Microblog Memes

I saw a great long-form article with a theory that I don't completely buy into but is very interesting.

In 1998, a MASSIVE lawsuit against the tobacco companies was settled. The result was the Master Settlement Agreement (MSA). Due to the harmful public health effects of tobacco, cigarette companies were required to pay huge sums to the state governments, in perpetuity, based on the level of sales of cigarettes. To be clear, this was a great and reasonable idea, given the public health costs associated with smoking (funny enough, since then, costs have lowered on average as people live longer but smokers don't).

Several states then "securitized" their future payments and sold them off to get short-term injections of cash. If the term "securitization" seems familiar, it's the craze that led to the financial collapse in 2008, when people were securitizing junk mortgages. As part of these tobacco bond securitization agreements, states have to pay their business partners a certain dollar amount every year going forward, NOT based on the level of sales of cigarettes.

Then, for a variety of reasons including vaping, cigarette sales started to tank. Meaning states were getting less money from the MSA, but they still owed the same amount to their debtors. Many of these bonds are in junk status, and some states are realistically looking at bankruptcy due to that stupid decision 20 years ago. There's $97 billion they owe in total, and most states have no way to pay it.

So now we have a large number of state governments with an extremely powerful financial incentive to suppress vaping and encourage cigarette smoking.