Commentary

Addictive Allotments

This article was published on Spectator.org, October 4, 2004.

Once upon a time, the Republican Party stood for fiscal responsibility and limited government. That fantasy world disappeared long ago.

A House-Senate conference committee in the Republican-ruled Congress is considering legislation to hand billions to tobacco producers and extend Food and Drug Administration rules to cigarettes. Republican President George W. Bush seems prepared to accept anything that passes.

More spending and regulation together: The GOP, no less than the Democrats, is the party of big government, in case you haven’t noticed.

Tobacco allotments began in the 1930s. Like most of the farm programs, tobacco subsidies make no sense, other than as yet another creative mechanism to loot taxpayers.

When the Great Depression hit, everyone looked for a “free lunch,” a deep pocket to pick. That meant using government to transfer wealth from one’s neighbors. Farmers came up with a complex system of loans, support payments, marketing orders, conservation controls, and even cash not to produce.

To prop up tobacco prices, farmers were issued allotments to limit supply. Allotments were then sold and bequeathed to non-farmers. Today many tobacco growers pay city-folk for the privilege of farming.

A mixture of foreign imports and government attacks on smoking have reduced demand for domestic tobacco. Which has driven down the value of allotments. Tobacco growers and friends want a bail-out.

Under today’s GOP, no special interest goes without generous aid. So the House approved a five-year, $10 billion boondoggle deal to buy out allotment holders.

After being criticized for its untoward generosity toward tobacco growers, the House passed a separate measure barring use of government funds for the pay-off. “Some call it a buyout; I call it a sellout of the American taxpayers,” observed Rep. Chris Van Hollen (D-Md.).

But congressmen haven’t given up passing out financial goodies for political gain. Now they just hope to stick cigarette companies and smokers with the bill. If there’s anything at which legislators excel, it is giving away other people’s money.

The Senate-approved package is even sweeter: as much as $13 billion over the coming decade. Along with the cash payment are provisions turning the tobacco industry over to the FDA’s tender regulatory mercies. There would be more controls over cigarette advertising and ingredients; the agency could ban flavored smokes and vending machines.

Both the House and Senate measures were attached to a corporate tax bill and now are being negotiated in conference committee.

The legislation represents congressional log-rolling at its worst. Liberal members say: who cares about wasting more money on those who grow a deadly crop since we can extend Uncle Sam’s regulatory reach? “The bill will save lives,” opines Sen. Edward Kennedy (D-Mass.).

Self-professed conservatives say: who cares about expanding paternalistic government since we can put billions of dollars into the hands of grateful constituents? About 90 percent of payments would go the Southeast, increasingly a Republican stronghold.

Admits Senate Majority Whip Mitch McConnell (R-Ky.): “I think FDA regulation is a very steep price to pay for a buyout. But if that’s the only way to get my growers relief, this senator will vote to pay it.”

But why do growers deserve relief at taxpayer expense?

Farm subsidies never made sense. People deserve help because they are poor, not because they grow tobacco, wheat, or sugar.

Even if a vast array of inefficient and contradictory programs —paying farmers to grow and then not to grow crops — made sense during the Great Depression, their time has long gone. Certainly enough taxpayer money has changed hands. Americans shouldn’t have to toss another wad to a few farmers.

Especially ones who produce tobacco. Larry Wooten, president of the North Carolina Farm Bureau, expects to collect $165,000 from the buy-out: “If you erase the value of the quotas, which was the scenario we’d been facing, there will be bankruptcies and havoc.” So what?

If the industry is evil and deserves to be sued and regulated, why only the cigarette makers and sellers? Why shouldn’t tobacco growers be sued and regulated rather than subsidized?

Especially since most of the allotment owners, 326,000 in all, don’t grow anything. Instead, they rent out their quotas to 90,000 active farmers.

As with most farm programs, the buyout favors big producers, the very people who least need help. Just ten percent of allotment owners would receive more than two-thirds of the cash. More than 400 of them would collect at least $1 million.

“I’ve waited and sweated for this moment for a very long time,” said John William Carter III, a North Carolina tobacco farmer who expected to collect more than $1 million. It’s like winning the lottery, only one financed by the taxpayers.

Then there are the non-farmers. Homemaker Susan O’Leary, from Exeter New Hampshire, expects to collect $119,000 for a quota from her father’s farm. She admitted to having “a bit of a guilty feeling whenever I receive income from the quota,” but, she added, “I could certainly use the money with a child starting college this year.”

Most farmers are willing to accept the deal as offered. But a few want even more: pay the cash and then transfer the allotments to active growers. Even most tobacco-friendly legislators — about 100 of 435 congressmen — realize that this greedy money grab won’t pass.

As always, Congress wants it every way. It wants to find new sources of revenue, and the cigarette makers represent a tempting source of funds to redistribute.

The administration, which has yet to find a special interest boondoggle that it opposes, flip-flopped to support the buyout. Even worse, the Bush administration is pursuing a Clinton-era $280 billion lawsuit against the industry for fraud and various other alleged offenses.

The states collected a similar amount through the 1998 legal settlement, and, contrary to their promises, used most of their ill-gotten gains to fund general revenue shortfalls. Only two percent of their spending this year will go for tobacco prevention.

Congressmen simultaneously want to win political support from health advocates by dumping on cigarette makers. Despite the administration’s professed anti-regulatory stance, Health and Human Services Secretary Tommy Thompson supports expanding the FDA’s power.

But everyone most wants to collect votes by underwriting farmers, even those who produce the tobacco used to make the cigarettes Congress wants to regulate.

No surprise, growers are clamoring for the money: “We drastically need the buyout, and that’s all we care about,” says Daniel Nelson, president of the Forsyth County (North Carolina) Growers Association. Another North Carolina farmer, Jimmy Crews, declared “If I feel like somebody is going to help me on this buyout, he’s going to get my vote.”

“My growers are in dire straits and they need help,” complains Sen. Jim Bunning (R-Ky). So? Lots of Americans are in distress. Why are tobacco farmers — actually, allotment holders — entitled to seize their neighbors’ hard-earned wealth?

Doug Bandow is a senior fellow at the Cato Institute and a former special assistant to President Ronald Reagan.