Post-Election America’s two Scenarios for the Tobacco and Nicotine Industries
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Post-Election America's two Scenarios for the Tobacco and Nicotine Industries

10 December 2020
Patrick Basham’s essay on post-election America’s two scenarios for the tobacco and nicotine industries

A Biden presidency versus a Trump presidency
By Patrick Basham

Under a Joe Biden administration, the tobacco and nicotine industries will experience the U.S. federal government’s full-throated enthusiasm for regulatory “solutions” to alleged problems. Should President Donald Trump continue in office, the existing framework will set the course for the next four years, with the possibility of occasional gyrations due to the waxing and waning of respective stakeholders’ political capital.

At the time of writing, the conclusion of the 2020 presidential election remains a mystery. The media declared Biden president-elect, yet the actual constitutional authority to do so rests with Congress, which meets in early January 2021, when it will ratify, or not, the electoral college tally drawn from the respective state delegations.

Given Trump’s desire to exhaust all legal, legislative and constitutional avenues in pursuit of a second term, this assessment of the election’s impact upon industry addresses both scenarios—that is, a second Trump term and an inaugural Biden administration.

It also reflects the fact that the precise composition of both the House of Representatives and the Senate remain unknown. The latter is currently 50 seats to 48 seats in favor of the Republicans. However, two runoff elections in Georgia, scheduled for Jan. 5, could tilt the Senate in either partisan direction. That is because two Democratic victories would see the Senate split 50-50. Numerical ties in the Senate are broken by the president of the Senate, a position held by the sitting vice president. If Trump is reelected, a tie would be broken by Vice President Mike Pence in favor of the Republicans.

However, a Senate stalemate under a Biden presidency would invite a Vice President Kamala Harris to break ties in the Democrats’ favor. If the Georgia runoff results in a split decision with each party winning a seat, the subsequent Republican majority could block a good deal of a Biden-Harris administration’s agenda while providing narrow backing to a second Trump administration. Clearly, both the presidential and senatorial outcomes will have direct and indirect reverberations for industry in all sectors of the economy.

Ditto for the House of Representatives where Trump’s Republicans gained significant ground. They won all 27 toss-up races, gained 10 seats and did not lose a single incumbent House member. Consequently, they narrowed the Democratic majority to a mere four seats with counting ongoing in two congressional districts. This sizeable change in partisan makeup, despite no change in majority control, nonetheless could impact policy and regulatory outcomes.

A second Trump administration
Donald Trump’s regulatory instincts are with the anti-nanny state side of most arguments. They generally match his light regulatory touch in most areas of economic and environmental policy. His instincts have been buttressed by Pence, who opposed onerous regulations while serving in Congress.

Trump remains convinced of the public health benefits of vaping and other innovative next-generation products (NGPs). He is personally hostile to smoking, however. As both 2019’s youth vaping “crisis” and the Covid-19 pandemic demonstrated, at times his anti-nannying approach is inconsistent; as such, he can be persuaded, albeit reluctantly, to adopt draconian public health measures. These generally play out in “sledgehammer to kill a fly” terms with predictably negative unintended consequences for both the economy and public health.

As a second term administration would be preoccupied with sustaining the economic recovery and ensuring the successful production and distribution of the Covid-19 vaccine(s), a Trump White House will not exhibit a proactive interest in tobacco and nicotine. Rather, as during its first term, attention will be paid to this file on an ad hoc, episodic and reactive basis, which is probably the least worst outcome from the position of the industry.

One would expect any further legislation to be along the noncontroversial lines of the so-called Tobacco 21 bill Trump signed on Dec. 20, 2019, which raised the minimum age from 18 to 21 on the sale of tobacco products.

A divided Congress would minimize the pressure on a Trump administration to “do more” on tobacco and nicotine. Pressure will most definitely be applied by a Democratic-led Congress, but a Republican-led Senate should be able to keep the health paternalists’ most damaging proposals at bay. However, the narrowness of the Republican hold upon the Senate could provide a tempting target for anti-tobacco Democrats to test the partisan loyalty of a handful of Republican senators eager to pursue the electoral fool’s gold of anti-vaping photo opportunities and legislative initiatives in the misinformed quest for enhanced public health.

A Biden (and a Harris) presidency
Biden is a traditional northeastern liberal politician who has survived and thrived in politics due to his affability, his seemingly harmless, albeit gaffe-prone, manner, his deal making abilities and his ability to spend half a century in national politics without offending a critical mass of his own party.

He favors an interventionist government in matters of taxing, spending and regulating but does so from a pragmatic political, rather than a deeply ideological, perspective. His recent leftward lurch on public health issues demonstrates the growing influence of the Democratic party’s so-called “progressive” wing and the latter’s own rather rapid movement in the policy direction of socialist Democratic Senator Bernie Sanders.

Given Biden’s son’s death from cancer and his own subsequent founding of a cancer research organization, it is quite possible, even likely, that anti-tobacco and anti-nicotine measures couched in the familiar, “This is how we save children’s lives …” rhetoric would find, in Biden, a very receptive ear.

Consider that, during his successful campaign for the Democrats’ presidential nomination, Biden said there must be “serious scientific data as to whether or not it [vaping] has the kind of long-term damage on the lungs and it causes death before we allow it to be sold.” Biden said that, if studies show that e-cigarettes damage the lungs then he would “eliminate” e-cigarettes and “go after it in a hard way. I would make it broader not just where [Trump] is.” Biden said, “I choose science over fiction.” He continued, tellingly, “And, so, if the science has demonstrated [vaping] is doing great damage, then I don’t care what it does to a small businessperson who’s selling this stuff.”

A Biden presidency would most likely work against the interests of the tobacco and nicotine industries in two ways. First, Biden never was a policy wonk and would not contemporaneously be characterized as a workaholic. Therefore, he would be unlikely to possess either the interest, inclination or energy to push back against stringent regulatory instruments and items advocated by his secretary of Health and Human Services (HSS) or the Food and Drug Administration (FDA).

Second, he has not hidden the fact that a Biden administration would last only one term. It is an open secret in Washington circles that, as he is elderly and frail, it is probable that Biden will not complete a four-year term in office; some forecast a two-year tenure at most.

Under such a plausible scenario, Biden would be succeeded by Harris. Although something of a political chameleon, she is far more comfortable and enthusiastic communicating, representing and championing the Democratic party’s new vividly left-wing colors.

Before her election to the Senate, Harris served as the pro-drug war attorney general of California and district attorney of San Francisco, respectively. She has no difficulty bringing the full force of the government to bear upon what she considers to be a pressing public health matter. A Harris White House probably would not serve as the catalyst for anti-industry proposals, but it is unlikely that her cabinet secretaries, public health bureaucrats and congressional allies would suffer much, if any, pushback against regulatory prescriptions that economically castrated the tobacco and nicotine industries.

President Ronald Reagan’s director of personnel, Scott Faulkner, perceptively said, “Personnel is policy.” The mantra is an especially helpful guide in understanding activity in the more esoteric areas, such as NGP regulation, of public administration.

The appointment of a new FDA commissioner to replace Stephen Hahn would be pivotal to the near-term future of e-cigarette regulation. The clear front-runner is Joshua Sharfstein, who was deputy commissioner for two years (2009 to 2011) under the Obama administration. Two years ago, Sharfstein wrote the paper “How do you solve a problem like Juul?” He argued that “Congress could mandate that each e-cigarette brand reduce youth use to a small fraction of overall sales, requiring those that fail to do so to pay a penalty.”

Sharfstein conceded that “Unlike combustible tobacco products, if appropriately regulated, e-cigarettes have the potential to help save the lives of many Americans.” He concluded ominously, however, that “sacrificing a generation of youth to nicotine addiction … is not an acceptable price to pay. The answer to the challenge posed by Juul may, in part, be to reward those e-cigarette companies that can do one without the other.”

A divided Congress would place something of a lid on either a Biden or a Harris administration’s ability to pass the most egregious measures into law. Still, the FDA’s anti-industry instincts may be given regulatory carte blanche. A divided Congress would not countenance ambitious proposals, but they nevertheless would establish the policy parameters for possible political compromises that would move the regulatory ball significantly down the anti-industry side of the field, if not across the goal line itself.

For example, on Feb. 28, 2020, the House of Representatives finally passed the Reversing the Youth Tobacco Epidemic Act of 2019. Subsequently stalled in the Senate, the bill would have banned all nontobacco-flavored tobacco and vapor products (including menthol) as well as online sales and would have raised the age of sale for both product categories to 21 nationwide. One should expect to see a comparable bill promoted during 2021 regardless of the Oval Office occupant.

Within the federal bureaucracy there would be little, if any, check upon the nanny staters’ worst regulatory instincts. Consequently, one would expect that the actual writing and, critically, the implementation and execution of any new or amended tobacco or nicotine rules would exploit fully the new administration(s) implicit commitment to pay any cost to “protect” the public’s health.

An evenly divided Senate would raise the possibility that either a Biden or a Harris administration may be able to pass, thanks to the vote of a Vice President Harris (or her successor in that office), narrowly focused legislation that claims to tackle the tobacco-related or nicotine-related crisis of the month (or year) without exposing Democratic politicians to negative electoral fallout from the increasingly politically influential grassroots coalition of vape consumers and retailers, which now has Trump’s ear.

Under a Harris-the-tie-breaker scenario, one would expect more efforts employing the pandemic as camouflage for further regulatory assaults upon the tobacco and nicotine industries. The existing template was publicized in late August 2020 when nine Democratic senators wrote to Secretary of Health and Human Services Alex Azar with their concerns over an allegedly, but unfounded, higher risk of Covid-19 infection among youth who vape or smoke combustible cigarettes. The contemporaneous sentiments of their House colleagues were demonstrated when Democratic Representative Raja Krishnamoorthi sent a letter to FDA Commissioner Hahn asking him to clear the market of all e-cigarette products during the global Covid-19 pandemic.

The only certainty at this stage of the electoral contest is that the next four years will not produce a libertarian panacea replete with overdue rollbacks of outdated, unnecessary, expensive and life-destroying regulations.

At best, the industry will experience some tweaked version of the status quo. This scenario’s contours are not entirely predictable, but its general direction will be navigable, at least by the larger commercial players.

At worst, the industry once again will be a regular public whipping boy as punishment for sins both real and imagined. The industry will serve as a convenient foil for politicians preoccupied with virtue signaling and woke-themed public health campaigns. Little mention will be made of the fact that such campaigns operate to the detriment of the affected industries’ commercial health and, more importantly, the actual health of smokers.

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