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The fun part about the e-cigarette epidemic: states have a perverse incentive to keep cigarette smoking rates from dropping too quickly. The Tobacco Master Sett

The fun part about the e-cigarette epidemic: states have a perverse incentive to keep cigarette smoking rates from dropping too quickly. The Tobacco Master Settlement Agreement gave states an annuity from tobacco profits, and many states took a lump-sum payment instead. That money has already been spent. If cigarette smoking rates (and thus, profits) drop too much, they have to pay back the money. Everything with e-cigarettes was fairly hunky-dory and not an 'epidemic' until 2014, the year teen smoking rates plummeted and e-cigarettes took off. Most of those teen smokers who took up vaping instead of cigarettes will likely never become cigarette smokers. This alters the math on the annuity payments that were already cashed in for up-front money, and thus the states could end up in the red on their bond payments. Thus they have a financial incentive to keep e-cigarettes from fully replacing combustible cigarettes, even if they are a definite harm reduction tool.

dragonwriter 8y ago
> Everything with e-cigarettes was fairly hunky-dory and not an 'epidemic' until 2014, the year teen smoking rates plummeted and e-cigarettes took off. Yes. E-cigarette usage wasn't an epidemic until usage “took off”. That's just the definition of “epidemic”; everything else you try to associate is irrelevant.
- nulagrithom 8y ago
  That's not the definition of epidemic. The dictionary definition is: a widespread occurrence of an infectious disease in a community at a particular time. "Infectious disease" being the key. If we limit the definition to "took off" then any new and popular software becomes an epidemic. It's naive to assume that something like this couldn't possibly be politicized simply because it relates to health. His points absolutely could be relevant to how the Surgeon General chooses to describe the uptick in vaping. Overall tobacco usage is still going down: https://www.cdc.gov/tobacco/data_statistics/fact_sheets/youth_data/tobacco_use/index.htm https://www.cdc.gov/tobacco/data_statistics/fact_sheets/yout...
  - deleted 8y ago
    [deleted]
- mullingitover 8y ago
  Don't epidemics usually create sick people? I realize the counter-argument will of course be "we don't know the long-term effects," but people have been exposed to aerosolized glycerine/propylene glycol for decades in the form of fog machines at concerts and clubs. Surely if this was the next asbestos we'd be seeing something by now.
  - vel0city 8y ago
    How many people spend a significant percentage of their time right next to a fog machine breathing in highly concentrated amounts?
13of40 8y ago
Do you have any citations for this? If it's true and the states are actually acting on that incentive, it's an epic conspiracy. I wonder if you could look at differences in anti-vape policy between states that took a lump sum payment and ones that didn't to validate it.
- mullingitover 8y ago
  June 23, 2014: "E-cigarettes could stub out tobacco bonds sooner than thought" "NEW YORK (Reuters) - The rapid growth of electronic cigarette sales poses a rising but under-appreciated risk to holders of as much as $96 billion of bonds tied to payments tobacco companies make to U.S. states from a sweeping legal settlement in 1998." https://www.reuters.com/article/us-tobacco-bonds-ecigs-insight/e-cigarettes-could-stub-out-tobacco-bonds-sooner-than-thought-idUSKBN0EZ0CZ20140624 https://www.reuters.com/article/us-tobacco-bonds-ecigs-insig...
  - adamiscool8 8y ago
    Starting to think that maybe, just maybe, finding ways to securitize everything under the sun is not such a good idea.
    - chimeracoder 8y ago
      > Starting to think that maybe, just maybe, finding ways to securitize everything under the sun is not such a good idea. It's weird to blame that on the security - ie, the vehicle that enabled the payment of this settlement in the first place - rather than the manipulation and outright fraud that the tobacco companies conducted for years (which is why the suit even existed).
      - adamiscool8 8y ago
        Bonds didn't enable the payment of the settlement. The tobacco companies were going to hand over ~$8B cash every year. The securitization added a layer of complexity that capitalized on greed and, surprise surprise, looks guaranteed to blow up in these state's faces. > Nine states — Alaska, California, Iowa, Michigan, New Jersey, New York, Ohio, Rhode Island and West Virginia — and Washington, D.C., Puerto Rico and Guam decided to get as much of those annual payments as fast as they could by mortgaging any future payments as collateral and issuing bonds. They traded their future lifetime income for cash today — at only pennies on the dollar. > A typical bond is like an interest-only loan with a balloon payment in 30 years. But to avoid having to pay yearly interest payments, these 12 chose to issue capital appreciation bonds, deferring all interest payments and repayment for up to 50 years. Then the entire amount is due — with no plans made as to how it will be repaid. By the time these bonds come due, the legislators who approved them will be retired or dead. > The 12 issued $22.6 billion in bonds, receiving only $573.2 million in cash. With compounded interest, they will have to repay $67.1 billion. Imagine borrowing $200,000 to buy a house today and your children having to pay back $234 million in 40 or 50 years. https://www.nytimes.com/2014/10/07/opinion/how-the-big-tobacco-deal-went-bad.html https://www.nytimes.com/2014/10/07/opinion/how-the-big-tobac...
SilasX 8y ago
Interesting, I didn't know this! But what different does it make? Whether you're getting the revenues from the indefinite future, or you need to keep the sum over several years at a certain level, you're incentivized to ensure sales don't fall.
gvhst 8y ago
> That money has already been spent. If cigarette smoking rates (and thus, profits) drop too much, they have to pay back the money. I don't believe there was a clawback provision when the states securitized their MSA claims into Tobacco Bonds. These bonds aren't general obligation bonds and therefore cannot tap into the states general fund. That being said, the states would like to avoid the bad publicity of a default, and thus some states have pledged additional tax revenue as a restructuring plan. In short, there is some incentive on the states end but its not as strong as you implied.

dragonwriter 8y ago

> Everything with e-cigarettes was fairly hunky-dory and not an 'epidemic' until 2014, the year teen smoking rates plummeted and e-cigarettes took off. Yes. E-cigarette usage wasn't an epidemic until usage “took off”. That's just the definition of “epidemic”; everything else you try to associate is irrelevant.

nulagrithom 8y ago
That's not the definition of epidemic. The dictionary definition is: a widespread occurrence of an infectious disease in a community at a particular time. "Infectious disease" being the key. If we limit the definition to "took off" then any new and popular software becomes an epidemic. It's naive to assume that something like this couldn't possibly be politicized simply because it relates to health. His points absolutely could be relevant to how the Surgeon General chooses to describe the uptick in vaping. Overall tobacco usage is still going down: https://www.cdc.gov/tobacco/data_statistics/fact_sheets/youth_data/tobacco_use/index.htm https://www.cdc.gov/tobacco/data_statistics/fact_sheets/yout...
- deleted 8y ago
  [deleted]
mullingitover 8y ago
Don't epidemics usually create sick people? I realize the counter-argument will of course be "we don't know the long-term effects," but people have been exposed to aerosolized glycerine/propylene glycol for decades in the form of fog machines at concerts and clubs. Surely if this was the next asbestos we'd be seeing something by now.
- vel0city 8y ago
  How many people spend a significant percentage of their time right next to a fog machine breathing in highly concentrated amounts?

13of40 8y ago

Do you have any citations for this? If it's true and the states are actually acting on that incentive, it's an epic conspiracy. I wonder if you could look at differences in anti-vape policy between states that took a lump sum payment and ones that didn't to validate it.

mullingitover 8y ago
June 23, 2014: "E-cigarettes could stub out tobacco bonds sooner than thought" "NEW YORK (Reuters) - The rapid growth of electronic cigarette sales poses a rising but under-appreciated risk to holders of as much as $96 billion of bonds tied to payments tobacco companies make to U.S. states from a sweeping legal settlement in 1998." https://www.reuters.com/article/us-tobacco-bonds-ecigs-insight/e-cigarettes-could-stub-out-tobacco-bonds-sooner-than-thought-idUSKBN0EZ0CZ20140624 https://www.reuters.com/article/us-tobacco-bonds-ecigs-insig...
- adamiscool8 8y ago
  Starting to think that maybe, just maybe, finding ways to securitize everything under the sun is not such a good idea.
  - chimeracoder 8y ago
    > Starting to think that maybe, just maybe, finding ways to securitize everything under the sun is not such a good idea. It's weird to blame that on the security - ie, the vehicle that enabled the payment of this settlement in the first place - rather than the manipulation and outright fraud that the tobacco companies conducted for years (which is why the suit even existed).
    - adamiscool8 8y ago
      Bonds didn't enable the payment of the settlement. The tobacco companies were going to hand over ~$8B cash every year. The securitization added a layer of complexity that capitalized on greed and, surprise surprise, looks guaranteed to blow up in these state's faces. > Nine states — Alaska, California, Iowa, Michigan, New Jersey, New York, Ohio, Rhode Island and West Virginia — and Washington, D.C., Puerto Rico and Guam decided to get as much of those annual payments as fast as they could by mortgaging any future payments as collateral and issuing bonds. They traded their future lifetime income for cash today — at only pennies on the dollar. > A typical bond is like an interest-only loan with a balloon payment in 30 years. But to avoid having to pay yearly interest payments, these 12 chose to issue capital appreciation bonds, deferring all interest payments and repayment for up to 50 years. Then the entire amount is due — with no plans made as to how it will be repaid. By the time these bonds come due, the legislators who approved them will be retired or dead. > The 12 issued $22.6 billion in bonds, receiving only $573.2 million in cash. With compounded interest, they will have to repay $67.1 billion. Imagine borrowing $200,000 to buy a house today and your children having to pay back $234 million in 40 or 50 years. https://www.nytimes.com/2014/10/07/opinion/how-the-big-tobacco-deal-went-bad.html https://www.nytimes.com/2014/10/07/opinion/how-the-big-tobac...

SilasX 8y ago

Interesting, I didn't know this! But what different does it make? Whether you're getting the revenues from the indefinite future, or you need to keep the sum over several years at a certain level, you're incentivized to ensure sales don't fall.

gvhst 8y ago

> That money has already been spent. If cigarette smoking rates (and thus, profits) drop too much, they have to pay back the money. I don't believe there was a clawback provision when the states securitized their MSA claims into Tobacco Bonds. These bonds aren't general obligation bonds and therefore cannot tap into the states general fund. That being said, the states would like to avoid the bad publicity of a default, and thus some states have pledged additional tax revenue as a restructuring plan. In short, there is some incentive on the states end but its not as strong as you implied.