Review 2: Cancer Scam: Diversion of Federal Cancer Funds to Politics , by James T.Bennett & Thomas J. DiLorenzo (1997)

William F. Shughart,
University of Mississippi,
Public Choice (1999)

"I have never known much good done by those who affected to trade for the public good. - Adam Smith"

"Jim Bennett and Tom DiLorenzo have devoted a great deal of effort to unmasking the symbiotic relationship that exists between the U.S. federal government and the so-called third sector - a shadowy world of mostly left-wing non-governmental organizations (NGOs) which thrive on taxpayer subsidies. Beginning with Destroying democracy: How government funds partisan politics (Washington, DC: Cato Institute, 1985) and continuing with Unhealthy charities: Hazardous to your health and wealth (New York: Basic Books, 1994), the two have used the Freedom of Information Act and their own considerable investigative skills to document widespread abuses of the political process and, indeed, brazen flouting of the law, by nonprofit groups which, under the guise of promoting the public's health or some other worthy cause, have diverted federal funds and charitable donations to push statist policy agendas and to lobby for programs which benefit themselves, but which do little or nothing to advance their stated humanitarian goals.

The two books reviewed here add to that literature. They do so in somewhat different styles. As befits the seriousness of the topic, CancerScam is a sober study of the unholy alliance that has evolved over the past 15 years between the American Cancer Society (ACS), the nation's largest and best-known health charity, and the National Cancer Institute (NCI), an arm of the federal government's National Institutes of Health (NIH) and an important source of funding for the basic research, education, and service activities sponsored by the ACS. The food and drink police is more polemical - and more lively. More on that later.

Because it is an agency of the U.S. government, federal law prohibits NCI officials from lobbying Congress for bigger budgets. Because private contributions to the ACS and various other voluntary health agencies such as the American Lung Association and the American Heart Association are tax deductible under Internal Revenue Code section 501(c)(3), these organizations traditionally were also careful to avoid becoming entangled in political issues that might offend potential donors or threaten their tax-exempt status. They worked mostly in the background to build grassroots support for expanding the federal government's role in funding medical research and other health-related programs.

The success of the AIDS lobby has changed all that. By demonstrating unequivocally that Congress, historically content to leave the determination of medical research spending priorities to the experts, could be pressured into appropriating more dollars for a specific disease, homosexual activists helped politicize federal health and science funding. Indeed, by 1994, more federal money was being spent on AIDS research, patient care, and prevention than on heart disease or cancer, the nation's number one and number two killers. The charities targeting these and other dread, but suddenly less politically correct diseases were flushed into the political open.

The need to compete directly for congressional appropriations brought to the fore concerns about using tax-exempt charitable donations to finance political lobbying activities. The ACS, for one, was not behindhand in solving the problem. Fearing that the IRS, which had responded to a general increase in political advocacy by 501 (c)(3) organizations with a rule imposing a 25% tax on political expenditures in excess of $1 million a year, would apply the spending limit to the consolidated tax return filed on behalf of its 57 state and local divisions, the ACS sought and won a special exemption treating national headquarters and each of the divisional units as separate entities for purposes of the spending restriction. As a result, the cancer charity could legally bankroll its lobbyists to the tune of $58 million per year without fear of IRS retribution.

If that was the end of the story, Cancerscam would be a simple, but sorry tale of tax-financed rent-seeking in which the American Cancer Society lobbies Congress to appropriate more money for the National Cancer Institute and the NCI, in turn, funds more grants and contracts to be administered by the ACS. A portion of these federal funds, along with some of the charitable contributions raised from private sources, is then diverted from research, treatment, and education programs and recycled to finance pleas for more cancer dollars.

A financial gold mine was struck in 1988, however, when California's voters approved a ballot initiative (Proposition 99) which raised the state excise tax on cigarettes from 10 cents to 35 cents per pack and earmarked most of the proceeds for activities and programs of direct benefit to the major health charities. No longer would these organizations be forced to rely exclusively on voluntary contributions or be dependent on the vagaries of the congressional appropriations process. "Prop 99", which the health charities campaigned vigorously to help pass, provided a stable source of funds that could be used to pay the salaries of agency employees, consultants, contractors, and lobbyists; bankroll dubious tobacco-related research and anti-smoking education programs; and, in contravention of the ballot initiative's plain language, mobilize political support for local laws restricting or prohibiting smoking in restaurants, retail establishments, and other "public" places.

The bulk of Cancerscam is devoted to documenting how the winning political brew of anti-tobacco zealotry and tobacco tax earmarking for health charities, so successful in California, was exported to 17 other states. The vehicle was Project ASSIST (American Stop Smoking Intervention Study), a collaborative effort of the American Cancer Society and the National Cancer Institute, which was not a study at all but rather a program that distributed grants and provided advocacy training for the purpose of lobbying state and local governments to follow California's lead. To avoid running afoul of proscriptions on using tax dollars to influence legislation, most of Project ASSIST's funds were channeled through the ultraliberal Advocacy Institute, a Washington, DC-based "public interest" organization headed by Michael Pertschuk, one of the gurus of the anti-tobacco crusade, and David Cohen, a long-time left-wing operative. As told by Bennett and DiLorenzo, more than $100 million was spent on political initiatives designed to push through tobacco tax increases and earmark them to fund the activities of the very anti-smoking activists, health charities, and other nonprofit agencies that collectively masterminded the scam.

Not all of these efforts were successful. A ballot initiative passed in Massachusetts, but was defeated in Colorado, for instance. California's recent approval of the "Meathead and Moses" initiative, named for its two most visible spokesmen, Rob Reiner and Charlton Heston, which raised the state excise tax on cigarettes once again and earmarked the revenues for programs designed to reduce underage smoking, proves that tax-funded politics is dangerously alive and well.

The food and drink police sets its sights on the neo-Puritan crusade to marshal the taxing and regulatory powers of the state to coerce Americans into stopping smoking, drinking, eating junk food, or making any other consumption choice that annoys the self-appointed guardians of public virtue. In prose dripping with sarcasm, Bennett and DiLorenzo chronicle the scare tactics used by groups such as the Center for Science in the Public Interest and Mothers Against Drunk Driving to sound alarms about the risks of consuming "too much" fat, salt, sugar, caffeine, or anything else that might, on the flimsiest of grounds, be deemed harmful to one's health. The propaganda wars waged by such groups have resulted in curbs on commercial speech (vintners are prohibited from informing consumers of the benefits of moderate daily alchohol consumption, for instance); consumer resistance to foods containing Olestra®, a no-fat, no-calorie fat substitute, and milk from cows dosed with bovine growth hormone; unwarranted fears about produce, meat, and poultry irradiated to destroy deadly E. coli bacteria and other pathogens; and constant pressure for more regulatory intrusion by the Food and Drug Administration and higher taxes on tobacco, booze, and other politically incorrect products.

Given the utter failure of alcohol prohibition and the zero-tolerance policies of the "War on drugs", the lifestyle zealots rarely admit that prohibition is their ultimate goal. And, indeed, given the tax revenues that would have to be sacrificed, prohibition is an unlikely political outcome. Beyond a paternalistic impulse to control other people's behavior, a passion which undoubtedly inspires at least some of the neo-Puritans ("They are like children!" exclaimed one unidentified former network news anchor), what explains the meddlesome preferences of the food and drink police? According to Bennett and DiLorenzo, regulatory regimentation has become acceptable because it relieves individuals of the responsibility of taking charge of their own lives and their own health. Social security trumps personal freedom.

There's a better answer in Cancerscam, though:

Until about the mid 1960s, "public health" professionals tended to be concerned with such issues as controlling infectious diseases, assuring safe drinking water and sanitary living conditions, and abating public nusiances. But when Medicare and Medicaid socialized large segments of the health care industry, the focus changed to controlling personal habits, ostensibly because risky or unhealthy behavior could affect the public treasury. Smoking, drinking, overeating, and lack of exercise were no longer viewed as mere personal habits, but as unacceptable social behavior. Diseases linked to these behaviors caused "fiscal externalities" - they caused others to pay higher taxes for Medicare and Medicaid - and therefore should be officially discouraged, or so the reasoning went. (pp. 10-11; emphasis in original)

America's nannies, busybodies, and petty tyrants, in short, are garden variety rent seekers chasing the wealth transfers generated by a system of publicly financed health insurance to which millions of poor and elderly persons are entitled and which, because premiums are not experience-rated, is plagued by the familiar problems of adverse selection and moral hazard. Armed with trumped-up estimates of the massive social costs supposedly associated with the consumption of "unhealthy" products and the pursuit of "risky" lifestyles, the food and drink policy lobby for a share of the loot produced by taxing the sinful, who are disproportionately young, blue-collar and politically unorganized.

Models of interest-group politics are the meat and bread of public choice scholarship, Although readers of this journal will not be surprised by the stories told by Bennett and DiLorenzo in these two books, most may nevertheless share my dismay in learning how cozy the ties between government and the nonprofit sector have apparently become. Cancerscam and The food and drink police are valuable expose of pressure group politics at work."