if the Senator would agree with me, that we have to take into consideration the approximately 50 million users of tobacco products in this society, many of whom are hooked on these products, or at least addicted to them; we have to consider the children; we have to consider using this money for tobacco-related purposes to the utmost extent that we can. Would the Senator agree with me on those?

Mr. HATCH. It is a very important quote. That certainly does not seem to echo the almost unequivocal of some other studies. To be fair, the Congressional Budget Office concludes that most of the evidence does, in fact, point to a relatively high price elasticity for young adults but concludes this discussion with the cautionary note that all the would-be social engineers, it seems to me, should take to heart. We have plenty of them around here. ``Most of the evidence points to a relatively high total price elasticity of tobacco consumption among teenagers. But those estimates could be exceedingly optimistic. How young people would respond to large changes in the price of cigarettes remains, like many of their behaviors, uncertain.'' Is the Senator aware of that?

Mr. HATCH. Is the Senator also aware that, unlike the Institute of Medicine, the Congressional Budget Office reads the studies and concludes that the data suggests a level of uncertainty on the price issue?

Mr. HATCH. Let's be honest here. There are many uncertainties here. We are talking about tobacco price increases never before contemplated or experienced in our country. But as we listen to this debate, I think it would be wise for all of us to heed the words of caution by the Congressional Budget Office when we hear someone say that all the public health experts agree that price is the single most effective way to cut youth consumption. Does the Senator agree with me on that statement?

Mr. HATCH. If data were unequivocal on the price issue, as some have already argued, or will argue, in this debate, how is it that the Congressional Budget Office--I ask the Senator this --felt compelled to so carefully qualify what some characterize as a near scientific certitude?

Mr. HATCH. Now, of course, if you were tied down to particular numbers in a budget table or in a bill financing table and neither could justify these numbers so that precisely the preordained amount of revenue comes into the U.S. Treasury, you might be inclined to overplay the public health rationale beyond what is warranted from the actual data. Does the Senator agree with me on that?

Mr. HATCH. I have no doubt that if the managers' amendment of $1.10 goes through--does the Senator have any doubt that if a managers' amendment of $1.10 goes though, let alone $1.50, that we will wind up with another similar process and problems on our hands?