The Politics Guys

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.)

In my pre-Thanksgiving post last week I wrote about the politics of turkey, as well other meat products. One thing I discovered is that thanks to good inspection standards, the meat supply in the United States is very safe. While food-borne illness is extremely common – the CDC estimates that over 48 million Americans are affected every year – most cases are relatively minor. In 2016, only 0.007% of the U.S. population sought medical treatment for a food-borne illness of any kind.[1] The vast majority of these cases aren’t caused by contamination occurring at slaughterhouses or meat processing plants. You’re a lot more likely to get sick from contaminated produce or under cooking your meat.

As I mentioned last time, animal welfare is another story. Groups like PETA have repeatedly and convincingly documented the horrific conditions livestock and poultry are subject to. (A brief definitionary aside: under federal law, ‘livestock’ includes cattle, sheep, pigs, horses, mules, donkeys, and goats, whereas poultry refers to domesticated birds including chicken, turkey, duck, and goose.)

The only federal law that addresses treatment of animals intended for the dinner plate is the Humane Methods of Slaughter Act. It limits or prohibits the use of certain livestock driving methods (you can’t, for instance, whack a cow with a piece of pipe or a sharp metal object to keep it moving) and requires that livestock be rendered insensible prior to slaughter, but that’s essentially it. Also, as the name suggests it only applies to livestock, so chickens, turkeys, and other poultry aren’t covered by even these minimal protections.

Maybe you’re thinking, “Okay, the factory farm situation may be pretty grim, but I only get good, organic meat.” If that’s actually you, you’re in a very small minority – over 99 percent of all meat in the U.S. comes from factory farms.[2] But let’s say that is you, or at least the meat-eater you aspire to be. What’s the USDA Organic seal mean when it comes to meat?

First off, in order to be designated as organic, animals have to be fed organic feed, which basically means feed that doesn’t contain pesticides, synthetic fertilizers, or animal protein or by-products. In addition, cows and other ruminants have to be able to graze a minimum of 120 days each year as well as get 30 percent of their feed from pasture.

That covers what goes into organic animals, but what about their living conditions? Going by the USDA’s Organic Livestock Requirements Fact Sheet (which, oddly, also covers poultry) standards seem pretty good. Organic-certified animals must be “raised in a way that accommodates their health and natural behavior”, which includes access to the outdoors, clean & dry bedding, shelter, exercise space, fresh air, clean drinking water, and direct sunlight and shade.[3] Just like how you’d imagine old Farmer Brown does it.

The reality is considerably different. For instance, while organic animals must be given access to the outdoors, that requirement can be satisfied by opening a single small door for an hour a day, a door none of the animals, crammed into unnaturally small spaces, can really access.

But what about that ‘accommodates their health and natural behavior’ clause? That shouldn’t allow for unnatural things like overcrowding, or chickens not ever going outside. I agree  it shouldn’t, but since there aren’t any specific requirements, the determination of what ‘accommodates natural behavior’ is made by organic certifiers. The certification isn’t actually done by the government – they approve third-party organic certifiers to do the job. (And as you might expect, there are more than a few quality-control problems with this setup, as government investigations have repeatedly uncovered.)

In the absence of clear federal guidelines, and not wanting get sued by producers, the standards certifiers adopt are generally far better for producers and certifiers than they are for animals. For example, it’s considered acceptable for producers of organic meat to de-beak their chickens, dehorn their cattle, and cut the tails off of their pigs.

In April of 2016, the USDA introduced a rule that would provide far more extensive protections for organic-certified livestock and poultry, a rule that was made final on the very last day of the Obama administration. The ‘Organic Livestock and Poultry Practices’ rule clarifies and tightens animal welfare standards, prohibits certain ‘physical alterations’ of animals, such as de-beaking, beak clipping, tail clipping, and tail docking, sets maximum indoor and outdoor densities for chickens, and defines required outdoor space for animals, among other things. The rule was scheduled to go into effect on March 20, 2017. Producers were given a year after that to meet the new standards, with producers of broiler chickens given an additional two years to meet the new indoor space requirements.

Once a ‘final rule’ has been published in the Federal Registrar, it can’t be revoked without a lengthy and difficult administrative process, which meant that the decidedly anti-regulation Trump administration wasn’t able to simply ignore the new rule on organic-certified animal welfare. But what the new administration could do was delay its ‘effective date’, which they’ve now done three times, with the latest effective date being May 14, 2018.

An agency can’t simply say, ‘we don’t like this rule so we’re going to stall’ – they have to submit  ostensibly good reasons for why they’re stalling. In this case, the USDA gave two main reasons. First, they said they needed more time to properly evaluate the costs and benefits of the rule, which they contend the Obama administration had miscalculated, to the detriment of farmers. In other words, they believe that making conditions better for animals would cost farmers and more than the Obama-era USDA said it would.

The second reason they gave for delaying was the need for more public input on the new rule. To get more comments from the public, the USDA opened up a 30-day public comment period that ended on June 9. The public responded with over 47,000 comments. Over 40,000 of them –  over 85 percent  – urged the agency to implement the rule. Most of these comments weren’t exactly handwritten, heartfelt letters though – as is usual for  public comments on regulatory changes, the bulk of the responses were via form letter. The USDA made sure to point out that of those 40,000 ‘implement it’ letters, 34,600 were form letters. They didn’t bother to provide similar information concerning the under 7,000 letters from those who wanted the USDA to delay, suspend, or withdraw the rule. I don’t think that was an oversight.[4]

The Organic Trade Association, which is the main lobbying group for organic producers, filed suit against the USDA, arguing that it unlawfully delayed the rule as well as ignored the overwhelming percentage of public comments calling for implementation of the law. Lawsuits concerning administrative rules are incredibly common, and often take many years to resolve. If you’re a fan of the status quo that’s pretty good news, because every day you delay the implementation of a rule, you save yourself the cost of complying with it. In this case, even if everything moves along incredibly fast by regulatory lawsuit standards, I wouldn’t bet on  conditions getting any better for organic-certified animals before the next presidential election.

_______________

[1] “Foodborne Illnesses Hit 24,000 Americans in 2016,” Medscape, accessed November 28, 2017, http://www.medscape.com/viewarticle/878896.

[2] “Farm Animal Welfare,” ASPCA, accessed November 28, 2017, https://www.aspca.org/animal-cruelty/farm-animal-welfare.

[3] United States Department of Agriculture, “Organic Livestock Requirements,” accessed November 28, 2017, https://www.ams.usda.gov/sites/default/files/media/Organic%20Livestock%20Requirements.pdf.

[4] “National Organic Program (NOP); Organic Livestock and Poultry Practices,” Federal Register, November 14, 2017, https://www.federalregister.gov/documents/2017/11/14/2017-24675/national-organic-program-nop-organic-livestock-and-poultry-practices.