[Philip Cook, guest-blogging, January 5, 2009 at 1:11pm] Trackbacks
An Insurrection and 2 Constitutional Amendments:

Thanks to Eugene Volokh for his invitation to guest blog on alcohol control policy.

There's been little public debate or legislative action in this area for many years, despite the fact that alcohol abuse remains our most important drug problem. But that's about to change. The governors of New York and California, among others, have called for an increase in alcohol excise taxes as part of their budget-balancing plans. The Amethyst Initiative to generate debate on the national minimum drinking age has been gathering steam. And the three-tier regulatory system for alcohol distribution is under attack in the courts.

I have selfish reasons to welcome this renewal of interest, since I've been doing research on alcohol control off and on for 30 years and just published a book on the subject (Paying the Tab, Princeton University Press). But surely any sensible account of the public interest when it comes to drug policy would put alcohol control high on the list of issues worthy of our attention.

Over the next few days I'll attempt to make the case for raising alcohol excise tax rates. And just to prove that I'm not really a "neo-prohibitionist" (as the industry spokesmen like to label me) I'll point out the reasons why I think the case for lowering the minimum drinking age is pretty strong.

Needless to say alcohol control and taxation have played a prominent role in US history. A distilled spirits tax was the first domestic revenue measure — enacted by Congress in 1791, it led to the Whiskey Insurrection and the subsequent assertion of federal authority by President Washington and Secretary of the Treasury Alexander Hamilton.

Between the Civil War and World War I, federal alcohol excise tax collections accounted for the bulk of internal revenues (as much as 80% in some years). This source became less important with the adoption of the 16th Amendment in 1913, which legalized the federal income tax. From a public-finance perspective, the 16th Amendment cleared the way for the 18th Amendment's prohibition on the "manufacture, sale, or transportation of intoxicating liquors."

After disillusion with that Noble Experiment arose (it didn't take long), one of the leading proponents for repeal, Pierre S. DuPont (retired chairman of General Motors), recruited his fellow millionaires to the cause by reminding them that a legal alcohol industry would generate tax revenues, thereby displacing the need for the despised income taxes.

Last year was the 75th anniversary of Repeal. In 1933 there was a huge nationwide beer blast to celebrate the end of Prohibition, but the anniversary passed largely unnoticed. It should have gotten more attention. After all, the legacy of Prohibition is very much with us. Historian David Musto observed that "This 'dreadful example' is now so firmly established that it has become a maxim of popular culture, a paradigm of bad social policy, and a ritual invocation of opponents of a variety of sumptuary laws."

Sure enough, Prohibition was a failure in the sense that it did not magically end drinking, and it engendered vast amounts of crime and corruption. But the modern interpretation of the Prohibition experience has gone well beyond those facts to a conclusion that "you can't legislate morality" and that drinking in particular is somehow unaffected by the terms on which alcoholic beverages are sold in the marketplace.

A careful look at the actual Prohibition experience tends to refute that conclusion. During the 1920s alcohol of uncertain quality was available from shady sources at prices substantially higher than before the War. While there are of course no official statistics on alcohol consumption during that period, all the indicators suggest a substantial reduction in consumption and abuse -- especially among working class folks.

Contemporaneous studies by economists Clark Warburton, Irving Fisher, and others made that case in convincing fashion. And when Martha Bensley Bruere conducted a survey of other social workers across the country for the National Federation of Settlements in the mid-1920s, she received reports indicating that most of the South and West had become quite dry, and that family problems associated with alcohol had fallen off considerably.

Newspaper reporters, providing the "first draft of history," tended to miss this big-picture story. Then as now, they focused on the wealthy and glamorous, the Yale grads with their hip flasks, and often missed the bigger story that Prohibition was, in a sense, "working."

Under the 21st Amendment, alcohol control was largely relegated to the states, although of course Congress reinstated excise taxes (but did not end the income tax!). The states had little experience with regulating commerce in alcohol. To provide them with guidance, John D. Rockefeller, Jr. commissioned a study by Raymond B. Fosdick and Albert L. Scott that produced an impressive piece of policy analysis called Toward Liquor Control.

It reviewed alternative control schemes from Europe and Canada, seeking a set of "rational" regulations that would supply "unstimulated demand" for alcohol without bringing back the corruption and abuse of the pre-War saloon era. Fosdick and Scott envisioned an era of experimentation by the "laboratory of the states" from which we would learn what worked.

To an extent, that promise has been realized. The states have gone their separate ways in regulating the supply chain, licensing retailers, setting excise taxes, and (until Congress intervened in 1984), setting the minimum drinking age. In the last 25 years, economists and epidemiologists have analyzed the results and learned a good deal about how alcohol control policy affects drinking and abuse.

So here's the irony. The true lessons of the Great Experiment with Prohibition have been lost, the evidence hopelessly distorted in the retelling. (It was never much of an experiment anyway, since there was no natural control group.) But since Repeal the laboratory of the states has generated considerable data on the effects of supply control. The analysis of those data provide pretty good guidance to the questions that will be debated in 2009.