Don Nickles

Mr. NICKLES

Mr. NICKLES. I will be happy to tell my colleague from Arizona that he makes a good point but he is absolutely wrong. What the industry agreed to, according to the settlement, is that they would pay $80 million per point of noncompliance, up to a total of $2 billion. What we have before us is two surveys, penalties up to $4.4 billion, and an amendment to go to $7.7 billion. Does my colleague from Arizona realize there is a difference between $7.7 billion and $2 billion? and that $5.5 of this new penalty is product-specific? and the industry did not agree to a product-specific penalty? These provisions were not in the industry settlement, as I am reading it right now.

Mr. NICKLES. I will be happy to answer the question.

Mr. NICKLES. I will be happy to yield.

Mr. NICKLES. The Senator is exactly right. You know, I am sure if this survey was taken during the Fourth of July break, it would have a little higher incidence of teen smoking than it would at some other time in the year. But if they smoke a cigarette, they are counted in the affirmative and the penalty would be $1,000.

Mr. NICKLES. I will be happy to yield.

Mr. NICKLES. And if we want to decrease teenage consumption, maybe we should encourage the States to pass laws it is against the law to consume and put some responsibility back on the individual. Instead, we are allowing this massive growth of government. It doesn't make sense. It is not workable. It is not fair. And I don't think it will be effective. I also don't think parts of it will be constitutional, and I don't think we have willing participants by the tobacco companies. So it is just not a good deal. For people who want to raise taxes, raise taxes. Be up front, be honest. If you want to do something else, do something else to get teen consumption down. But this bill is not going to work. It is just not a workable plan. Frankly, if it wouldn't work at $4.4 billion, it won't work at $7.7 billion. I urge my colleagues examine this look-back provision, see how complicated it is, see how confusing it is to give the Secretary this power, and to decide this is not the right way to legislate. It is not the right way to tax, and let's come up with something better. I hope something better would include some personal responsibility and accountability for people who are breaking the law. If a teenager purchases, it is against the law if they are under the age of 18. And if you really don't want them to smoke, maybe we should encourage the States to have laws against the consumption as well. I appreciate my----

Mr. NICKLES. Mr. President, I want to respond to my colleagues who are proposing this amendment. But, first, I would like to make some general comments about the bill to complement some of the comments I made earlier today, some of which were related to a statement from the Joint Tax Committee which I inserted into the Record, the chart that they put together on the net cost of the bill. They have now added a line to their estimate. I want to include that in the Record as well. This is the price per pack of cigarettes under this bill with all these new taxes and surcharges and look-backs. I will tell my colleagues that for 1998, the year that we are in right now, before this bill goes into effect, Joint Tax assumes the price of cigarettes is $1.98. They assume for 1999--I want our colleagues to hear this--Joint Tax says the cost of a pack of cigarettes goes up to $2.88, a 90-cent increase. The next year, $3.24; the next year, $3.41; the next year, $3.66; the next year, $3.83; by the year 2004, it is over $4, $4.06 per pack. The next year it is $4.12; the next year, $4.78; by the year 2007, 9 years from now, the price per pack, $4.48. The price today is less than $2. This isn't coming from Don Nickles. This came from Joint Tax. I haven't agreed with everything that Joint Tax has done in estimating this bill. But in this estimate, they have added some of the other aspects of the bill, including the look-back. I ask unanimous consent to have this printed in the Record.

Mr. NICKLES. Yes.

Mr. NICKLES. I will tell my friend and colleague, the Finance Committee did consider this bill for 24 hours. I didn't support their $1.50 tax increase, but I think their $1.50 tax increase is a lot more honest, is a lot more plain, a lot more doable. We have excise taxes on tobacco today of 24 cents. Congress last year, when we passed the kid- care bill, increased that another 15 cents. So, tobacco taxes are going to 39 cents already in present law. People say that the Commerce Committee bill, the administration bill, increases that another dollar and a dime. That takes the tax to $1.49. But they do not call it a tax, they call it a fee. So we are telling everybody who is in this industry--and we have wholesalers and distributors and so on--that the tax is $1.49 and it is increasing. But that bill, the bill that we have before us, doesn't saying anything about a dollar and a dime. It says put all these billions of dollars into a fund. That is not very workable. It is not very legitimate. I think we should have the committees of jurisdiction take this bill. The Finance Committee did take the bill, but unfortunately the Commerce Committee and the administration looked at our changes, and they just ignored them. They dropped the changes that the Finance Committee made. I resent having the Commerce Committee write the tax portions of this bill as well as I resent the Commerce Committee writing the ag portions of the bill. And I think those are two of the more contentious and two of the more difficult things that we have to deal with. The committee that marked it up didn't have, in my opinion, the taxation expertise, they didn't follow the same taxation procedures that we have on every other excise tax in history. And, frankly, I think the Agriculture Committee should have written that instead of the Commerce Committee as well.

Mr. NICKLES. In a minute. That youngster taking the survey, if they mention a name brand, whether that was the brand they smoked or not, it comes out in the calculation of this data which is deemed accurate, proper, and correct. Then, that company can be subjected to enormous fines. In the proposal, in the amendment that we have pending, the fines that are brand specific go up to $5 billion. They are also indexed for inflation. That is a pretty big penalty. Then there is a $2.2 billion look-back that applies industry-wide. The Secretary of Treasury takes this survey and tries to determine what percentage of young people are smoking each brand in the country, and if each one of them by brand product missed this target, then they are assessed penalties that can go up to $7.7 billion and even higher in the outyears. This is not a good plan. This is not a workable plan. I tell my colleagues, if you want to do something to reduce teenage smoking, come up with something else. If you want to come up with higher taxes, just increase the tax. I have heard some people say you don't need $1.50 because we have a big look-back and it's really $1.50 anyway. If you want to make it a $1.50, make it a $1.50, but call it a tax. Make it clear. Make it honest. This is a scheme. We are going to deem a poll to be accurate, and authorize the Secretary to assess enormous penalties, in the billions of dollars. That doesn't make sense. Now, if you really want to reduce teen smoking, do something else. Say to teenagers, if you are caught smoking, we are going to slap your wrist. The second time we are going to make you clean up a park, the third time maybe a financial penalty. We don't have that in this bill. And I don't want the Federal Government to do it because I don't want to federalize these actions, but instead we should encourage the States to enforce the law. It is against the law for teenagers below the age of 18 to smoke in any State. If you don't want anybody to smoke that is 18 years old, try and increase the age to 20 or 21. You have that right. But to come in-- --

Mr. NICKLES. Mr. President, I wish to address the amendment by my friends and colleagues from Illinois, Ohio, and Oregon dealing with increasing the look-back penalties. I made a statement earlier today that I think the look-back provision in this bill is one of the most unworkable provisions that anybody could dream up. I say ``unworkable.'' I don't think it will work. But I would like to maybe bring to my colleagues' attention how they propose that it should work. To make the look-back penalties work, they say we are going to empower the Secretary of the Treasury to do a poll. It says to conduct a survey. The survey is on a national basis. They are going to measure the type of tobacco product used in the last 30 days. They are going to conduct this survey with methodology that he determines is appropriate. They are going to identify the name brand that the youngsters use. They are going to be surveying kids. They are going to be surveying people from ages 11 to 17. And they are going to ask them a question: ``Did you smoke, and what brand did you use?'' Then they are going to put all this information together. I don't think they are going to ask this of every teenager in America. So it is going to be a random survey. Then they are going to compare the results of this survey to the mandates in the bill. If we don't meet the targets, or if the consumption of tobacco by teenagers is higher than what this bill says they should be, the tobacco companies are going to be assessed penalties. And the penalties are very large. The penalties in the look- back provision under the negotiated settlement with the attorneys general went up to $2 billion. The penalties that came out of the Commerce Committee were $4 billion--$3.96 billion. And then the penalties which were rewritten by the administration and introduced on Monday came out $4.4 billion maximum, and now the amendment that we have in the Chamber says take that to $7.7 billion, and also increase the target rate to 67 percent. Why do rates make a difference? Well, for every point you are out of compliance, you are assessed a penalty, and the penalty is large. The penalty for not making the target under the attorneys general negotiated agreement was $80 million per point missed. Well, the penalty under this bill is $240 million per point missed. It is three times as large as that proposed under the original settlement. That is just the industry-wide look-back. There is also a segment that applies to the product, and it has a penalty that is $200 million per point missed. If this sounds confusing, it is because it is, and it is in this bill. My point is it is not going to work very well. You are telling the Secretary of Treasury to take a poll, and then we are going to deem that this poll is correct. Now, all of us have used surveys. We have all had polls. But this bill has language that I guess people want to become law which says the survey using the methodology required by this subsection is deemed conclusively to be proper, correct, and accurate for the purposes of this act. So we are saying, whatever the Secretary says, it is accurate. It is a done deal. And then they are going to and ask the kids, did you smoke? Now, they don't ask them, did you smoke 10 times? Did you smoke a pack a day? They can smoke one cigarette during that 30-day period and they are counted. And if this thing worked just right, a tobacco company would have to pay $1,000 because a youngster smoked one cigarette. I find that to be pretty high. And I might mention, this is really supposed to go after young people who are smoking illegally. They are smoking illegally. Let's put the penalty on the young person for breaking the law. Instead, we are going to do a random survey, a random survey that has to determine every single percentage for every single tobacco product. There is a de minimis level. We are not going to hit the smallest companies, I guess. I don't know how many different tobacco products there are. I don't know them very well. I don't smoke. I can only think of three or four cigarette brands. I don't smoke. And my guess is there is probably a lot of teenagers who don't either, but they can remember maybe the biggest name brands. I can remember Marlboro and Winston and maybe Virginia Slims. So if somebody said, do you smoke? I might be able to remember those name brands.

Mr. NICKLES

Mr. NICKLES. Mr. President, I would like to announce for the public that a hearing has been scheduled before the Subcommittee on Energy Research, Development, Production and Regulation of the Committee on Energy and Natural Resources. The hearing will take place Thursday, June 11, 1998 at 10 a.m. in room SD-366 of the Dirksen Senate Office Building. The purpose of this hearing is to conduct oversight on the federal oil valuation regulations of the Minerals Management Service. Those wishing to testify or who wish to submit written statements should write to the Committee on Energy and Natural Resources, U.S. Senate, Washington, D.C. 20510. For further information, please call Michael A. Poling at (202) 224-8276. committee on energy and natural resources

Mr. NICKLES

Mr. NICKLES. Mr. President, I had printed in the Record this Joint Tax table. I also want to clarify a statement. I said, all of this money would be going into the trust fund. That was the way it was designed as it passed the Commerce Committee initially. The Commerce Committee now says the net revenues from this large payment goes into the trust fund. This chart says ``Industry Payments.'' That is not correct. It is consumers' payments. Consumers are going to be paying every dime of this tax. Granted, they have a section in here that says industry, companies, you pay this amount. But they also have a section in here, on page 189, that says the tobacco companies must pass the cost on to consumers. . . . an amount sufficient to pass through to each purchaser on a per-unit basis an equal share of the annual payments to be made by such tobacco product manufacturer. . . . In other words, consumers, you have to pay every dime of this, every single dime. This is not paid for by tobacco companies. This is not a tax on tobacco companies. This is a tax on consumers. The way to solve this ambiguity on volume adjustments is just say: ``Here is the tax per pack, or per can or whatever it is. And then, if volume goes down, there is less money.'' We do not do that in this bill. I just mention, too, there is something really phony going on here. Joint Tax--and maybe I am not being as respectful to Joint Tax as I should be. But the way they scored this thing, as I know my colleague knows, they take 25 percent of the revenue from excise taxes and assume that is lost in transmission. So, if you raise $1 in tax, they assume only 75 cents gets to where you are trying to send it. That would usually be correct. If you were going to increase excise taxes on a farmer, he is going to have less money to spend on other products, it is going to slow the economy, so there would be some decline. This assumption, I don't think, is applicable to these tobacco payments. Maybe the government would lose some percentage, but I don't think it would be as much as 25 percent. And the reason is the companies, by this language, are forced, mandated, to pass on every dime of this payment. I cannot think of any other business--if Nickles Machine Corporation I used to run, if we had an increase in excise tax, granted that might be in our cost of manufacturer. I might try to pass it on in higher prices to consumers and so on. Maybe I would be successful and maybe I wouldn't. Maybe I'd have to eat part of it. We have language in here saying we don't want tobacco companies to pay a dime of this. We want consumers to pay every single dime of this part. Not the look-back. The look-back, they say, is not deductible, so maybe they are supposed to chew on part of that. But the big part of it is passed on to consumers. So I want to make sure I was accurate. I think I said this money goes into the trust fund. That was not the case. The language now says the net revenues go into the trust fund. And the net amount is really determined by the Secretary of the Treasury. He has a great deal of flexibility, I am afraid, to say, ``Oh, well, we think, since this is all passed through, the gross amount could be the net amount.'' He could say that this since it is all passed through. Maybe I am getting too technical. I just want people to know, when you see estimates from Joint Tax that they agree that this is a $102 billion tax increase over the first 5 years. The look-backs are a question mark. Who knows? But evidently somebody thinks it is real money or they wouldn't be trying to jack up the look-back penalties. And then the other variable is the volume adjustment, and no one has had scoring on volume adjustments until today. These are purely assumptions. I put those into the Record. So, if they were accurate, consumers will pay $102 billion, adjusted by 8.7, so $93.4 billion over the 5 years. So it reduces it somewhat. For that to happen, you have to assume you are going to have volume less than 80 percent of 1997 over that period of time. Who knows? I don't know. But I always want to be factually correct. I may disagree with the colleagues on substance or philosophy or motives or whatever, but I want to be factually correct. And these numbers, I believe, are factually correct. The volume adjustment is speculative and now Joint Tax says it is minus $8 billion. Great. I do not agree with them that there would be such a large loss of revenue from gross to net, because of the language that says 100 percent of it shall be passed on to consumers. This figure, this payment by consumers, is accurate. Consumers, not tobacco companies, will pay the cost of this bill. I think it is too high. I yield the floor.

Mr. NICKLES. Mr. President, I am going to make fairly lengthy remarks dealing with the contents of the bill. First, let me just state my respect and admiration for Chairman McCain. He is a very good friend of mine in the Senate. One of the things we have a pleasure of doing in the Senate--we are not a very big body--so we get a chance to know each other sometimes pretty well. I have had the pleasure of working and knowing Senator McCain since he came to the Senate. He is a very good friend of mine. He will still be a good friend of mine. I don't like his bill. I don't like the procedure by which the bill is being considered, and I was involved in the procedure. Senator Lott asked me to head up the task force to try to put this bill together. Senator McCain, and the Commerce Committee, had a lot of jurisdiction over the bill, probably more than any other committee. Also, he had to deal with the issue of whether or not we are going to have a limitation on liability for tobacco companies. Probably the most important issue is whether the attorneys general package will either pass or not pass, it is very pertinent to the amendment that the Senator from New Hampshire has pending before the Senate today. Are we going to give a limitation on liability to tobacco companies? We don't do it for other companies, with very, very few exceptions. I think we did it for the airline industry for a small, targeted area, but, by and large, we don't do this for any industry in America. We don't do it for pharmaceuticals. We don't do it for people who make heart valves, and so on. A liability limitation was in the attorneys general's package that they dumped on Congress, that they signed off with the administration. The administration agreed with that package, the so-called $368 billion 25-year package. That was handed to Congress and they said, ``Here, go pass it.'' I told some of my colleagues from the outset I don't think we will pass legislation--nor do I think we should--that will put a total limitation on class action lawsuits. If you are using in tobacco, you can't have a class action lawsuit against tobacco companies? That is what the attorneys general's package was going to do. In exchange for that, tobacco companies were going to pay about $15 billion a year. That was the so-called deal. They didn't consult very many people in Congress, and I thought at the time they are going to have a hard time passing that restriction on liability. If they don't have that, they don't have a deal. Frankly, as this process evolved and the Commerce Committee marked up the bill, they struck some of the liability protections on exemption from class action suits, and instead came up with a cap--which is kind of a back end way of trying to do somewhat the same thing. The tobacco companies said, wait a minute, you have increased the price, you have increased the penalties, you have increased everything, and you gave us very little legal protection--this cap. Anyway, the tobacco companies said that is not good enough, there is no deal, we are not going to abide by it. The only way this could conceivably be in the Commerce Committee instead of the Finance Committee is we say there will be payments of fees in lieu of protection for liability. But it didn't work out that way. So then we had a referral to the Finance Committee. The Finance Committee struck out this fee structure, which I think is a disaster. I see my friend and colleague from Nebraska here is also on the Finance Committee. I will go through, and it will take some time, but I will go through how the tax is computed or the fees are computed in this bill, and just say that it won't work very well. I also want to say I concur with the objectives of trying to reduce teen smoking. I don't want teenagers to smoke. I have four kids. One out of my four smokes, and he happens to be 28 years old. He started when he was in high school. I really wish that he didn't smoke. I grew up in a family--both my parents and all my brothers and sisters--all of them smoked. My mother has had lung cancer and emphysema, very critical. She still is a survivor, but it is a very serious problem. A couple of my brothers and sisters had a hard time quitting. They did quit. They were able to do it. One in my family didn't have that hard of a time of quitting. I am trying to get my son to quit and I have not been successful. I wish that he would. I really wish that he would. When you look at the use of tobacco products, you can see that it is pretty significant. This chart shows anybody who has ever used cigarettes in their lifetime, kind of an unusual statistic. I guess I would fall into it because I know I smoked one or two cigarettes when I was in junior high--probably never a full pack. But I guess, if somebody said, did you ever smoke a cigarette, I would have to say, yes, sometime in the 8th grade. So I would be in the 70 percent category--you might notice from this chart that usage went down a little bit in the last few years. Frankly, under the Clinton administration it started going up. Marijuana use has also gone up--and I am more concerned about drugs than I am smoking. I will make that evident in a moment. But marijuana use, which was up to 60 percent and has fallen down to about 33 percent, fell almost every year through the 1980s until, frankly, President Clinton was elected. Then it has gone up and it has gone up in a skyrocketing fashion. As a matter of fact, I will insert in the Record this chart. I tell my friend and colleague from Nebraska that marijuana use in 1992 among 12th graders was 11.9 percent. Last year, it was 23.78 percent --100 percent increase of marijuana use among high school seniors. That is a staggering statistic. This is marijuana use by people categorized as ``frequent users'' who have used it in the last 30 days. You can see on the chart that this has jumped up. You also see tobacco use has gone up. Cigarette use has gone up. In 1992, cigarette consumption among seniors in high schools was 27.8 percent. In 1997, it was 36.5 percent, an increase of about a third. That is a big increase. You could go all the way back to the 1960s as to who uses cigarettes on a frequent basis or in the last 30 days, and it was very constant for decades, until frankly, the Clinton administration. And during these 5 or 6 years, it has gone up a third, the biggest increase that we have seen. You might also note, and this is more troubling to me, that marijuana use had gone down for frequent users, down to only about 11 or 12 percent in the early 1990s. And now it is more than double and is up to about 24 percent. Now, that bothers me. And I cannot help but think a lot of people, when they are just going after tobacco and how terrible it is, are fairly silent about drug use, drug use that is habitual, drug use that is illegal, drug use that is deadly, drug use that leads to lots of other crimes, lots of other problems. Why only the attention on cigarettes? Why only the attention on cigarettes? We are going to have some amendments which will have significant attention on drugs. I had a town meeting during the Easter break in Oklahoma--I had several--but I had one in Shawnee, OK, a middle-class town. This town meeting happened to have a lot of high school students, a lot. I told them we were debating the cigarette tax issue and I just asked how many smoked, and hardly any hands went up. I said, ``Well, let me ask you a question. Congress is contemplating raising tobacco prices by $1.10, maybe $1.50. Would that make any difference for those of you that raised your hands?'' The answer was, ``No, we don't smoke that much.'' Maybe they would smoke on a weekend or at a party. They said it would make no difference. That is an informal survey; it is not scientific. But some claim that scientists say if we raise this tax, we are going to reduce teen smoking. I am not sure that is the case. I think when you ask the question if somebody smoked in the last 30 days, that means one cigarette or two cigarettes. I am not sure you are going to have an appreciable reduction because you raise prices a dollar. Maybe there would be some. Maybe it would be a component in reducing teen smoking, but some people are acting like it is the whole battle. I disagree with that. I don't think it would work. As a matter of fact, I am kind of amused because now we hear everybody say our objective is that if we raise these prices, these taxes, spend all this money and run this massive campaign, we will be successful and we can reduce teen smoking by 60 percent. If you are against this, you are for tobacco companies and you are against kids. I reject that outright. I don't like smoking. I don't like teen smoking, especially. I don't like to see kids smoke. But that doesn't mean you have to sign onto a program that spends hundreds of billions of dollars. I looked at a statement of Secretary Shalala when she announced new FDA regulations with David Kessler in August of 1995. They came up with a lot of new regulations. I don't agree with a lot of them. I think they are overly intrusive. But whether I agree with them or not, they stated in those regulations they thought they could reduce children and adolescent smoking by 50 percent within 7 years. Wait a minute. We are talking about spending hundreds of billions of dollars in addition to these FDA regulations to it to 60 percent? So these massive price and tax increases might decrease smoking another 10 percent in addition to what they are already doing in FDA? I am not so sure. That tells me that people are sometimes pretty loose with statistics. Maybe these surveys don't mean as much as some people think. Maybe this question of, ``Did you smoke in the last 30 days?''--maybe that is one cigarette. I am not sure. That is one of the questions. My point is that I don't want kids to get addicted to smoking. We want to do some things to discourage that. I am concerned when I see that drug use has doubled; marijuana use has doubled under this administration amongst high school seniors. That bothers me a whole lot more than the 33 percent increase in teen consumption tobacco. I happen to be a parent; I have four kids. If you tell me that maybe they smoked a cigarette once, or if they were using marijuana on a regular basis, I would be a lot more concerned about the marijuana. I don't want them to do either, and we should discourage both. But to have a campaign and have this massive effort to attack tobacco and be silent on drugs, I think, is absurd and it should not happen. We should have a campaign against teen smoking, but we should not raid taxpayers in the process. We should not spend hundreds of billions of dollars. If you ask people, ``Do you want to reduce teen smoking?'' you are going to get a favorable poll that says 90 percent say yes. If you say, ``We are going to reduce teen smoking, and we are going to spend hundreds of billions of dollars and pass the largest tax increase in years. Do you still think we should do it?'' They are going to say, ``What?'' I think there was a poll that said 70 percent of the people thought Congress is doing this more to spend money than to help kids. They know this is more about a money grab, a big ``cookie jar,'' than about reducing teen smoking. Look at the costs. I happen to be kind of a numbers cruncher. I am on the Budget Committee and the Finance Committee and I think numbers are important. I am going to talk about this bill quite a lot this morning. I looked through this bill, and in this bill there is no mention anywhere of a $1.10 tax increase. I am going to tell the press there is no mention of a $1.10 per pack tax increase in this bill. They mention it in the committee report, but the committee report is not the law. So how much does this bill cost? I stated repeatedly that it costs more than a $1.10; and it does cost a lot more than $1.10. People will say, wait a minute, where did you get the figures? I got the figures from the bill, not from Senators' statements or from reading The Washington Post or The New York Times, where the headline was ``Senate to Stay With $1.10 Tax Increase.'' There is not a $1.10 tax increase in this bill; there is a lot more. It is going to cost consumers a lot more. Is it going to cost tobacco companies a lot more? I don't think so. As a matter of fact, I put on this chart the gross tax increase on consumers in billions of nominal dollars. These new taxes cost consumers, but do they cost tobacco companies? Not a dime. Let me go through a couple of the provisions, Mr. President. Before I do, I will submit the chart I have already discussed about the increase in use of marijuana and also cigarettes into the Record. I ask unanimous consent to have the chart printed in the Record at this point, along with another chart regarding the national tobacco settlement trust fund.

Mr. NICKLES. I understand; no problem. I bragged on the Senator before. But I want to talk a little bit about the volume adjustment. I am very familiar with the volume adjustment because I have been trying to figure out what they are doing with it. Also the Senator from North Dakota tried to repudiate my number of $755 billion. I am telling you that is the same number OMB came up with, and they didn't volume adjust it, and they didn't volume adjust the $368 billion. I want people to know that I am consistent with what was done before. In addition to inflation, the bill that was reported out of the Commerce Committee was to have a volume adjustment. If you sell less, there would be less tax. So you have some reduction. But they do not know exactly what that would be. What was rewritten by the administration on Sunday or Monday is that there will be a volume adjustment if and when volume gets less than 80 percent of last year's level. That is a big change. Under the bill as originally written, the volume adjustments don't kick in until the sixth year. Then you would have some reduction. They say you will get a reduction if and when you reduce consumption below 80 percent down here. My point is there is no volume reduction for the first several years, and after that you are guessing. But the volume reduction must be lower than 80 percent. To get any volume reduction whatsoever, you must reduce consumption total by more than 20 percent. It used to be that you only had to reduce it 1 percent to get a 1-percent reduction. Now, you have to reduce 21 percent to get a 1-percent reduction. It may be that they will never get a volume reduction as a result of that change. I don't know. But my point being is that, one, we are being consistent in our analysis of the cost of the bill, as it pertains to OMB, as it pertains to the Attorney General. I want people to know what the facts are. The fact is the bill says it has a CPI adjustment. The facts are that OMB said they used constant 1999 dollars to get $516 billion. I read it in the committee report. This is absurd. It said total payments shall not exceed $516 billion. That is not in the bill. It doesn't fit. It doesn't work. If you use nominal dollars, as we use in every other budget projection, and you put a 3-percent kicker in, that is how you get up to $755 billion. Then you can add the look-back assessment. One could say there will not be a look-back. Why was all this effort to add a look-back. I heard colleagues say on the floor that look-back is almost maybe 50 cents. I will tell you the look-back is a disaster. If anybody wants to raise tobacco prices another 50 cents, do it honestly. The look-back rests on the Secretary of Treasury taking a poll and saying, ``Did we meet our objectives? We want to reduce consumption by teenagers by a certain percentage. Did we make it? If we didn't make it, what happens then?'' If they miss it by a certain percent, there is a fine. If they miss it by a bigger percent, there is a bigger fine. That raises about $4 billion. Then, they go to brand specific look-back assessments. This is absurd. They say they are going to, in the same poll, find out whether these youngsters buy X, Y, or Z brand. And if they smoke that brand, and that brand does not meet that target, there is a $1,000 penalty. For every teenager they identify that smoked more cigarettes in that particular percentage, then there is a $1,000 fine. That is not really workable, and it needs to be fixed. It needs to be cleaned up. It needs to be deleted and then raise the tax whatever you want to raise it. Be honest. Tell people we want to raise taxes. The first year it is going to a dollar a pack. Just raise it a dollar a pack. Say next year, instead of 24 cents, it is going to be $1.24. Just do it. That would be the honest way. This thing is more than deceptive and, in my opinion, probably won't work. Mr. President, I yield the floor. Mr. CONRAD addressed the Chair.

Mr. NICKLES. I want to make sure people understand. I am not sure my colleague from Arizona knows what was done.

Mr. NICKLES. I will be finished shortly.

Mr. NICKLES. The Senator is throwing me off track.

Mr. NICKLES. Mr. President, my colleague is making my argument for me. In the first place, I am consistent. The administration, and Senator McCain, said this bill would only cost $516 billion. Guess what? They don't make a volume adjustment on that estimate. Instead, they used constant 1999 dollars. I have a letter from OMB that was trying to refute my argument, but basically they made it for me. OMB says inflated nominal dollar industry payments would equal $755 billion over 25 years. That is without the look-back penalty. By way of comparison, the equivalent estimate which the State attorneys general are proposing is $539 billion in nominal dollars. Like the private analysis, these estimates do not included volume adjustments. There is a reason they do not include volume adjustments. It is because it is hard to figure. My point is that everybody here has heard the attorneys general group discussing the $368 billion figure that the administration signed off on. When they use the $368 billion, they do not take into account any volume adjustment. No one knows what the volume adjustment is going to be. I will show my colleague a table from the Joint Tax Committee. I have been trying to figure out what these industry payments really are. How much of a tax increase is it? I have hounded Joint Tax for an estimate, and we have a letter and report from them dated yesterday. If this is not the one the Senator printed in the Record, I will insert it in the Record at the conclusion of my statement. In the first place, they show the total revenues on the top line which, frankly, are consistent with the revenues that I showed on my chart. It is shown in calendar years, according to the bill on certain pages which provided for a payment of $24.4 billion, $15.4 billion, $17.7 billion, and so on.

Mr. NICKLES. Now, are we going to pass that? I know I saw an ad by Dr. Koop saying we need to. I love Dr. Koop. I know he is very sincere. But I don't think you have to spend hundreds of billions of dollars to go after teenage consumption of tobacco or of drugs. And I think we should go after both. I think we would be grossly irresponsible if we don't go after both. I am concerned about the cost of this bill. I told my friend and colleague from Arizona that I have the greatest respect for him but I don't have great respect for this bill. I think this bill is one of the worst pieces of legislation that Congress has considered since the health care dictates of the President and Mrs. Clinton several years ago. That bothers me. I don't think we should pass it in the Senate. I told my colleagues I am not going to just stand back and throw rocks at it. I will try to make some improvements. I read a list of the sections, and I don't think there should be an asbestos section. I may have an amendment to delete it. I don't think we should have the massive industry payment system. I am going to try to talk my colleagues into replacing it with a simple excise tax. Raise it $1.10, so you know exactly the amount. I am not comfortable with the fact that some people are saying it is $1.10, but it raises more money than that, so maybe they will have more money to spend. There is no doubt in my mind that these payments, and you divide that out by the number of cigarettes sold, if you are selling 24 billion cigarettes, you realize this will raise a lot more money than $1.10. We are talking about big money. We are talking about it every year. The tobacco settlement was originally, when fully implemented, about $15 billion a year. This bill starts at $24 billion, and by the year 2002, assuming the kickback comes in, $30 billion. That is a lot of money--3,000 percent increase in the tax on smokeless tobacco and so on. Maybe people don't care. I care. I care about the procedure. I think some of my colleagues from the tobacco areas were upset about the procedure. I think when you are dealing with the agriculture section, that should have come out of the Agriculture Committee. Commerce Committee is not supposed to write the agriculture section. And Commerce Committee is not supposed to write the tax section. And they did both and they did a crummy job on the tax section. This is the worst tax law I've seen. If we pass it, it would be the worst tax bill Congress has passed. With all due respect, it wasn't even done by the Commerce Committee. It was done by the administration. President Clinton didn't want to use the word ``tax'' so he thinks they hide it by using the word ``fee,'' but it is not a voluntary fee. If tobacco companies were in agreement with this, this would be voluntary, it would be a fee, and in return they get some liability protection, and that is what they negotiated with the attorneys general. Maybe that would work. This is not voluntary. There is no provision that says if the tobacco companies don't like the fee, they don't have to pay it. There is no provision like that. So it is a tax. Congress has the power to tax, but if we are going to tax, let's tax right. The cigarette excise tax right now is 24 cents per pack. It is going to 39 cents by 2002. This bill purports to raise it another $1.10, so that goes to $1.49. So for my colleagues who are trying to push the tax to $1.50, it will be $1.10 by the year 2002 under this bill, plus indexed for inflation. So maybe you have a lot more than you really realized. Let me take you through the numbers again. The tax on cigarettes today is 24 cents per pack. Congress, last year, I believe, increased that tax 15 cents--24 and 15 is 39 cents. That is already law. This bill adds to that, purportedly, another $1.10. A $1.10 on top of the 39 cents is $1.49. So the Federal excise tax on tobacco, at a minimum, will be $1.49 in the year 2002, plus it is indexed for inflation forever. This is indexed at inflation, or 3 percent--whichever is greater. Never had an index that I know like that. I don't know that that makes sense, but we have it in there. Why do we have it in there? So we put more money in the pot so we have more money to spend. I don't think we should do that. What should we do? We should work together to come up with a responsible package. I am willing to do that. I think this bill goes way too far. I haven't touched the regulatory side of the bill. I will save that for another speech, and hopefully maybe the FDA section will have some common sense come into it. We don't want to give this unbridled authority to the administration. Don't we want to preserve for ourselves, the legislative branch, the authority to write law? Or are we going to take a massive menu of FDA regs and say they are deemed to be law, although a court said part of them is unconstitutional. I don't think we should do that. I will save the FDA section for another comment and another time. Now I am talking primarily about the financial impact of this bill. Let's work on a bill that will do a couple of things. Let s work on a bill that will try to educate youngsters that using drugs or using tobacco is a very serious problem. Let's try to reverse this trend that happened, frankly, in the last 6 years, during the Clinton administration, where marijuana use doubled among high school seniors, where tobacco use is up 35 percent among high school seniors. Let's try to reverse that through some public education. Let's try to get some workable restrictions that are constitutional. Let's try to put some responsibility back on young people. Let's try to maybe give the States the encouragement to enforce the law. It is against the law in every State in the Nation for people under the age of 18 to smoke. So if they enforce the law, we don't have this problem. Now, maybe they are not enforcing the law. But certainly this little operation we have here where we are going to have the Federal Government spend $200 million a year to go around and have all these people inspecting to see if the convenience stores are checking IDs up to people age 27 is absurd. That is not going to work. It will build resentment. We need to say, States, what can you do to enforce the law? Maybe all the enforcement should go not to just the person selling the tobacco product. I am all for the States, if they find somebody selling tobacco or alcohol, frankly, to that minor, there should be significant penalties. That is the reason the laws are on the book. They should enforce the law. The penalties should not be just on the person selling but on the person buying or the person consuming. There are laws if you are driving under the influence, you get a DUI, they can take your license away. Maybe we should have restrictions and penalties on the consumer if they are breaking the tobacco consumption laws. Maybe it would be a financial penalty, maybe it would be that they have to do community service. Maybe they have to clean up a park. Give the States some flexibility to put some penalties on the consumer. One of the reasons I didn't smoke is because I had a football coach who said, you smoke, you are out of here. Everybody else in our group understood that there was a penalty, there would be a price to be paid. So let's put it back on the individual. Let's turn it around. We can do some things like that. What I see here is a massive effort to conceal, disguise, slide in under the radar screen, a very big tax price increase. And the way it is done is going to have minimal impact on reducing consumption among teenagers because we slide it in stealthily. It starts at 65 cents and over 5 years it is $1.10, according to this nonsense. Are we going to do it so gradually there is no sticker shock, so there won't be any impact anyway? The Finance Committee said, if you are going to increase the tax, put it up front, that, to me, is at least more honest. Do a tax, do away with the nonsense of hundreds of billions of dollars in industry payments. The tax is 24 cents now, so it's going to 39 cents. If Congress has the votes to do it, make it another dollar, add it on, vote on it. I probably won't vote for it. But do it honestly. The way we have here is so misleading and deceptive. Instead we are going to talk about volume reductions, and we are going to talk about inflation adjustment and about these payments, and I am going to bring up the point that some companies don't have to pay. If smokeless companies produce less than 1 percent, they are exempt. So what are we going to do? We are going to put penalties, big assessments on some companies; but a new startup company doesn't have to pay this $1.10 assessment. That is a big advantage. I have a feeling that this bill is going to cause new companies to crop up all over the place. I think the arguments made by the Senator from Utah and others about having a black market are very real. These commodities aren't that hard to smuggle or hide. I think if you put in this kind of incentive, you will have the same thing happen as it did in Canada and in other countries in Europe. You are going to find a lot of contraband, a lot of hidden stuff, and people smuggling tobacco like they used to be smuggling liquor. There is a lot of money to be made in the process. If they are smuggling tobacco tax free, there is money to be made. And there is money to be made in drugs. Smuggling under this bill is illegal. But the financial rewards will be very lucrative. If a person figures out the value of a truckload of cigarettes, you will realize that there is a real incentive if a person can get around the law and paying these taxes. The taxes are going to be greater, certainly, than the product. I stopped in a gas station last weekend just to see what tobacco prices were. I didn't know; I don't buy tobacco. There were some cigarettes selling for $1.24 a pack, and another for $1.84, and another for $2.02. People say most of them are about $2. The more popular brands were the higher-priced ones, closer to $2. That is with the tobacco tax of 24 cents. If it goes up another 15 cents--this bill purports to take it up to $1.10, and that is without the look-back penalties. If you add that back in, you are looking at probably close to a $2-per-pack tax that is in this bill. So taking a product right now that sells from $1.24 to $2, you are going to add $1.50 to $2 in taxes very shortly on consumers. Is that going to be an incentive for people to smuggle cigarettes and get around the law? I believe it is. Certainly, there is incentive. I hope they won't be successful. I don't want to set up a black market or encourage that type of activity, but I am afraid we will be doing it. Finally, Mr. President, let me just say that I am disgusted about the procedure. I don't say that very often. I am part of the leadership, but I am disgusted by the fact that you have one committee, the Commerce Committee, writing the finance portion, writing the agriculture portion, and they didn't do a very good job. I am disgusted by the fact that the bill changed and the administration rewrote the bill over the weekend. They didn't consult the Commerce Committee, or the Finance Committee, or the committees of jurisdiction dealing with welfare, child care, the committees that wrote those laws, people that had the staff and the experts who knew what they were talking about. The administration put in a lot of their wish lists. I am disgusted by the fact that we would set up a whole new trust fund and say it is limited to $1.10 tax, when it is not. Let's be honest with people. This is not the way to pass legislation. The Commerce Committee is not a tax-writing committee. They did a crummy job. I am disgusted. The tax on one can of Skoal will be one level, and on a competitor it would be 30 percent less. I am disgusted by the fact that one cigarette company is not going to have the excise tax that another cigarette company is going to have. Wait a minute, this is a national excise tax, but some companies don't have to pay it and some companies do. That is not the way you do business. I don't care if you are small or large. Excise taxes are supposed to be across the board. They didn't do that. I am also disgusted by the fact that we would end up passing a bill to allow trial attorneys to make $100 billion over the life of this bill--probably $4 billion a year over the course of this bill. That bothers me a lot. That reminds me of what motivates this bill and it reminds me of the movie ``Jerry McGuire,'' where someone is screaming, ``Show me the money.'' That is what is driving this thing. It is not just about curbing teenage smoking. That is a great public relations campaign, and I will stand with anybody to try to curb teenage smoking and drug use. I emphasize ``drug use,'' because there is silence in this bill about that. We are not going to pass a bill, if I have anything to do with it, unless we have a significant effort to combat not just cigarettes but also marijuana and other illegal drugs that are much more hazardous, dangerous, and deadly. I think this bill needs a lot of work. My guess is that it is probably not fixable with just a few amendments. I don't think we should be in a real rush to pass it. I have spent the last three nights staying up past 1 o'clock reading this bill, trying to understand how it works. I still have a lot to learn about this bill. Before we pass the biggest tax increase, the biggest spending program considered by Congress in years, I think we ought to know a little bit more about it. So I urge colleagues to do their homework, consider serious amendments, not frivolous amendments to string this bill out for a long time, but to make it better. We are legislators. We are trying to pass law. My opinion is that this is a bad bill that needs to be improved significantly before we let it become law. I will reiterate my statement that I will work with any colleague, Democrat or Republican, to try to fashion a bill that will reduce teenage consumption of drugs and tobacco. But I don't think we have to spend hundreds of billions of dollars to do it. I don't think we have to turn over massive amounts of power to bureaucrats to do it. So I look forward to working with my colleagues to try to make that happen in the next few weeks as we consider this legislation. Mr. President, I yield the floor and I suggest the absence of a quorum.

Mr. NICKLES. Mr. President, what about the money? Now we are talking about money. The States are going to get 40 percent of this amount, and they can spend half as they want, and the other half is spent as the Clinton administration wants. They can spend it on public health--and we are all for public health. That is going to get 22 percent. So we are going to grow a lot of government in that area. Health-related research, we are all for that. Farmers' assistance, we are going to make farmers millionaires. Maybe these farmers were thinking about selling their property last week. Now, they hear Congress is getting ready to pass a bill and they say, ``I might get 4, 5, 10 times what the property is worth if I hang around.'' It would be interesting to see what is happening on tobacco farm prices right now in North Carolina, Kentucky, Virginia and other places, because Congress is going to pay them billions of dollars. We are going to pay them so much--not per acre--per pound of quota, and we are going to make a lot of them a lot wealthier than they have ever been. Guess what? When we are done paying them they can still grow tobacco. We can buy their farms cheaper than what will be paid under these two proposals right now. We can buy the land, have the Government take over the land and turn it into a park. I shouldn't say that out loud, because somebody is going to propose it. We are going to make people very, very wealthy because they hold a document called an allotment. It goes back to the New Deal. If you believe in free markets, it is just totally wrong. Yet, we are going to compensate them; we are going to buy them out. Let me go through some other new spending provisions. There is a Medicare preservation account. Frankly, that is important, but I tell my colleagues, it wasn't in the Commerce Committee bill. It wasn't in the Finance Committee bill. It appeared Sunday or Monday night, and I object to that. I object to the administration coming in and saying, ``Oh, we have some new ideas here,'' as they did with their volume adjustment. We have child care development block grants. This is very interesting. This was put in the Commerce Committee bill, and I objected to it. One, they don't have jurisdiction over child care development block grants, but they were putting it in anyway. They are not the committee of jurisdiction on that. I don't know if they know anything about it. They put the money in. The Finance Committee took it out. Guess what? The Clinton administration put it back in. I am troubled by that. Then, I find they did some other things. They changed formulas for child care programs. I wonder if my colleague from North Dakota knows that. They changed the formula. We have a State match formula for Medicaid. The match in most States is 50-50. In some States, it is 70- 30. This bill now reduces that State match for child care to 20 percent, because they want more child care money spent and more individuals to qualify for it. The States actually have more money now in this program than they know what to do with. People were not taking advantage of it, so they reduced the State participation down to 20 percent. The Federal Government for child care, with this increase, is going to pay four times as much as the State pays for it. That is an entitlement. That is a change, and the Commerce Committee has no jurisdiction over that. They did it. They also have report language that says, ``Hey, let's spend about $4 billion per year on this program.'' This is a 25-year bill. That is $100 billion. It was just added. Does anybody know it? Like I said, it was in, it was out, now it is back in. They changed the Medicaid provision, which is wrong. They put in a brand new children's health care provision, which basically reopened the welfare bill. The bill would add $25 billion for States to do Medicaid outreach on children's care. We debated welfare. We passed the welfare reform bill. Now, the administration is coming through the backdoor on the tobacco bill saying, ``Let's expand the welfare bill.'' They did it in the middle of the night. It did not pass the Commerce Committee. They didn't ask anybody in the Finance Committee who worked on welfare reform--not one person, not staff, not anybody. They just put it in. They also put in a provision that allows for presumptive eligibility outside the cap funding for children's health care. Last year, we passed children's health care, a $24 billion. We increased cigarette taxes to do it. I thought it was too much. I didn't support it, but we passed it. It is now the law of the land. Guess what they did in this bill? They just put in this new language. It was not in the Commerce Committee bill. It was not in the Finance Committee bill. The administration put it in. It sickens me to know that the administration thinks they have the ability to rewrite this bill. It may have Senator McCain's name on it, but it is the administration's bill. Now, they are opening up the welfare bill, and they are opening up the kid care bill we passed last year for a massive expansion. These new provisions are estimated to cost $400 million per year. They open up the balanced budget agreement. That was part of our balanced budget agreement package that we negotiated and fought so hard for. Again, they cannot find enough people to qualify for the money under the language that we already have, so they are trying to figure out new ways to spend more money. We have new programs for cessation and other treatments, Indian Health Service, education prevention, counterads, which incidentally, I will support. This paltry bill is spending hundreds of billions of dollars. Do you know what it spends for countereducational ads to discourage the consumption of tobacco? Mr. President, $500 million a year. Big deal. Everybody says, ``Hey, we need to pass this bill so we can reduce teen consumption of tobacco.'' So $500 million out of a total of about $20 billion dollars almost every year. All the rest is for other Government spending; in some cases, any Government spending. The national educational effort to convince people that smoking can bring about cancer is pretty small out of this total package. It has an Institute of Medicine study, National Institutes of Health--all of these are getting pro rata shares of money that would be authorized--Centers for Disease Control, National Science Foundation, National Cancer Clinical Trials. That program wasn't in anybody's bill. The administration put that in either Sunday or Monday. They have money in here for a State retail licensing program, State grants, of $200 million a year. It is on page 118 of the bill. I will just tell my colleagues what this does. I am embarrassed that we would put language in that allows this to happen. But I want my colleagues at least to know it so that maybe they will agree with me. I will have an amendment at some point to strike some of this language. The State retail licensing program codifies that portion of the FDA regulations. It provides for $200 million a year and, basically, it codifies the FDA regulations dealing with selling tobacco. That is on page 119. It says: Shall prohibit retailers from selling or otherwise distributing tobacco products to individuals under 18 years of age, in accordance with the Youth Access Restrictions regulations promulgated by the Secretary. Let me mention what that one little paragraph does. That paragraph says we are going to set up a whole mechanism to find out whether or not retail establishments are selling tobacco to teenagers. Maybe you say, ``Hey, I don't want retail establishments selling to teenagers.'' So how are they going to do it? There is $200 million which they give to the States in block grants. The States have to contract to set up inspection teams to do random inspections across the country to find out whether or not they are complying. What if they don't comply? The fines and penalties are very, very significant. I looked it up. The fifth noncompliance the penalty is $10,000. For the sixth there is an even greater penalty; it is not just monetary. So the Federal Government is going to train these inspectors. They are going to go out and do random audits. And I just have to think, what are we doing? How far are we going in this Government police business? In the committee reported bill there would have been so many inspections per State. Each individual State had a list of how many inspections. I will talk about this later, because I plan on having an amendment on it. But I say on the floor today, I believe, there have to be 4,000 inspections--smaller States less, bigger States more. The bill was mandating thousands of inspections where these people would be going by and seeing if somebody is purchasing cigarettes. Guess what? It is not just purchasing under age 18; they are checking to see if the establishment is checking IDs for people up to age 27. So you are in noncompliance if you are a gas station and you sell cigarettes to somebody who is 26 years old. That is a violation if you do not check their ID. You are in violation of these Federal regulations if you do not check their ID. Now, I am going to have a different speech talking about FDA regulations. But my point is, this bill sets up a $200 million new program to give money to the States. The States monitor this as we deem appropriate on the Federal level. I find that to be absurd. And the Federal Government, with its wisdom, says, ``We believe you should check everybody aged 27 or less. If you don't check them, you are subject to fines of up to $10,000.'' Wow. Now, think of that. You have some burly Marine who is 25 years old from the Marine camp in North Carolina who comes in, and he says he wants a pack of cigarettes, and you can tell he is more than 18 years old. And you are going to ask this guy, ``Oh, I can tell you're a sergeant major, but we want to check your ID"? I don't want to ask him to do that. But you could be fined up to $10,000. That is in the FDA reg. We are getting ready to codify the FDA regs. We are getting ready to deem the FDA regs as law, which is a very bad idea. The FDA can come up with regs. They cannot write law. They cannot write law. Their regs, in my opinion, are unconstitutional. We just cannot deem something unconstitutional as law, as this bill would propose to do, whether it be in advertising or otherwise. Just to give you an example, the FDA regs said it was unlawful for tobacco companies to develop advertising gimmicks such as a hat. I have a staff member who has a hat that says ``Marlboro'' on it. Heaven forbid, what outlandish behavior. We have the Federal Government saying, ``You can't have a hat that has `Marlboro' on it or `Winston' ''? Give me a break. And there are penalties for noncompliance with that. The FDA came up with some outlandish regulations. We are just going to deem those regulations as law? We are the legislative body. I think we should clarify what FDA can do. I don't mind regulating nicotine. I do not mind giving FDA some additional authority if we clearly define it, but Congress should define it. We should not just take their regs and say, ``Here. Whatever you've said is fine. It's law, no matter what court cases are already decided.'' Wait a minute. If they went too far, they breached the Constitution, we are just going to deem it as law? That is not good legislation. That is just doing whatever FDA wants. Again, this administration wrote the bill. But we should not adopt those provisions. We are the legislative branch. We are the equal branch of the administration. Why let them write this bill? Why help them pass a bill which has no tax relief, spends hundreds of billions of dollars, and its impact on smoking is very questionable? Mr. President, there is a lot of new spending. I am going to submit for the Record several specific references. I have heard people say this bill has 17 new agencies. It has a lot more than that. Mr. President, I think I have mentioned all these. I will run through this other list in a minute. It has Indian tribe enforcement grants, Indian tribe public health grants, tobacco farmer quota payments, tobacco community grants, farmer opportunity grants, tobacco worker transition program, USDA operation of tobacco program, international tobacco control awareness effort--brand new; it was not in either bill, was not in the Commerce Committee, and was put in by the administration Sunday or Monday. Compensation to tobacco vending owners: That was in the Commerce Committee bill. Let me just touch on that for a second. Everybody knows the FDA regs say we are going to ban vending machines. Well, if Congress wants to ban vending machines, Congress should do it. And then you say, ``Well, wait a minute. Shouldn't we compensate the vending machine owner?'' It is logical. As a matter of fact, the Constitution says you should not confiscate somebody's property without just compensation. What do we do in this bill? We set up a corporation. And the corporation is to deem what is just compensation. I have had people come in and lobby me--some of them are very good friends --and say, ``Boy, we need this in there.'' I say, ``What kind of compensation are you talking about? How much do those machines cost?'' ``Well, they might cost $1,500, $2,000, $2,500, something like that.'' ``How much do you envision taxpayers paying you for that machine?'' ``Well, we're kind of thinking maybe $8,000 or $10,000, something along those lines.'' That troubles me. ``Well, we were going to make money off that machine for the next several years, and we would like to have the present value of the future earnings of that machine since you're taking it away from us.'' Maybe they have a legitimate argument, but that bothers me. It is the same argument that we are going to be making on tobacco farmers. Are we going to be giving them the future value of the earnings potential of that farm for a long number of years? I do not want to do it. And I love my friends from the tobacco States, but I do not want to do that. I do not want to do it on vending machines either. I just think that is a mistake. We are getting ready to pay--if we allow this legislation to go forward,''such sums as necessary.'' We are going to be spending lots and lots of money. This bill has a section in it, Mr. President, called ``asbestos trust fund.'' Now, I raised this with my colleague, the Senator from Arizona. The bill that was reported out of the Commerce Committee contained a $21.5 billion asbestos trust fund, originally funded separately by the tobacco companies. I objected to that, and so they agreed to fund it out of the larger trust fund. Then the Finance Committee struck it altogether and said if we are going to set up a new compensation program, we should look at it more closely. And if we do it for asbestos, shouldn't we also do it for black lung? Shouldn't we do it for brown lung? And shouldn't we do it for textile mills? Shouldn't we do it for any other number of lung diseases related to occupation? I do not think you can stop just with asbestos. I think you have to look at black lung, you have to look at brown lung, you have to look at all of them. So the cost of this, the $21 billion, could grow like cancer, and would. I made these points in the Finance Committee. We struck it in the Finance Committee. This was never a request by the administration, and never a request by the Commerce Committee. Then it was put back in by the Commerce Committee anyway; it is back in. They delete the authorization language and so on, but they authorize Congress to spend tobacco money whenever Congress passes an asbestos bill. You can tap into the fund an unlimited amount of money. It does not say $21.5 billion, it just opens the door. I think that is grossly irresponsible. Does that mean I am not sympathetic to somebody who had asbestos problems and also is a smoker and had lung cancer and has a problem? No. I am very sympathetic. But I am also looking at what we are doing here. And we are in the process of expanding a program greatly out of control. It has money in it for the Veterans Affairs' tobacco recovery fund-- not specified; wide open; no limit to how much it could cost. Is has an attorney fee arbitration panel. I touched on this before. This arbitration panel is a three-member panel, with no limit as to how much this would cost. I heard some people say, ``We can't do that.'' Now, wait a minute. Everything else has limits. I am going to submit this list of programs for the Record, but we have about 30-some-odd guidelines on how this money should be spent. But we are going to leave a blank check in here for attorney fees? Now, give me a break. Congress is in the process of raising these taxes, putting this money in the fund. Congress is also responsible for spending the money: ``Here, States, here is how you spend it. Here is how you must spend it. Here is how we're going to spend it. And we can place restrictions on what attorney fees should be. Right now if we pass this bill, the clear winners are trial attorneys. The clear losers are consumers, low-income smokers. They are the losers. The trial attorneys are the victors. They are the winners. They win big time. They become millionaires--billionaires, maybe in some instances. And the losers are the people who see their total Federal tax liability increase by 44 percent if they make less than $10,000. They are the losers. They are big-time losers. Are we going to fix it? I hope we will fix it. Mr. President, I ask unanimous consent to print in the Record attorney fees from the States of Mississippi, Florida, Texas, and Minnesota.

Mr. NICKLES. No, I won't yield. I am going to continue or I will never get done, and then I will be happy to yield for a question. The spending side of this equation, I mentioned it has a couple of entitlements. The States get 40 percent of revenues. We tell the States: You have to spend half of it as the Clinton administration decreed. You have to spend half as they said. It must be on children's health, child care, child welfare, substance abuse, education, children's health insurance--any of their little social programs that they like. Granted, the Clinton administration wants to expand the welfare state. So they say, here, States, we know that you initiated these lawsuits and you were winning some of them, but, since now we are going to take this over and federalize it, you have to spend the money the way we want. So the bill restricts half of the state money and says: States, you spend it in a welfare-acceptable or child-acceptable manner as the Clinton administration dictates that it be spent. And then they say: States, you can spend the other half any way you want to. So that is the way we are going to increase government in the States. States, congratulations, here's your money. In exchange for that, we are going to limit your ability to sue the tobacco companies. I can see why the companies walked away from this deal. They made a deal with the Clinton administration and the administration broke it, and they can still be sued in lots of areas. Oh, well, there is an $8 billion cap. I can see a race to the courthouse. I am going to support the amendment of the Senator from New Hampshire to strike protections for the tobacco companies. Some people say, if you are opposed to this bill, Senator Nickles, you must be in favor of the tobacco companies. This bill does the tobacco companies a big favor by limiting their liability to $8 billion a year. The tobacco companies are saying they are not even part of it. Why should we give them an $8 billion limit of liability? Why? I don't see any reason to do that. I agree with the Senator from New Hampshire. So I am not going to give the tobacco companies the protection they really want. Why give it to them? It is the proponents of the bill who are trying to do the tobacco companies a big favor, not some of the opponents. (Mr. FAIRCLOTH assumed the Chair.)

Mr. NICKLES. Mr. President, I am also going to insert a table that shows new tax assessments and penalties that are in this bill. The national tobacco settlement trust fund is what I am going to talk about now. This is the trust fund, the big kahuna. There are a lot of other taxes, penalties, but this is the bulk of the money. If a person was interested, they could look at this provision in the bill. If you go to page 179, it talks about the trust fund. You can see on page 181 that it says tobacco companies, in the first year, pay $10 billion. Then on page 182, it says--in the first year, you also pay $14.4 billion. That is the reason why the first year payments are $24.4 billion on my chart. It doesn't say anything about a $1.10 tax, or any other tax. It says, industry, you pay $24.4 billion. I have heard some people say, well, we are going to raise the tax gradually to $1.10. It starts out at 65 cents. The only mention of a per pack tax is in the committee report. It starts at 65 cents and ends with $1.10. I am just telling you that those numbers don't add up. I have told this to my colleague from North Dakota, and maybe he will believe me by the time I finish this presentation. The bill doesn't mention $1.10. We are passing a bill, not a committee report. We are passing a bill. The bill says in the second year the companies will pay $15.4 billion. The third year is $17.7 billion, then $21.4 billion, and then $23.6 the fifth year. Thereafter, it is adjusted for inflation. That is where these numbers come from. These numbers are adjusted for inflation. At a minimum of 3 percent, regardless of whether there is any inflation or CPI, whichever is greater. The bill says a minimum, so I put in the 3 percent. Now, some of my colleagues and the administration said this bill raised $516 billion. That number is in the committee report. The committee report embarrasses me. I am embarrassed by the work that the Commerce Committee put together, but frankly I shouldn't really blame them. I want to blame the administration because, frankly, they wrote the bill. It wasn't the Commerce Committee; it was the administration. The administration-drafted report even has a section that says payments will be no greater than $516 billion. That is hogwash. As a matter of fact, I have a letter from OMB that says you only compute $516 billion if you deflate the industry payments to constant 1999 dollars. That is where they get $516 billion. Those are constant 1999 dollars. They make it look a lot smaller than it is. Frankly, that is not the way we do accounting in the Senate. The bill says, here are the payments and they are adjusted for inflation, and, frankly, these are conservative because I will tell you that sometime in the next 25 years, you are going to have more than a 3 percent inflation rate. We know that. So I am going to tell you that the $755 billion in industry payments over the next 25 years is conservative. It is much more conservative than what will actually happen. I will also mention that I didn't add look-back assessments. The administration, when they said $516 billion also didn't add the look-back. Then, they increased the look-back to $4.4 billion when they rewrote the bill over the weekend. The administration rewrote the bill over the weekend, not the Commerce Committee or the Finance Committee. The Finance Committee reported out a bill and some amendments and said, let's scrap this industry payment nonsense and come up with a tax increase. I didn't support it--a $1.50 tax increase--but at least it was honest. This bill is very misleading. These industry payments are very deceiving. We ought to be ashamed of ourselves. I will talk about the look-back provisions in a minute. I didn't even add the look-back, yet, but if you add the look-back at another $130 billion the total tax increase is $885 billion. These are just the facts. These are the facts that you get if you read the bill--if you read the bill on page 182, page 183 and page 184. Then you find out that they did a lot of other silly things in this bill. I guess silly things maybe to protect certain constituents or certain parts of the industry. But, if you think you are passing a $1.10 tax on all tobacco, you will find out that they exempted some companies. They exempted some companies. I thought excise taxes were excise taxes, like excise taxes on gasoline--the Federal excise tax is on all gasoline, made in North Dakota and Oklahoma. Except perhaps for gasohol. I don't think we should exempt gasohol. But we do. But this bill exempts certain companies from the tax. If their sales are less than 1 percent, they pay no tax. What does that mean? You already have a 24-cent Federal excise tax on cigarettes. Everybody pays it. There is no exemption on that. Congress has already increased that in the future to go up to another 15 cents. That is going to be 39 cents. Everybody pays that. But this committee said for this additional tax or fee some companies need not pay. Think about that. Everybody else is going to have to pay this. Let's say the tax is $1.10. I think it is much more than that. But most companies will have $1.10 additional cost put on their products, and some companies won't. That makes sense, doesn't it? I also looked at the tax increases on other products. I would love to have a sponsor of the bill explain to me how they did this. Take a product like snuff. I calculated the tax increase on snuff, that little round package, you know, you put a pinch between your check and your gum. The tax increase on snuff is over 3,000 percent. That is a significant tax increase. Right now it is 2.7 cents per little can, and it goes up to 85 cents. That is a pretty good increase. Maybe 85 cents is the right amount. But I will venture to say nobody in here knows that. That little can costs about $3 and something. That is a pretty good hit. We at least ought to know what we are doing. I don't think anybody here knows what they are doing. Then we find in the bill that some smokeless tobacco companies, small manufacturers, are getting a smaller tax increase, 60 cents. For most of the snuff people, the people who make these little round things, we are going to increase their tax by 82.5 cents. But for some people we are only going to increase it 60 cents, because they are small, or maybe because their Senator said, ``Hey, they are not part of the problem, they are not very big. They sell less than 150 million units.'' I thought we were interested in children's addiction. So we are going to give this company a 20-some-cent advantage over other companies? That is in the bill. That is on page 185, if anybody cares to look at it. I wonder how many of us really looked at this bill. Excise taxes, if they are going to be on snuff, should apply to everybody. But we didn't do that in this bill. I say ``we,'' the Commerce Committee. The Finance Committee did tax everyone, and in proportion to the tax on cigarettes. Finance said, ``Let's scrap all this industry payment nonsense and have an excise tax.'' I am going to show you that this tax is a lot more than one dollar and a dime. And I don't think there is any question it is more than a dollar and a dime. Yet, people are still under the facade that this is $1.10. Why? Because OMB said it is, and Treasury said it is. I don't think that is the truth. The bill says, here is the amount of the industry payment, pay it. Not everybody has to pay. One company made a deal, and said, ``Hey, we have already settled. So we are not part of the problem. So we don't have to pay the excise tax.'' They have a much better deal. It is worth hundreds of millions of dollars. We are getting ready to pass it. I don't think that makes sense. I think we ought to be ashamed of ourselves the way we are legislating. There is a reason why we have committees of jurisdiction. And we violated it grossly. I thought maybe we fixed it when the Finance Committee took this bill. But, obviously, the Commerce Committee and the administration said, ``No, we don't want to do that. We like what we have.'' I will tell you why. Because they are going to get more money, in my opinion, than they would get at $1.50. I was halfway tempted to vote for the amendment of the Senator from Massachusetts amendment to raise the tax to $1.50. If you had a real tax at $1.50, I think it raises less money than the figures we are talking about. Maybe I am wrong. The press is going to report $1.10 and $1.50. That is what the press reports. I think this payment scheme equates to more than $1.50. This chart shows $40 billion or $50 billion per year in the future. Guess how many packs are sold a year? About 24 billion packs a year. If you have a $1 tax, assuming you had no reduction in consumption, you are talking about $24 billion. This bill is in that neighborhood already in the first year--not just the fifth year. We are talking about the first year. That is going to be about a $1 tax paid for 1999. You have the $10 billion initial payment. That equates to about $1 a pack. The tax on snuff and smokeless, and so on, doesn't raise a lot of money cumulatively, but it is a huge tax increase. On chewing tobacco, the tax goes from a very small two-and -a-quarter cents per 3 ounce pack of chewing tobacco to over 40 cents--almost 41 cents. That is a 1,711-percent increase in one fell swoop. That is a big hit. I think it is a nasty habit. If you want to tax it and eliminate it, maybe that is what some people are trying to do. But we at least ought to know what we are doing. I would venture to say that maybe a lot of people in the Senate don't. I want to talk a little bit about the look-back provisions. I think I heard Senator Hatch, and others, say that the look-back is unconstitutional. I think he is right. I will tell you, I am not a constitutional scholar. I will not enter that debate. I will tell you, it is unworkable. I heard somebody say the industry has signed off on the look-back provisions. I have not been talking to the industry, but I am pretty sure they are planning on contesting them on constitutional grounds. And they are pretty confident--at least that is what my staff tells me--that they would win. What does the look-back do? It could raise a lot of money. And evidently the administration thinks this is real money and it is going to happen because they increased the amount to $4.4 billion over the weekend. The look-back grew by over 10 percent over the weekend. It is much higher now than when it passed out of the Commerce Committee. That is interesting. How does it work? If a person was interested, they could look on page 106 of the bill and find the look-back section. This is kind of interesting. How does this work? Is this going to be a real incentive for companies to curtail smoking? I found out these provisions are very interesting. They start on page 103 of the bill and go through to page 109. I will just talk about this for a second. The look-back says the Secretary--talking about the Secretary of Treasury--shall conduct a survey to determine methodology and the percentage of all young people who use a type of tobacco product within the last 30 days. It says ``a type of tobacco product within 30 days.'' He is going to take a survey, a poll. A lot of us are in the political business. All of us in the Senate take polls. The Secretary of the Treasury is going to take a poll. Keep in mind that of all tobacco consumption, only 3 percent of it is done by teenagers. Keep in mind that it is against the law for teenagers to smoke in every State. It is against the law to smoke if you are less than 18 years old. He is going to take a poll and find out how many are trying tobacco. These numbers are going up. Maybe they did it once, or more. They are going to take a poll. The poll is going to also specify: ``Did you use tobacco?'' and ``What brand did you use?'' Then there is a complicated formula. But if a tobacco company's numbers don't come down, then we are going to be subject to special assessments. I should mention more about the poll--this is interesting. Every poll that I have ever seen has pluses and minuses. There is a range of plus or minus 4 percent. This cannot be entirely accurate, because they are not going to ask every teenager age 11 through 17, ``Did you smoke?'' That wouldn't be too cost effective. They might do it maybe for that reason. On page 106, it says, the survey is deemed conclusively to be proper, correct, and accurate for purposes of this act. They deem their poll whenever they happen to take it to be accurate. That is interesting. I just think of the games that could be played with that. Let's see, if they took their poll around the Fourth of July, there may be a greater instance of tobacco use on the 4th of July, or maybe the Memorial Day weekend, or maybe the Labor Day weekend when people are going to the beach. If they want to jack the penalties up, ``Let's take the poll then.'' I just fail to see that this is a good way to do business. If the company doesn't meet the underage tobacco use goals as outlined by this bill, then there would be significant penalties--very significant penalties, up to about $4.4 billion, and indexed for inflation. So on my chart the totals increase rather significantly to $130 billion. Those aren't tax deductible. Is that really workable? Then there is another section. There is an additional look-back assessment on brand-specific underage tobacco problems. If you look on page 112, which talks about if they miss their percentage share, tobacco companies could have an additional surcharge of $1,000 per teenager. The amount of the manufacturer-specific surcharge for a type of tobacco product for a year under this paragraph is $1,000 multiplied by the number of individuals for which such firm is in noncompliance with respect to its target level reduction. So we have target-level reductions. It starts out at 15 percent. It gradually increases to 60 percent. They are going to take a survey and find out what brand of cigarettes this youngster is smoking. So in this random survey, if a bunch of kids say, ``Yes, I had a Marlboro,'' mark them down, and for every child they determine smoked that brand of cigarette, they are going to assess the company another $1,000. Now, I find that to be ludicrous. There are hundreds of brands of cigarettes--hundreds, and so we are going to have the Department of Treasury conducting this poll asking teenagers did you smoke. And if you did, what brand? And it may be they can remember the brand, maybe they can't. Maybe they smoked one cigarette; maybe they bummed a cigarette; maybe they don't tell the truth; maybe they don't respond; or maybe whatever. We are going to be assessing penalties to the tune of $1,000 for every teenager deemed by this poll to have used this particular product. That is ludicrous. I want to warn my colleagues. I may not have the votes, but I am going to probably try and strike that. If we don't strike that, it is going to come back to haunt you. You are going to be embarrassed because we put language in here that says this poll was deemed to be accurate and therefore whatever the Secretary says is law and as a result here is your penalty. We have determined that there are 10,000 youngsters in the age category who are using your brand and they are age 17 or less, and therefore we are going to sock it to you. This doesn't make sense. If you want to figure out ways to punish tobacco, to fine tobacco, do it. But this is not the right way. This is not workable. You should trash this whole thing and say, if you want to increase tobacco tax $1.10, do it. Do it tomorrow. This thing phases it in over five years. My point being, if you are going to try to reduce consumption, you want to have a sticker price shock. You don't phase it in over 5 years. They will never see it. They won't know it. It won't make the reduction in use. It won't get consumption down. It won't be effective. Wow, what did we do. We raised hundreds of billions of dollars, but did we achieve our objective? I don't think so. What did we do? Maybe the objective was to raise billions of dollars so we would have a lot of money to spend. Maybe that's the case. I don't know. I hope not.

Mr. NICKLES

Mr. NICKLES. I appreciate that. I am going to make two other very quick remarks. One, the negotiated look-back with the attorney generals was not product specific. And the amendment that we have before us goes to $5.5 billion in penalties on a product specific basis, which means we are going to do a survey on every tobacco product used by teenagers and assess penalties on every single product. Now, isn't that bureaucratic, isn't that a mess. I hope people will understand this is a big expense. And some people think it is a move in the right direction. I think it is a move in the wrong direction. Before my colleague from Arizona leaves, he said, ``Didn't Senator Lott ask Senator Nickles to head this tobacco effort up and pull all the committee Chairs together,'' and we then assigned the responsibilities to the Commerce Committee chairman? I say that when I was involved in this particular phase of it, that the linchpin of granting immunity--and I see that as a linchpin in this legislation fell to the Commerce Committee. If there was going to be a deal--and that is what the attorneys general's settlement was predicated on--the fact that if you grant tobacco companies limited immunity from class action suits, they will pay so many billions of dollars, about $15 billion. Now, conceivably, that could be put in the Commerce Committee. But I really believe that the Finance Committee should have jurisdiction over the tax. I have been upset about it ever since. I do think that if we are going to have a tax, we ought to call it a tax. We should not hide behind fees and we should not have look-backs assessments. I think these issues are the responsibility of the Finance Committee. And I think if we did that, we would tax tobacco just like we always taxed tobacco. I think the Commerce Committee, with all due respect, did a crummy job. Its bill has different prices for different brands of snuff. It exempts some tobacco companies from a tax. It hits other tobacco companies hard. I find that to be inequitable. I think the tax should be so much per product, and let us just say how much a pack it is, how much a can it is and how much a pouch, so people will know. I believe that very, very strongly. And so I communicate that to my friend and colleague. I appreciate the fact that my friend from Texas has been so patient. I yield the floor. Several Senators addressed the Chair.

Mr. NICKLES. I appreciate it.