NCPA - National Center for Policy Analysis


November 17, 2004

A new proposal allowing Food and Drug Administration (FDA) control over tobacco is loaded with goodies for tobacco farmers, and neither Republicans nor Democrats in Congress appear to be fazed by its $10 billion price tag, says Doug Bandow, a senior fellow with the Cato Institute.

At issue is a proposal before the House that will allow cigarettes to fall under the jurisdiction of FDA rules. In exchange for this government intervention, Congress will pay billions to tobacco producers, says Bandow.

During the Great Depression, the government propped up tobacco prices by issuing allotments to limit supply, which farmers then had the option of bequeathing to heirs or selling to non-farmers. However, the allotments have declined in value due to foreign imports and tobacco lawsuits. As a result, Congress is offering more subsidies in the form of a "buyout," says Bandow:

  • Only 10 percent of the allotment owners will receive more than two-thirds of the buyout cash; over 400 would collect at least $1 million.
  • Currently, 326,000 farmers rent out their quotas to only 90,000 active farmers.
  • The president of the North Carolina Farm Bureau will collect $165,000 from the buyout.

However, after being accused of being too generous with tobacco farmers, the House proposed another bill which would make cigarette companies and smokers foot the bill. If that's not enough to appease taxpayers and punish tobacco companies, about 90 percent of the buyout payments will go to the Southeast, a large Republican voting bloc, says Bandow.

Source: Doug Bandow, "Addictive Allotments," The American Spectator, October 4, 2004.

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