Month: December 2017

Now that my sabbatical is over, I’m back to teaching four classes each semester, which means I’ll have a lot less time to research and write food politics blog posts. I’ll still be posting every Saturday (aside from January 30, when we won’t be doing a podcast either) but more often than not those posts will be links to things I think are worth reading, listening to, or watching, along with some thoughts on why I believe they might be worth your time. Which brings me to my suggestions for this week:

Shrinking government isn’t something I’m necessarily opposed to, but I think the focus on ‘big government’ vs. ‘small government’ often misses the point. What I believe most people really want is efficient, effective government. Sometimes, that means cutting bloated programs. But in other cases it might actually be better to increase government employment, salaries, and resources. As special interest lobbyists have grown more and more powerful, the ability of our government to independently assess and evaluate their claims has diminished. Whether you’re a libertarian concerned with crony capitalism or a liberal worried about income inequality, this is something that should matter to you. Below are two articles that flesh out this argument for investing in government capability.

Congress just doesn’t know enough to do its job well. Here’s why. 
An article from the Washington Post’s ‘Monkey Cage’ blog, where political scientists descend from their ivory towers and talk about real-world politics. The writing can sometimes be sort of stiff (I mean, what do you expect from academics?) but it’s rare that a week goes by in which I don’t find something very worthwhile there.

Members of Congress should get higher salaries. 
This is not from some lefty, mainstream media outlet but from the conservative Washington Examiner. One thing I’d add is that the author’s proposal to increase congressional salaries to $225,000 isn’t nearly enough. I’d like to see a system like they have in Singapore, where legislators earn close to $2 million per year.

One final recommendation. During the holidays, I try to remember to not only be grateful for all that I have, but to be aware that life is short and very precious. Not too long ago, Sam Harris started this excellent podcast episode with a short story that brought home this point in beautiful fashion. The story is only about seven minutes long – quite possibly the most meaningful seven minutes of podcast listening I did all year.

Happy Holidays!
Mike

This is a golden age for American beer. It’s never been easier to find an amazing ale, a hearty porter, or a hoppy, refreshing IPA (my personal favorite). It’s all thanks to the explosive growth of craft brewing in the United States. In 2016, craft breweries (defined as breweries producing under six million barrels per year and not owned by a larger brewer) sold 24.1 million barrels of beer – that’s 747.1 million gallons, enough to fill 95.6 billion bottles.[1] Over 98 percent of the 5,301 brewers in the United States are craft breweries or brewpubs, which account for 42 percent of all employment in the domestic brewing industry.[2]

How did this craft beer revolution come about? The answer to that question has a lot to do with politics.

In 1920, the 18^th Amendment to the Constitution was ratified. The amendment prohibited the “manufacture, sale, or transportation of intoxicating liquors” within the United States. It also closed down the over 1,000 brewers then operating in the United States. When the 18th Amendment was repealed in 1933 breweries started to open up again, but in nowhere near their pre-Prohibition numbers. The market quickly became dominated by a small group of mega-brewers who churned out bland, insipid lagers for a mass market.

This ‘beer dark age’ began to end thanks to two laws passed in 1978. The first of them lowered the excise tax on beer for small brewers (those with overall production of under 2 million barrels per year). Previously, they’d paid $9.00 in federal tax for every barrel, just like the mega-brewers. The new law cut that to $7.00 per barrel for their first 60,000 barrels.[3] The second law repealed the excise tax on wine and beer for personal and family use, so long as you weren’t making more than 200 gallons per year (and if you need more than 200 gallons of beer per year for ‘personal and family use’, I’d say you’ve got bigger problems than an excise tax).

These laws led to a renaissance in home brewing, which in turn revitalized the craft-brewing industry as first hundreds, then thousands of home-brewers thought, ‘I should do this for a living.’ Most of them were wrong about that – if you’ve tasted much home-brewed beer, I’m sure you’ll agree – but as successful homebrew entrepreneurs began to start businesses, more and more Americans discovered that beer could actually taste good. Word began to spread, and the number of craft breweries and brewpubs soared.

Over the years, the federal excise tax on beer has gone up, though nowhere near as much as the rate of inflation. The current rate is $18 per barrel, which in unadjusted terms looks like a huge increase over that $9.00 rate from 1978. But in inflation-adjusted terms, $9.00 from 1978 is roughly the equivalent of $33 today, which means that in real terms the tax on beer has gone down considerably.

The special rate for small brewers is still around – it’s $7 per barrel on the first 60,000 barrels.[4] That tax, combined with various state and local taxes, accounts for about 41 percent of the price of every beer, according to an analysis commissioned by the National Beer Wholesalers Association.[5]

Congress has definitely taken notice of the growing interest in craft beer. Both the House and Senate have formed Small Brewers Caucuses, with 226 members in the House and 37 in the Senate.[6] [7] Recently, there’s been a bipartisan push in Congress to lower the federal tax burden on craft brewers. The latest effort, was the Craft Beverage Modernization and Tax Reform Act of 2017 (S.236 / H.R. 747). It was introduced by Senators Ron Wyden (D-OR) and Roy Blunt (R-MO) with a companion bill in the House introduced by Representatives Erik Paulsen (R-MN) and Ron Kind (D-WI).

The legislation called for the excise tax to be reduced from $7 all the way down to $3.40 per barrel on the first 60,000 barrels for small brewers, along with a reduction in the standard excise tax from $18 to $16 per barrel. This bill was rolled into the recently passed House and Senate tax reform legislation, with one small change – the lower rate for craft brewers was changed to $3.50 per barrel. More important to brewers is that it’s not a permanent tax cut. Under both the House and Senate versions, the lower rates only apply to beer ‘removed for consumption’ between January 1 of 2018 and December 31 of 2019.[8]

Why only a two-year cut? One reason is the deficit. Almost all independent and nonpartisan estimates of the tax bills conclude that they’ll add a minimum of $1 trillion to the national debt (currently at $20 trillion plus) over the next decade. Not only do Republicans in both chambers want to keep this number as low as possible, but the Senate can’t approve legislation with more than a $1.5 trillion increase if they want to use reconciliation rules, which prevent a Democratic filibuster. Another reason is that when Congress makes tax  cuts temporary, the industry benefiting from the cuts will almost certainly come calling when the cuts are due to expire, usually with campaign contributions.

The House-Senate conference committee kept the reduced excise tax, and given the near certainty of the bill becoming law, brewers will soon be getting a sizable tax break. Conservatives argue that this is a good thing, believing that reducing the tax will create even more growth in the brewing industry, boost employment, and result in more, better, and less expensive beer.

Many liberals counter that the industry is growing just fine without extra incentives and that, if anything, taxes on alcohol should be increased. According to economist Adam Looney of the left-leaning Brookings Tax Policy Center, the tax cuts for alcohol producers would not only lower federal alcohol tax revenue by 16 percent, leaving it at a rate not seen since 1950, but would lead to an increase in drinking that would ultimately result in over 1,500 additional alcohol-related deaths every year.[9]

I’m old enough to remember the days when good beer was hard to find, and I’m glad Congress acted back in 1978 to help the cause of good beer (a truly noble cause, in my book). But now that there’s a thriving craft beer industry in the United States, I think the potential benefit of even greater tax cuts is outweighed by the effect those cuts will have on the national debt ($20 trillion and growing) and the role they’ll indirectly play in more alcohol-related deaths.

____________________

[1] “National Beer Sales & Production Data,” Brewers Association, accessed December 5, 2017, https://www.brewersassociation.org/statistics/national-beer-sales-production-data/.

[2] “Historical U.S. Brewery Count,” Brewers Association, accessed December 13, 2017, https://www.brewersassociation.org/statistics/number-of-breweries/.

[3] Alistair Williams, “Exploring the Impact of Legislation on the Development of Craft Beer,” Beverages 3, no. 2 (March 28, 2017): 18, https://doi.org/10.3390/beverages3020018.

[4] TAD NRC, “TTB | Tax Audit Division | Tax and Fee Rates,” Data & Tools, accessed December 5, 2017, https://www.ttb.gov/tax_audit/atftaxes.shtml#Beer.

[5] John Dunham & Associates, “A Study of the U.S. Beer Industry’s Economic Contribution in 2016,” May 2017, http://beerservesamerica.org/wp-content/uploads/2017/05/2017-Beer-Serves-America-Report.pdf.

[6] “House Small Brewers Caucus Members,” Brewers Association, accessed December 13, 2017, https://www.brewersassociation.org/government-affairs/house-small-brewers-caucus/house-caucus-members/.

[7] “Senate Bipartisan Small Brewers Caucus Members,” Brewers Association, accessed December 13, 2017, https://www.brewersassociation.org/government-affairs/senate-small-brewers-caucus/senate-caucus-members/.

[8] Kevin Brady, “Text – H.R.1 – 115th Congress (2017-2018): Tax Cuts and Jobs Act,” webpage, December 4, 2017, https://www.congress.gov/bill/115th-congress/house-bill/1/text.

[9] Adam Looney, “Measuring the Loss of Life from the Senate’s Tax Cuts for Alcohol Producers,” Brookings (blog), November 22, 2017, https://www.brookings.edu/research/measuring-the-loss-of-life-from-the-senates-tax-cuts-for-alcohol-producers/.

I took a mini-vacation this week to deal with a bit of burnout, which means there’s no food politics post this week. Prior to my break I was researching something I think you’ll enjoy reading about: the politics of beer. In my beer politics article, which will be up December 16, I’ll explain how Jimmy Carter, homebrewing, and tax subsidies made the craft beer revolution possible.

I don’t want to leave you with nothing new to read, so I’ve put together some … well, I was going to say ‘recommended reading’, but that doesn’t sound very enticing, so I’ll go with ‘interesting things I’ve found this week’.

(Which reminds me – if you’re interested in getting 3-5 article links like this every week, send me an email  (mike@politicsguys.com) to let me know. If there’s any sort of demand for it, I’ll make it a regular feature.)

Conservatism is dead.  Matthew Walther.
A smart and frequently funny look at what it used to mean to be a conservative and why the future prospects for ‘real’ conservatism are very dim.

The Closing of the American Mind.  Jacob Hamburger.
Alan Bloom’s The Closing of the American Mind was probably the most important book to me in my days as a young Burkean conservative. While I’m now a liberal, I still consider myself a Burkean, and I still view Bloom’s book as a revelation. This article does a great job of explaining what Bloom and the book were all about – the role of higher education, the meaning of true freedom, why democracy needs elites, and much more.

Net Neutrality: A Primer.  Daniel Lyons
I think this is essentially what Jay would have to say about net neutrality if he decided to write an article about it. You probably know that I’m a strong supporter of net neutrality, but I think it’s useful to understand the best arguments that opponents of it can bring to bear. (One thing you’ll notice that’s not in this article is any discussion of the lack of real broadband competition in nearly two-thirds of the country and the related issue of natural monopolies. That’s central to my support for net neutrality, as well as my call for a nationwide fiber-optic infrastructure project.)