[Congressional Record Volume 143, Number 131 (Friday, September 26, 1997)]
[House]
[Pages H8043-H8047]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      A FLAWED TOBACCO SETTLEMENT

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 7, 1997, the gentleman from Kentucky [Mr. Baesler] is 
recognized for 60 minutes.
  Mr. BAESLER. Mr. Speaker, what I want to talk about today is the 
tobacco settlement that was negotiated between the several attorneys 
general and several of the manufacturers of tobacco in the United 
States.
  It was the intent of those negotiators when the settlement was 
reached to have Congress ratify the agreement and put the settlement in 
place. However, the negotiators and the manufacturers made at least two 
strategic errors in their discussion.
  First, during the negotiations themselves, they did not include the 
constituency necessary to bring this matter to the Congress for its 
consideration. For instance, nowhere during the period of time were the 
farmers in Kentucky, North Carolina, Tennessee, Virginia, and other 
tobacco producing States represented at the table or represented at the 
negotiations.
  Also left out of these discussions were other members of the tobacco 
family who depend on tobacco for a major part of its revenues, such as 
convenience stores. For those who might ask why convenience stores 
throughout this country, between 20 and 28 percent of their net profits 
comes from the sale of tobacco products.
  So the point I am making is it is not responsible to suggest that 
Congress will take the tobacco settlement as proposed and pass it, 
because there is no constituency in Congress for the settlement, 
because the right people were not all included when the discussions 
took place.
  Who do I talk about when I talk about the tobacco family? In this 
Hall, as in the other Hall across the building, tobacco is not a 
popular subject with a lot of people. Throughout this country, we are 
castigated annually, monthly, by a lot of people, some people know 
about us, some people do not. But the tobacco family is much more than 
the manufacturers. The tobacco family in the State of Kentucky are 
60,000 farms of the 90,000 who have allotments. Those allotments 
usually are less than 5 acres, unlike the large allotments in North 
Carolina.
  On these farms, practically for the last 150 years, people have had 
part of their income generated from the production of tobacco. The 
tobacco family also includes the farm implement dealers. It includes 
the feed stores, it includes all the people in the small communities. 
And in my district alone, some 8 to 10 of the counties are most 
dependent on tobacco that are in the United States.
  The tobacco family are the folks who are trying to pay the taxes, not 
the large manufacturers who are in the top 10 companies in the Nation 
or worldwide, but small farms who might make $3,000 or $4,000 a year to 
pay the taxes or to maybe put their kids through school.
  So these folks were not represented when this discussion took place. 
To give you a comparison of what it meant, since in early 1938 to 1940, 
tobacco farmers in this country have been paid a total of $80 to $85 
billion for all their products put together. The tobacco settlement was 
for $368 billion overnight. So it was proper that they be there, but 
they were not.

[[Page H8044]]

  So for this settlement to come to Congress, representing the tobacco 
farmer and the tobacco family, there are certain things that have to be 
included before I and many other people who represent the farmer will 
even talk about it or definitely would even think about supporting it.
  First of all, in Kentucky it is mandatory that the program of tobacco 
be maintained. Throughout this country, different people think 
different things about the program. They say why should the Federal 
Government be involved in subsidizing tobacco. The government is not 
involved in subsidizing tobacco for many, many years. What the program 
means in tobacco, particularly means, is you regulate in burley tobacco 
or dark-fired tobacco in Kentucky or flue-fired in North Carolina, you 
regulate how much can be sold, and you put a base or a floor on the 
price for which it is sold. That is what the program is.
  When the manufacturers do not buy the tobacco during the marketing 
season, then the tobacco goes into a pool that is maintained, and that 
pool of stocks is then sold over the period of years to other buyers 
throughout the world.
  Any cost to maintain that pool is paid for by an assessment against 
the tobacco farm and the manufacturers. The Government has no role in 
that whatsoever. So we say why should the program be maintained? Why do 
you care?
  As I indicated earlier, in Kentucky there are 60,000 farmers that 
have allotments. Each one of these allotments has a monetary value for 
their farm. If I buy a farm in Kentucky of 100 acres and if it has 
10,000 pounds of tobacco, a quota, that means I can easily anticipate 
that I might pay a great portion of the payment on an annual basis out 
of the tobacco.

                              {time}  1515

  Without the program, I have no monetary value attached to the 
tobacco, because anybody can raise it.
  The second reason, other than just to keep the price paid to the 
farmer up, which is important, for those folks in this country who do 
not like our product and who suggest that we should not even be in the 
business, they say, why should we be involved in the program? Well, I 
suggest to my colleagues, Mr. Speaker, that with the price of the 
product up, the folks who are antitobacco would suggest, well, that 
might mean the consumption then would go down, because the cost would 
be higher.
  So on this issue on the program for tobacco in the settlement, it is 
interesting, but we will have several different constituencies that are 
not always together supporting this issue. Those who do not like 
tobacco, are antitobacco suggest, well, we need to keep the program 
because we have to control its production, and we have to keep the 
price higher, and only with the program can we have certain controls on 
what is put on the tobacco, what type of chemicals and so forth, 
because it would just depend on the tobacco from out of the United 
States, and we cannot do that.
  So the program is essential. The program is different in different 
States. In flue-cured it is acreage versus poundage; in burley in 
Kentucky it is basically poundage; and in other parts of Kentucky it is 
basically acreage. So for any settlement to come here, it is imperative 
that we have a program, because without a program, what will happen?
  No. 1, the price of tobacco will drop substantially to the 
manufacturer. Rather than pay $1.90-something per pound for burley 
tobacco in Kentucky in November, the manufacturer will be able to pay 
$1.50, $1.40, next year $1.20. What does that mean? It means that 
people in the tobacco business, especially tenants, could not raise it 
at all, because they only get 60 percent in some cases, 50 percent in 
others, and their expenses are not going down. So we would put that 
whole part of the tobacco family out of business.
  The second thing we would do is we would basically turn over all the 
tobacco production to large corporate farms or even the manufacturers 
themselves. I suggest, Mr. Speaker, that those folks who have a problem 
with our industry would have a bigger problem if that were the case.
  Another reason, when we talk about what is going to have to be 
involved in the settlement, is our quotas must be maintained. This year 
in Kentucky we have nine hundred million dollars worth of pounds of 
burley we can sell throughout this country; $900 million for Kentucky 
alone, the largest demand we have had in history, contrary to what some 
people think.
  If we maintain our quotas at a certain level and our prices at a 
certain level, then the part of the tobacco family that is on the 
bottom of the food chain, which is the farmer, and keeping in mind that 
on a pack of cigarettes, whether we like them or not, if they are 
$1.50, $1.75, I do not know what they are, $1.50 or so, the tobacco 
farmer only gets 3 cents of that. The tobacco farmer is on the bottom 
of the food chain.
  So it is imperative that we maintain the quotas and the allotments 
and the acreage that these farmers presently are allowed to grow, 
because if any settlement comes to this floor that wants to cut that, 
then we are basically going to hurt the farmer to benefit other folks 
in the tobacco family like the manufacturers, and we cannot allow that 
to happen.
  Another thing that has to happen ties to the program. That is, the 
price has to have a level it has had similar to today. One would say, 
why should we guarantee that? For the reasons I indicated earlier. It 
keeps the price of cigarettes up; it allows the tobacco family to 
continue to produce tobacco; and in a lot of my communities throughout 
this State, in the State of Kentucky, the communities themselves could 
not stand the devastation economically of what would happen if tobacco 
was no longer present.
  So any settlement that comes forward must have the program in place 
with a level of production and guaranteed purchases from the 
manufacturers, because really the government will have nothing to do 
with this, it will be the manufacturers who will have to guarantee the 
purchases and at a price similar to what it is today. If that happens, 
then we have an opportunity to discuss it.
  Now, regarding the quotas, it is imperative that our quotas in 
burley, flue-cured and dark-fired others be tied to the world market 
global sales, not just domestic market. Those folks in this country 
will admit, and I think I would share the opinion, that domestic sales 
are going to go down. None of us, whether we are a tobacco farmer like 
myself or like the other 60,000 farms in Kentucky, think we ought to 
try to encourage sales to underage young men and women. The sales to 
underage folks should be vigorously attacked and try to be prevented. 
We know by doing that, and it is proper to do it, that domestic sales 
will go down. At the same time, global sales are going to go up.
  It is interesting to note that probably more people use tobacco 
products in Red China than live in the United States. So when we are 
talking about our quotas and our price from a farmer's perspective, we 
want to tell the manufacturers particularly that we want to make sure 
if international sales go up, which they will, then we want to make 
sure our quotas reflect that.
  One might say, Mr. Speaker, why do that? We want to get out of the 
business. Well, folks, there are 90-something countries that produce 
tobacco, 26 of them export it, and we are not even the largest. In 
Kentucky alone we raise burley tobacco in one part and dark-fired in 
the other. In the burley industry, we raise only 30 percent of the 
burley tobacco produced worldwide. Flue-cured raises only 20 percent. 
So the point I am making is, whether we are in the business or not, 
somebody is going to sell it to the other folks.
  My argument all along has been never try to defend tobacco as 
healthy. It is not healthy. Nicotine is addictive. But there has not 
been one suggestion on this floor, to my knowledge, or even on the 
Senate floor, that we ban the sale of cigarettes, not one. We tried 
prohibition in the early 1920's, and it did not work, and nobody has 
ever suggested that.
  My point is, if one is going to sell it, if it is going to be on the 
counters, I want my Kentucky farmers to have a portion of it, whether 
it is dark-fired or whether it is burley.
  Why is it going to be sold? Well, for selfish reasons, probably. 
There are $12 billion excise taxes generated on the

[[Page H8045]]

sale of tobacco throughout this country. Most States that are involved 
in the lawsuits against all of the tobacco companies receive more money 
from excise tax on the cigarette sales and tobacco products than in 
incurring Medicaid costs. Let me repeat that. Most States today receive 
more money from the excise tax on tobacco products than they incur in 
Medicaid costs.
  So there is going to be no movement to ban the sale, and if all 
Kentucky farmers are out of business tomorrow morning, North Carolina 
farmers are out of business tomorrow morning, when you go down to the 
convenience store Monday morning, you will find the same number of 
cigarettes on the counter and probably more health problems, because it 
is going to come from the foreign nations with less regulations than 
us. And all we have done, if so be it, to put the American farmers out 
of the business, the Brazilian and Africans and Argentines will love 
us, because they can sell the products and not us. So that is why, when 
we talk about quotas and settlement, the quotas of the American farmer 
must be tied to global sales.

  Some people will say we cannot do that because of the GATT Treaty or 
this treaty or that treaty. That is often an excuse to hide behind. 
From our perspective, if we do that, then we can bring the settlement 
to the floor for discussion with the support of the tobacco family. If 
not, we will not support it, because we will be like an elevator going 
downhill, which will be unfair because the manufacturers at that point 
can move out of country and sell the same number of cigarettes they 
could from inside the country, and only the farmer, the person on the 
low end of the food chain, will be the one hurt.
  The third part of any settlement has to be that all costs of the 
program that people believe are incurred by tobacco must be paid 
outside the government. Right now, even though we have a no-net cost 
system, when a farmer goes to the ASCS office or the FSA office, as it 
is now called, in Kentucky and North Carolina and other places, they go 
there to get service. Some people say, well, we should not have let the 
clerk or the assistant there help you farmers. Help other farmers, do 
worry about what everybody else sells, but if you walk in that office 
and talk to that person about your business, they should not help you 
because you are a tobacco farmer. It is not fair. That is what we hear 
here all the time, and it costs a certain amount of money, about $14 
million a year.
  Another thing we hear all the time lately is if hurricane whatever 
comes in off the coast and knocks out your crop, or you get hail damage 
or whatever damage and it wipes out your crop in Kentucky, by the way, 
you should not be able to get crop insurance from the Federal 
Government. Everybody else should, but you should not because you are a 
tobacco farmer. Again, the lower person on the totem poll getting hurt 
the most because of why? Because of the anger at the manufacturer; not 
the farmer, but the anger at the manufacturer. But they are coming to 
get us.
  So those costs each year, we pay for crop insurance. Some years, when 
we have large hurricanes in North Carolina, a number of them rather, we 
have disease hitting Kentucky, it might be that the cost we pay does 
not cover what you have to pay out, so we have a deficit in the 
insurance program. Some people say, well, we should not have that; we 
are in tobacco. Never mind that when we have floods everyplace else, 
and everybody else is paid, but not tobacco. But, saying that, let us 
remove that cost.
  So part of this settlement, we need to have an assessment, which I am 
sure will be agreeable to the manufacturers, that they themselves would 
pay the losses we have on insurance and the administration costs we 
have. Then we could remove the discussion of tobacco from this Chamber, 
because the only people to get hurt in this Chamber, recently on the 
discussion of tobacco, is going to be the farmer, not the manufacturer, 
the farmer, and that is unfair.
  So when we talk about the settlement, we need to maintain the 
program, we need to make sure that quotas and allotments are tied to 
the global sales, and we need to make sure that any costs associated 
with the program are assumed by the manufacturer in order that we can 
remove this discussion from here, because a lot of people at home do 
not have time to explain their votes because they are not really 
protecting big tobacco, they are trying to protect the farmer, but they 
just do not have time to explain, because nobody would believe them.
  The fourth thing we have to have is immunity, and why would we say 
that? Well, the manufacturers want this settlement for immunity, I 
understand. At some point somebody is going to try to go all the way 
down to the food chain to the farmer. I do not know how; we do not have 
anything to do with the manufacturing or the processing, we just grow 
it. Some people in my State look at me as being the only tobacco farmer 
here in Congress, and say, well, how could you grow such a thing? One 
of these days somebody might try to sue us if you are growing it. So if 
we are going to throw immunity around, let us throw it at the farmer 
and all the people associated with it: the warehousemen, the farmer and 
other people in the tobacco business, and that should be the fourth 
thing.
  Let us talk about in case we are put out of business. Lately there 
has been a lot of discussion here, and what is probably the most 
arrogant statement I hear in tobacco country is from outsiders: Why do 
we not help you folks get in some other kind of business? I do not 
think it is arrogance because of meanness, I think it is arrogance 
because people do not have the foggiest idea what our business is.
  Tobacco in Kentucky, as I indicated earlier, on small farms, 2 acres, 
1 acre, 2 acres of tobacco will basically bring about 5,000 pounds of 
tobacco. Five pounds of tobacco could net you close to $4,500 a year if 
you raise it yourself. If somebody else raises it for you, they would 
make about $2,000, or a little less. If a tenant raises it, they have 
all the cost, some of the revenue, they would make about $2,000, a 
little less. So if anybody tells us, let us help you do something else; 
after 200 years of raising this, help us do something else.
  If you knew the terrain of Kentucky, you would find out that you 
cannot run combines over hills that go up and down or go down in the 
valley for 2 acres. You cannot raise vegetables and compete with people 
in California who have been doing it for years; you cannot get that 
kind of return. To assume that a Kentucky farmer would not do something 
else if they could make more money is arrogance, because Kentucky 
farmers are not dumb. They want to make more money with the least labor 
and least exposure as anybody else does.

                              {time}  1530

  So they tell us, ``We will put you in some other business. We will 
retrain you.'' That is arrogance, especially when we consider that the 
same people that want to retrain us do not want to take tobacco off the 
counter. They want to leave it on the counter to be sold in their 
State, because their State generates $600 million worth of excise tax, 
and they want the Brazilians to be able to grow the tobacco, or the 
Africans, not the Americans. So do not insult us and suggest that, do 
something else, it will all work out. It will not happen.
  It is ironic, if we walk around this Capitol, walk around it with 
somebody who knows about tobacco, we will find out, probably to the 
chagrin of many folks here, that the tobacco leaf is commonly displayed 
throughout this Capitol because it used to be the currency of this 
country.
  So when we talk about what we are going to do with the farmer in case 
things go bad, do not give us the suggestion, ``Get out of the business 
now, we are going to help you do something else.'' What we need to do, 
though, is understand that tobacco in the communities can be essential, 
as are other things in other communities.
  If we are going to enter into a program whereby the demand will 
decline and is going to be down, down, down, down, and if there is some 
way we want to say, OK, we want to get our American farmers out of the 
business, for some reason, I have never understood why, especially if 
we are going to have it sold anyway, then we have to make provision for 
the communities and the farmers.
  What are we talking about for the farmers? It is interesting, on the 
other side of this building not too long ago a Senator said, ``I want 
to buy these

[[Page H8046]]

farmers out. I want to give them $8 a pound for their tobacco.'' A lot 
of my farmers in Kentucky run around and said, ``Where is that $8? 
Where is that line? I want to get into it. I want to find it.'' Some 
people threw around $14 a pound. Buy me out. Buy me out tomorrow. Keep 
in mind, they did not say we are going to do away with tobacco. They 
just said we are going to buy out Kentucky farmers, North Carolina 
farmers.
  I tell my farmers in Kentucky, I say when people talk about buyouts, 
you had better ask a couple of questions, four or five questions, 
actually.
  No. 1, what are they going to pay you, $8 a pound? $14 a pound? Now, 
if they pay you that, is it taxable? The Members know it is, 20-some 
percent. We are already down to $6 a pound, are we not?
  By the way, who do you have to share it with? What about the tenant 
farmer who does not have a quota? In a program I had the other day, the 
first person to stand up was a 22-year-old tenant farmer on no quota, 
no quota, but had his equipment. What are we going to have him do, park 
his tractor at the barn? He would get nothing, nothing, after his 
investment.
  We have to ask the question, does $8 have to be shared with different 
people? Should there not be a program for folks in the tenant farmer 
area?
  What about the lessee in tobacco country? We have those who lease 
tobacco from other people. Should the lessor get all the money, or 
should the lessee get part of it, because that is who is doing the 
producing? These are all questions.
  Is it going to be paid in installments, by the way? Some fellow stood 
up and said, ``I would like to take my $8.'' I said, ``Fine. Do you 
want to go here to this settlement? Twenty-five years, get paid $8 a 
pound over 25 years?'' These are questions a farmer has got to ask 
throughout Kentucky, throughout North Carolina, before we jump at what 
somebody might offer.
  The next thing we have to ask, ``What do I have to give up for my $8 
a pound? Do I give up the program? What does that mean?'' What it 
means, they give me $8 a pound. If I have 100,000 or 50,000 pounds of 
tobacco, I get $400,000. It sounds like a lot. It is a lot. But it 
means next year, can I raise tobacco still?
  Some people suggest, ``Sure, if you want to raise it, it does not 
make any difference, we are going to pay you and let you raise it.'' 
That sounds nice. But to our farmers, it is fine for the person who 
owns it, maybe, but the person who does not own it, they cannot raise 
it at $1.30 a pound. They cannot grow tobacco. So they are going to be 
out of business.
  Do you have to give up the program? The question the farmers need to 
ask throughout Kentucky, North Carolina, every place else, ``If I take 
this buyout somebody is throwing out, first of all I do not know why 
they are throwing it around, but if I take it, how much, what do I give 
up? Can I raise it for my own? Can my kids raise it? What is going to 
be the decrease in value of my farm?''
  You have to ask, ``What other costs might I have to incur?'' Because 
right now the program pays the people who grade the tobacco, what 
quality it is, what goes on the market, how is it sold. The program 
involves all that cost now and makes it pay. Farmers pay it. Are they 
going to have to pay more? These are questions the farmers are going to 
have to ask.
  The other thing is, how are the other members of the tobacco family 
impacted? The farmer has to say, ``Do you care how they are impacted? 
How about the fertilizer salesman down the road? How about the fellow 
who sells tractors? What about the person who sells a seed, or about 
the labor, who the only place they work in the summer is tobacco? How 
are they going to be impacted?''
  The point I am making is when farmers are told they are going to have 
buy-outs, or people up here in Washington keep on saying, ``Let us just 
make it easy, let us buy them out,'' they are doing a disservice. They 
are doing a disservice because, Mr. Speaker, they are not answering the 
questions, they are not putting out a program that is clear. They are 
making everybody in Kentucky think all they have to do is line up at 
the FSA office and get their check. That is not going to happen.
  What we need to be doing is trying to see how we are going to 
preserve the ability of people in Kentucky and North Carolina, Virginia 
and other places, to grow this product, since it is going to be on the 
counters, anyway.
  We, Mr. Speaker, should not be trying to export an industry that in 
Kentucky alone this year will generate $1 billion to somebody else. We 
should not keep on wanting to throw in the towel and say, ``Kentucky 
farmers, go home. Quit. Park your tractors. Park your wagons. Forget 
about it. Let the Brazilians have it. No, Kentucky farmers, we are not 
going to take tobacco off the counters. We just want you out of the 
business.''
  When somebody comes down here in this well and makes a motion or 
files a bill, files a bill to say we are going to ban the sale of 
cigarettes in the United States of America, then we talk about buyout. 
Then we talk about other things.
  Because that same individual is going to have to tell every State in 
the Union when they do that, ``By the way, California, you are going to 
have to find $600 million more, plus, a year revenue.'' ``By the way,'' 
some of the western States who are paying for education with tobacco 
products' excise tax, ``you are going to have to find so many more 
millions of dollars worth of revenue.''

  When they come down and they file that bill, then we will stand up 
and talk about how we are going to take Kentucky farmers out of the 
business. But until that happens, there is a certain arrogance about 
the fact that they want to tell our farmers to quit doing what they 
have been doing for 150 years, because they do not like us.
  Now, I suggest, Mr. Speaker, that throughout this country there are 
different industries that have different problems internationally, 
different problems healthwise, whatever; none more pronounced, 
obviously, than tobacco; none on peoples' lips, obviously, than tobacco 
in this Chamber, about who they do not like.
  But in Kentucky, we are talking about 60,000 farms out of 90,000. One 
in five people who work in Kentucky have some connection with tobacco. 
I am not talking about the manufacturers, I am not talking about the 
people, the top 10 international businesses in the world. I am talking 
about farmers who work at factories, farmers who teach school, farmers 
who do other things, and then they go home at night to the tobacco 
crop. I am talking about people who put their kids through school. That 
is who I am worried about. The manufacturers can take care of 
themselves.
  But if we sit in this Chamber and keep on trying to suggest we are 
going to roll the people at the bottom of the food line out of the 
business, it bothers me. We are not going to solve the health problem 
when we run our farmers out of business. In fact, we are creating a 
more serious health problem, because the tobacco that is going to be 
imported into this country will not have the regulations, not have the 
supervision that ours has. It will be bought at cheaper prices. Right 
now in Africa you can buy a pound of tobacco for less than a dollar. 
Manufacturers cannot. In Kentucky they are going to have to pay $1.90. 
Which ones do Members think they would rather buy?
  So, to conclude, Mr. Speaker, the tobacco settlement created a lot of 
discussion, but it was flawed from the beginning. It did not have 
everybody at the table. It definitely did not have the people most 
affected by this at the table, which are the farmers and the families 
of the farmers and the communities which the farmers serve and live in.
  Until that is corrected, and until we understand how we need to 
remove this discussion from these Halls for an industry that has been 
here a long, long time, that does have problems, that no doubt does 
have some health problems attached to it, then that settlement should 
never be placed on the table in this Chamber because it is not worthy 
of discussion.
  I find it appalling that a lot of people are criticizing Congress for 
not taking it up, not taking it up. They should save that criticism 
when they have the discussion to say who all should we have involved 
here, so if we get a settlement, then we have a constituency to support 
it.
  In conclusion, I want to say this. We know in tobacco country we are 
not

[[Page H8047]]

popular in Washington. We know outside tobacco States very few people 
like us, even though there are 30 million people that smoke. We know 
that if we take a vote in here, most of the time we could very well 
lose because of what has happened throughout the country, a lot of it 
out of our hands; a lot probably brought on, justifiably, by certain 
testimony that has happened here in the House that I cannot defend.
  But we further know that in Kentucky alone, we are going to sell 700 
million pounds of tobacco this year, this year; 700 to 800 million 
pounds we will sell at $1.90 a pound. Math would teach me that that is 
close to $1.5 billion that is going to be turned over several times.
  The question I ask, Why should we not, if we are going to have this 
product on the counter, which we are, why should we not let Kentuckians 
sell it, and North Carolinians, and Virginians sell it? That is what it 
is all about. They do not have to like us, but they need to understand 
that I think in this country it is best that we take care of our own, 
than try to export an industry that is so vital to us for the last 200 
years.
  We will be the first to acknowledge we have health problems. We know 
that. But that is not the issue. The issue is, if you are going to sell 
it, we should grow it and we should provide it, not folks from outside 
this country.

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