The lessons of prohibition

Television viewers are being treated to another fascinating documentary from filmmaker Ken Burns, which focuses on one of the worst public policy decisions of the last century: Prohibition. The series illustrates how the 18th amendment – in outlawing the manufacture, sale and transportation of alcohol beverages – led to serious, unintended negative consequences.
 
Under Prohibition, crime rates soared. Gangsters and thugs became celebrities.  It was the exact opposite result of what Prohibition backers intended.
 
Prohibition taught us about the negative consequences of an ill-thought out policy. And Burns’ documentary could not be better timed, as our lawmakers continue to consider policies that could have unintended consequences that harm jobs, consumers and the economy.

 
For example, pending federal legislation – H.R.1161 or the so-called “CARE Act” – could have a harmful impact on beer industry workers, as well as consumers.  The bill contains many overly-broad, unnecessary provisions that would harm consumers and the marketplace, limit consumer choice, and allow states to enact protectionist and anti-competitive laws. If this bill became law, it could make it much harder for brewers and importers to get their products to market.

Customers themselves could also be negatively impacted.  Since H.R.1161 could make it more difficult for brewers and importers to access markets, consumers are likely to face increased prices and decreased product variety. A favorite beer that was once readily available could become increasingly difficult to purchase.

The current state-based alcohol regulatory system provides an efficient balance of control that serves the interests of the entire industry - producers, wholesalers and retailers – as well as consumers, and results in a healthy and orderly marketplace. Nothing has changed to warrant upsetting this careful balance, but the negative consequences of tampering with such a framework are clear.

Another bad policy idea that never seems to go away is the idea to solve economic woes by taxing beer.  In 1991, beer was grouped in with goods such as jewelry and private jets and subjected to a major tax increase. While the increased excise taxes were repealed on some of the goods, beer continues to be taxed at the 1991 rate. Today, more than 40 percent of the retail price of beer is comprised of various taxes.
 
Harmful tax hikes are not only being suggested at the federal level.  Connecticut recently increased its excise taxes on alcohol.  But the idea may be backfiring, since voters in neighboring Massachusetts decided to lower theirs.  So as business in Connecticut heads north to Massachusetts, retailer revenues, as well as state revenues, are headed south.
 
The American beer industry consists of 2,000 brewers and importers, 3,300 distributor establishments and 547,000 retailer outlets. All told, the beer industry today is directly and indirectly responsible for more than 1.8 million American jobs. Excise tax increases could adversely impact the industry, potentially forcing them to lay off employees and reduce production that is helping fuel local economies.
 
We should heed the lessons of Prohibition, and avoid policies that would just make the situation worse.  Instead of raising excise taxes, Congress should take up and pass the bipartisan-supported H.R.1675, the Brewers Excise and Economic Relief Act, to roll back taxes to the traditional levels and help brewers and importers invest, expand and create more jobs.
 
Seventy-eight years after the repeal of Prohibition, the domestic beer industry stands as a true American success story. Nearly two million Americans help support their families with a beer industry-related job.  The industry contributes $233 billion each year to the national economy.  And the industry spends significant resources on responsibility initiatives to develop public safety, education and prevention campaigns and to promote federal and local programs to help reduce underage drinking and drunk driving.
 
As we look toward the future, these successes should be reflected in common sense policies that support and maintain the current system of alcohol regulation, protect jobs, grow local economies and keep this successful sector of our economy thriving.
 
Joe McClain is the President of the Beer Institute.

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