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Jewish World ReviewSept. 28, 1999/18 Tishrei, 5760

Larry Elder

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Smoking down: Good news? -- CALIFORNIA JUST REPORTED a 29 percent drop-off in cigarette sales.

Good news, say supporters of Proposition 10, the voter-approved initiative that places a 50-cent tax on a pack of cigarettes. Actor-director Rob Reiner, who spearheaded the initiative, barely contained himself, "It's thrilling. It's only been six months and we're off to an amazing start."

Well, sort of. Smoking may be foolish, but this does not necessarily make smokers fools. Many simply cross the border to purchase their cigarettes in states with lower taxes, or travel south of the border, into Mexico, to buy cheaper cigarettes. Some use the Internet to purchase cigarettes and avoid some state taxes. And, what about the black market? A tobacco analyst for an investment firm said, "There's no doubt that imports, both legal and illegal, have taken up much of the demand. The market is smart. It will seek the lowest price."

Not only did Proposition 10 drive up the price of cigarettes, but the government-induced $206 billion tobacco settlement caused companies to increase prices by an average of nearly 50 cents a pack. On top of that, California added still more taxes on back of the Prop. 10 taxes, jacking the price of cigarettes to as high as $4.00 a pack!

The rationale behind the tobacco settlement? That the government needs the money to recoup its smoking-related health expenses. But, writes Matthew Rees of The Weekly Standard, "A June report from the Congressional Research Service, a government agency, concludes that, because smokers die prematurely and thus do not receive retirement benefits or incur nursing home costs, they save the federal government $29 billion each year in health care expenditures."

But some good news lies beneath this nonsense. For a California anti-smoking professor said about the decline in smoking, "It's very good news. It says that all the economists who said people are price sensitive were right."

Well, well. What's this? Some respect for economists? Economists did, indeed, predict a decline in smoking as the price increased. Economics 101 says: Make certain types of behavior more expensive, you get less. Make certain types of behavior less expensive, you get more.

During the dark, old days of "Hillarycare," 560 economists sent a letter to the president, urging the administration to abandon its health care plan.

The wary signers stated, "Price controls produce shortages, black markets and reduced quality." "Clintoncare," they said, inevitably leads to rationing, inefficiencies, and lack of innovation -- all without achieving its objective of lower prices. How did many react to the economists' plea?

With yawns, but now some in the feel-your-pain crowd seem ready to acknowledge the logic behind fundamental economics. So, let's grab this sliver of intelligent life while we can, and attempt to apply it elsewhere.

For example, children having children remains our most disturbing social problem. Here, too, California recently registered a drop in births to single women. The good economy helped, but much of the credit for the out-of-wedlock birth rate drop goes to welfare reform. While various state laws provide exemptions and exceptions, welfare mothers now face "term limits," and so-called "family caps," stopping welfare mothers from getting more money for more children.

Yet Anna Ramirez, the director of California's Office of Family Planning, does not seem to think the drop occurred because of the change in incentives, "The one thing that has started to change is our own society's attitude toward out-of-wedlock birth. There's been some significant question about children having children and an overall non-acceptance of that." Not quite.

Many have long criticized welfare. Indeed, in 1985, a Los Angeles Times poll asked poor people whether poor young women "often" or "seldom" had babies to receive public aid. Sixty-four percent of poor people agreed that welfare recipients "often" had babies to collect the benefits. In fact, by 64 percent to 44 percent, more poor people than non-poor people agreed that welfare begets welfare.

Attitudinal change without policy change did nothing. Only after Congress finally removed welfare incentives did we begin to see nationwide declines in welfare rolls and the out-of-wedlock birth rate of young women.

High cigarette prices change behavior by increasing the cost of the targeted activity. Similarly, time limits and family caps created economic disincentives for out-of-wedlock births, and, surprise, surprise, we got less of it.

Yet anti-smoking forces applaud economists for correctly "predicting" a drop in cigarette smoking. But, when economists and others argued that welfare generosity facilitated out-of-wedlock birth, the same feel-your-pain crowd screamed, "Insensitive! Cold-blooded! Mean-spirited!"

So, let's declare a partial victory. On this issue, the no-smoke folks gave two thumbs up to economists. But these same insensitive, cold-blooded, mean-spirited economists also bemoan minimum wage laws, rent control, farm subsidies, and monopolistic government schools.

Who knows? Maybe now somebody's listening.

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©1999, Creators Syndicate