October 25, 1999

by Peter J.M. Orvetti

Smoke And Mirrors?
I'll Trade You
The Burning Issue

Smoke And Mirrors?

A jury can decide a punitive damages award in the Florida smokers class-action lawsuit against cigarette makers, an appeals court decided Wednesday. The award may cripple the tobacco industry, and tobacco attorneys argued for damages on a smoker-by-smoker basis, AP reports. In July, jurors found the nation's five largest cigarette makers and industry groups had produced a "defective and deadly product."

"Tobacco is under siege," wrote Robert A. Levy in the Cato Policy Analysis "Tobacco Medicaid Litigation: Snuffing Out the Rule of Law". "No fewer than 39 states are suing the industry to recover Medicaid outlays for smoking-related illnesses. Florida has led that effort with a new statute, allegedly resting on principles of equity, that strips tobacco companies of their traditional rights and puts in their place a shockingly simple rule of law: the state needs money; the industry has money; so the industry shall give and the state shall take. During the past 40 years, not a single smoker received a single dollar of damages from tobacco companies, as juries repeatedly concluded that smokers are responsible for their own behavior and their own losses. Yet under the new regimen, if a smoker happens to be a Medicaid recipient, individual responsibility is out the window. The same tobacco company selling the same person the same product that results in the same injury is, magically, liable, not to the smoker, but to the state. By legislative fiat, liability hinges on a smoker's Medicaid status, a fortuity totally unrelated to any misdeeds of the industry… These lawsuits retroactively eradicate settled doctrine and deny due process to an industry singled out for its deep pockets and public image, not its legal culpability."

In 1997 testimony before the Senate, Levy noted, "I do not defend the tobacco companies if the evidence shows that they should be liable. And I would not defend any other industry if similar evidence showed that they should be liable. What I object to and what I do fear with respect to other industries is that states have been able to alter the rules of the game after the fact, to change the rules that were in effect when the products were sold, so as to make it impossible for the tobacco companies to defend themselves in these Medicaid recovery suits."

I'll Trade You

The U.S. trade deficit narrowed to $24.1 billion in August in its first decline since April, AP reports. The July deficit was $24.89 billion. In August, imports hit a record $106.12 billion and the deficit with China hit $6.87 billion, more than with any other country.

Daniel T. Griswold wrote that a trade deficit is no cause for sorrow in the commentary "A Rising Trade Deficit Signals Good Times for U.S. Economy": "The trade deficit is not the cause of bad things, but the result of good things in our economy. It reflects an economy ripe with investment opportunities and flush with consumer confidence… By almost any measure, America's economy has performed better in years in which the trade deficit rose compared to years in which it shrank. During years of rising deficits, the growth of real gross domestic product averaged 3.2 percent per year, compared to 2.3 percent during years of shrinking deficits. If trade deficits really are a drag on growth, why does the economy grow so much faster when the trade deficit is getting bigger? … The biggest threat to our prosperity is not the trade deficit, but what politicians might do in a misguided mission to shrink it."

Griswold made this case in the Cato Trade Policy Analysis "America's Maligned and Misunderstood Trade Deficit": "Contrary to popular conception, the trade deficit is not caused by unfair trade practices abroad or declining industrial competitiveness at home. Trade deficits reflect the flow of capital across international borders, flows that are determined by national rates of savings and investment. This renders trade policy an ineffective tool for reducing a nation's trade deficit… There is no connection between trade deficits and industrial decline. From 1992 and 1997, the U.S. trade deficit almost tripled, while at the same time U.S. industrial production increased by 24 percent and manufacturing output by 27 percent. Trade deficits do not cost jobs. In fact rising trade deficits correlate with falling unemployment rates. Far from being a drag on economic growth, the U.S. economy has actually grown faster in years in which the trade deficit has been rising than in years in which the deficit has shrunk. Trade deficits may even be good news for the economy because they signal global investor confidence in the United States and rising purchasing power among domestic consumers. What matters to the economy is not the difference between imports and exports but the extent to which Americans are free to benefit from the efficiencies, opportunities and consumer choice created in an economy open to world trade."

The Burning Issue

The government of Hong Kong has called on the Chinese region's highest court to ban flag burning, AP reports. "If you offer an indignity to the national flag, you offer an indignity to the state," a lawyer for the government, Gerard McCoy, told Hong Kong's Court of Final Appeal. The flag-burning law, which prohibits the desecration of both the Chinese and Hong Kong flags, took effect just after Hong Kong reverted to Chinese rule in 1997.

Of course, the flag burning debate has raged in the United States for a decade, and in March, Roger Pilon testified before Congress on the right to such protest in a free society: "[T]he flag is not simply the symbol of America; more deeply, it is the symbol of the principles on which this nation rests. Those who would desecrate the flag are thus guilty, at bottom, of desecrating our principles, which is why we find their acts so offensive. Ironically, however, it is those very principles that protect such acts--and restrain the rest of us in the process. In a word, therefore, I am here not to defend flag desecration but to defend the right to desecrate the flag, offensive as the exercise of that right may be to so many Americans. That position may strike some as contradictory. It is not. In fact, there is all the difference in the world between defending the right to desecrate the flag and defending flag desecration itself. It is the difference between a free and an unfree society…

"It is crucial… to understand precisely why the Framers wanted to protect political expression. To be sure, they thought such expression was essential to the workings of a free society: democracy works, after all, only when people are free to participate in the processes through which they govern themselves. But it was not a concern for good consequences alone that drove the Framers: more deeply, they were concerned about the simple matter of protecting rights, whatever the consequences of doing so. The protection of our rights is tested, however, not when what we do or say is popular but when it is unpopular. Stated most starkly, a free society is tested by the way it protects the rights of its least popular members. Sir Winston Churchill captured well that essential feature of our system when he observed in 1945 that 'the United States is a land of free speech. Nowhere is speech freer--not even [in England], where we sedulously cultivate it even in its most repulsive forms.' In so observing, Churchill was merely echoing thoughts attributed to Voltaire, that he may disapprove of what you say but would defend to the death your right to say it, and the ironic question of Benjamin Franklin: 'Abuses of the freedom of speech ought to be repressed; but to whom are we to commit the power of doing it?'"