The $43 Million Claim

The alleged high cost of implementing the initiative was one of the tobacco industry's key themes in its campaign against Proposition 5. In the previous election of June 1978, California voters had passed Proposition 13, which slashed property taxes and started the “taxpayers' revolt,” and the issue of government waste was high on the public agenda. For months the tobacco industry's campaign hammered the claim that Proposition 5 would cost taxpayers $43 million to implement.

Proposition 5 proponents challenged this claim in letters to television and radio stations in early September, shortly after the tobacco industry began its massive advertising campaign against the initiative, asserting that the advertisements were “false and misleading.” (Proponents argued that Proposition 5 would actually save money by reducing smoking and the associated costs.) The stations ignored this challenge. A couple of weeks later, someone leaked three important documents to the Yes on 5 campaign: a planning poll that Houston-based pollster V. Lance Tarrance and Associates had conducted for CCS in December 1977 and two reports presenting cost estimates for implementing Proposition 5 that provided the basis for the industry's advertising claims. These documents

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revealed yet another instance of the industry saying whatever it thought necessary to sway the public. The Tarrance poll in fact showed strong support for the idea of clean indoor air among all segments of California voters and tested the arguments that the industry was considering for its campaign to defeat the initiative. None of these arguments moved the voters save one: cost to taxpayers.

The pollster asked people three questions about how they would vote, depending on what the initiative would cost taxpayers to implement.^[10] The initiative gathered a landslide 71.2 percent “yes” vote if it cost $0.5 million to implement. The margin of victory dropped substantially if the initiative cost taxpayers $5 million to implement; only 53.6 percent said they would vote “yes.” If the initiative cost $20 million to implement, the “yes” vote fell to 41.4 percent and the industry won. The tobacco industry then hired the consulting firm of Economic Research Associates (ERA), which produced a report claiming Proposition 5 would cost taxpayers $19.7 million to post No Smoking signs in state buildings.^[11] ERA produced a second report stating that enforcement would cost another $23 million, bringing the total alleged cost to $43 million, twice the amount that the tobacco industry needed to push voters toward a “no” vote.^[12]

To obtain the $19.7 million cost estimate, ERA assumed that No Smoking signs would cost $27.50 each, even though hardware stores were selling them for less than $1.00. ERA made an even more fundamental error: they got the arithmetic wrong. In estimating the number of No Smoking signs that would be needed, ERA calculated the total square footage of office space in state buildings and then multiplied the square root of the office area by 4 to obtain an estimate of the number of linear feet of office walls in state buildings (it was assumed that signs would be placed at regular intervals). But the square root of 207.2 million square feet was miscalculated as 14.4 million feet whereas it should have been 14.4 thousand feet. Thus, even using the industry's own methods and $27.50 signs, the report overestimated the cost of signs by a factor of 1000. Simply correcting the arithmetic error brought the industry's cost estimate down to $19,700.

Loveday and Glantz thought they had caught the industry in a major scandal. They had the poll showing that a high cost claim was necessary to defeat the initiative and they had a flawed report that seemed designed to justify the number that the tobacco industry needed. On September, 19, 1977, they held press conferences in Los Angeles and Sacramento exposing the poll and the arithmetic error. Unfortunately, few members

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of the press understood what a square root was. According to Loveday, “What was really funny; I mean you look back on it and you say, `God this was so aggravating, so frustrating.' The press didn't understand the math. Stan would try to explain at a press conference what had happened and that the press just couldn't…they didn't know a square root from a cigarette. …You can discover something like that but getting to the public with that information through the press when the tobacco industry is spending $6 million. …It was a pretty uphill battle.”^[13]

Even when the initiative's supporters thought they had a winning issue, the industry quickly recovered. On the way home from their press conference announcing the mistake, Loveday and Glantz heard a radio advertisement ridiculing the lower number. As Grefe observed, “All that square root stuff? The error is irrelevant. The whole strategy is to put the other person on the defensive. If I say, `It'll cost a billion dollars' and you say, `No, it'll only cost a million,' you've lost, you're dead.”^[8]

Even though the industry was successful in framing the election fight as a cost issue at this point, it continued to worry that the health issue could appear. According to Pepples,

Lance Tarrance's organization kept a close watch on the effect of the pro-5 advertising. If other people's smoke became a dominant issue in the closing days of the campaign, we had an alternate ad campaign which was prepared and kept in the can in case it was needed. It had been tested in Madison, Wisconsin. It was based on work done by BBD&O [Batten, Barton, Durstine, and Osborne, an advertising firm with longstanding tobacco accounts]. The testing at Madison showed no perceptible improvement in attitudes about “other people's smoke,” but it seemed to be bombproof.^[6]

The industry never needed these advertisements because Proposition 5's supporters never succeeded in getting the campaign focused on health issues. In the end, the tobacco industry defeated Proposition 5, with 54 percent voting “no.”