08 August 2010

Let Me Get This Straight: Jimmy Carter Deregulated the "Beer Industry"?

So blogger E.D. Kain reported the following Thursday in the blog Balloon Juice:
If you’re a fan of craft beer and microbreweries as opposed to say Bud Light or Coors, you should say a little thank you to Jimmy Carter. Carter could very well be the hero of International Beer Day.
To make a long story short, prohibition led to the dismantling of many small breweries around the nation. When prohibition was lifted, government tightly regulated the market, and small scale producers were essentially shut out of the beer market altogether. Regulations imposed at the time greatly benefited the large beer makers. In 1979, Carter deregulated the beer industry, opening the market back up to craft brewers.
This message and theme got picked up by Jonathan Chait at the New Republic, and then Chait was commented on by Matt Welch at Reason Magazine's website.  Kain then added a rebuttal to Welch on Friday, and the comments there spin off into a wild thread having to do in part with (I can't figure out quite how) gas station hours in Oregon(?!?).

As is typical with online articles relating to beer at such websites, the commentary by readers that follows blathers on and on over the virtues or lack thereof of various craft beers, the "crapitude" of mass-market beers, etc.

There's only one problem.  Actually, make that two.

First, Kain makes no reference to just how Carter "deregulated the beer industry."  No bill number, no details of the changes made, or anything.

Second, everyone else accepts this article on faith, save for quite a few savvy commenters way down the list of 150+ comments on the original piece.

As most homebrewers are made aware in various accounts of homebrewing's history, Jimmy Carter most definitely did one thing legally relating to beer: he lifted the Federal prohibition on making beer or wine at home, in October 1978 with the signing of H.R. 1337, which, among other things,
Allows any adult (formerly only heads of families) to produce wine and beer for personal and family use and not for sale without incurring the wine or beer excise taxes or any penalties for quantities per calendar year of: (1) 200 gallons if there are two or more adults in the household and (2) 100 gallons if there is only one adult in the household.
Now, aside from this, which was indeed a sea change in the way beer other than "North American industrial lager" could be made and discovered by the teeming masses in the nation...........  was there any act or law signed by Jimmy Carter which had any effect of deregulating, in any fashion, the commercial beer industry in the United States?

If so, the appropriate historians should be able to cite the specific law in question, and I/we should be able to look it up online.  The comments are open, folks.  Have at it.

My presumption, until I hear otherwise, is that Kain has made a grandiose error of mis-association by confusing the legalization of homebrewing with the "deregulation" of the "beer industry," possibly from overhearing some associate describe the former (possibly over several beers or homebrews) and making a leap (of ignorance or desire) to the latter.

What's even more egregious is that, in their haste to jump into a mud-wrestling pit debate on deregulation or re-regulation, both Chait and Welch run with this theme without even questioning the original premise.

UPDATE:  In a (so far vain) attempt to discern if, indeed, there was any specific law signed by Carter that "deregulated" craft brewing and made commercial microbrewing possible, I did a couple Google searches.  What I discovered is that, as of this moment, "Jimmy Carter deregulated brewing" is on track to replace "Ben Franklin said 'Beer is proof that God loves us and wants to see us happy'" as THE most popular "urban legend" regarding beer, thanks to people online citing the New Republic piece.....

UPDATE II:  More on the subject here.  "The intermediate step, which goes unnoted by Carlson ("as far as I can tell nothing else substantive changed about the market") and thus by Kain and Chait, is the legalization of brewpubs in individual states. Washington passed its law in 1982, and that same year Bert Grant opened his brewpub in Yakima--the first brewpub in the US since Prohibition. California's brewpub law also passed in 1982 (sponsored by Assemblyman Tom Bates), and Oregon's passed in 1983. Over the course of the 1980s, various other states followed suit." 

UPDATE III: As if I thought the oversimplification couldn't be any worse..........  see this headline at another blog that cites Kain: "Like Beer? Thank Jimmy Carter!"  As if Carter ended Prohibition or something..... 

UPDATE IV:  Welcome, readers of The Atlantic!  I am most happy to see that Atlantic National Correspondent James Fallows, a former Jimmy Carter speechwriter, had enough scruples to revisit and retract his original promotion of the Kain essay and meme.

Kudos to The Atlantic.  Still waiting for Reason and The National Review, however......   As with fellow blogger Tom Hilton, I am only interested in the truth in this matter, with no political bias for or against Carter himself.

UPDATE V: As noted elsewhere, it turns out Matt Welch of Reason Magazine/.com put up a story that included a link to my piece within a day of my original spiel.  Thanks. Mr. Welch and Reason!


E.D. Kain said...

Actually Carter's deregulation of home-brewing was a deregulation of the beer market. I'm still failing to see how that doesn't count. If you remove a barrier to entry in any market that counts as deregulation. Not sure what your point is.


Sandy, I traced this mis-meme back to a Rob Carlson, in a march 2010 piece entitled "Beer as an Example of Distributed Biological Manufacturing." http://bit.ly/9hOkkp

Carlson offers no evidence about his claim that Carter de-regulated the beer industry; he simply states it. His essay seems to have been the starting gate for all the references this week.

Carlson even manages to contradict his central point about the alleged deregulation when he acknowledges that even though there are more breweries now than in 1979, production is more concentrated now than then: "According to the Beer Institute's "Craft Brewers Conference Statistical Update - April 2007" (PPT), three brewers now supply 50% of the world's market and 80% of the US market."

Carlson also is wrong on other things, such as writing that a US barrel equals 30.6 standard gallons. Well, no! The US government recognizes a barrel of beer as 31 gallons.

The 0.4 gallon difference might not appear to be much, but, when large volumes are produced, such negative discrepancies are huge. For example, in 2006, then Anheuser-Busch produced 197 million barrels of beer. Carlson's 'small' error would have resulted in 7, 888,000 gallons of beer to have been missing.

And YOU shouldn't be so humble, sir! It was you and Phil Sides who co-wrote a nifty piece of journalistic investigation in 2006, debunking that supposed Ben Franklin quotation. http://bit.ly/9vh5Tl

Alexander D. Mitchell IV said...

I will openly acknowledge that legalizing homebrewing and home winemaking--a point NOT mentioned in your original post, mind you--dramatically impacted the long-term impact of the American beer industry by indirectly changing consumers' taste from bland, mass-market beers to beers with flavor. It also gave many who would become craft brewers the opportunity to dip toes into the experience of brewing, and gain the knowledge necessary to start up the thousands of brewpubs and microbreweries across the nation. For that, we thank him. (But we also owe a debt to Sen, Alan Cranston, who actually introduced the bill.)

That's NOT "deregulating the beer industry"--your exact words, I remind you.

Also, in 1977, Congress reduced taxes slightly on small brewers, from $9 to $7 per barrel on the first 60,000 barrels of beer produced--a financial incentive to start small, to be sure, but NOT "deregulation."

Those who wanted to take a hobby commercial STILL had to fight for permission, on a state-by-state and even local basis, to start up a microbrewery or brewpub.

And the brewing industry remains among the most regulated industries in the United States, both on a Federal level and a state level. Ask anyone who lives in Pennsylvania, where you can only buy prepackaged beer by the case except by paying tavern prices and mark-up. (Boy, you'd better love that Belgian import before you spend $125 on a case!) Ask folks in Maryland, where you can't have beer (or wine or other hooch) shipped to you across state lines. Ask those in Mississippi, where they had to wait an additional 20 years for state permission to open a microbrewery. Ask those in numerous states where the strength of beer permitted to be sold was restricted to only 6% alcohol by volume until recently (or still). Ask any brewer who wants to put the ingredients or nutritional information on a beer bottle label or can--still prohibited by Federal law. Ask any brewer that is prohibited from listing the level of alcohol in his beer on the bottle label by state law.

When the bills signed by Carter deregulated the airline, trucking, and railroad industries, there was indeed a seismic shift in the way those industries did business. No longer did they have to genuflect and lay prostate before the Interstate Commerce Commission to change a freight rate or fare, or exit one market and enter another, or abandon underused railroad lines, or scratch themselves. We can endlessly debate whether the changes in the transportation industry that resulted were good or bad--and many have already argued endlessly, so let's not be redundant--but the fact remains that said deregulation was real and effective, as it actually made massive changes to Federal oversight of, and interference in, the freight transportation and airline industries, and thus the ability of the players to compete in the marketplace.

That hasn't happened with beer.

If we had a similar loosening of Federal oversight in the alcohol industry, we well might have a WORSE craft beer scene in the United States, not a better one, as there would be little to nothing to prevent the massive buyout and consolidation of tiny breweries by bigger behemoths, as occurred in Britain before their own craft beer revival. (Some of that is going on now as I type in the States: ABInBev and other big breweries partially own and control several companies that partially own regional microbreweries like Magic Hat, Pyramid, Redhook, Widmer, Fordham, and the like, mostly in an effort to increase distributors' craft beer portfolios.)

Thomas said...

E.D. deregulation is the removing barriers to enter the market. Homebrewers are not allowed to sell on the market so I don't see it qualifying.

Great post Alexander.

E.D. Kain said...

Look if you guys can't see how deregulating home brewing didn't lead directly to people suddenly being able to experiment with brewing techniques, which led directly to the explosion of craft beers - then I'm not sure you're going to be convinced. Let's pretend that instead of beer, bread had been heavily regulated. People could not bake at home without a permit and adherence to a long list of regulations. Can you see how removing this set of regulations might lead directly to an explosion of new small bakers?

Alexander D. Mitchell IV said...

Keep stretching that way, E.D., and you're going to hurt yourself.

The term "deregulation" when applied to governmental affairs denotes, or at the very least implies, a relaxation of governmental regulation of an industry, trade, act, substance, or whatever. And that is the way your original post has been MISREAD by almost EVERY subsequent commenter and blogger--they read it as "Carter deregulated commercial brewing."

To apply the term "deregulated the beer industry" to the bill legalizing homebrewing is a grotesque insult to the many hard-working zealots in the craft brewing avocation and industry--many of whom I'm proud to call friends, some of whom I'm on a first-name basis with--who personally lobbied for and shepherded the passage of state laws actually permitting the establishment of the microbreweries and brewpubs that give us reason to drink beer. It's an insult to those who still have to jump through local and state hurdles, reasonable and no, to set up and operate a brewpub or microbrewery.

And it is a gross insult to those who still continue to labor to produce and serve craft beer for our enjoyment while bedeviled by a multitude of arcane, archaic, and sometimes asinine local, state, and federal regulations all hovering over their every move, brew, and barrel. Ask the brewpub that has to legally sell every drop it makes to the county before it turns around and sells it back to its own customers. Ask the beer importers whose imports are banned in certain states because the state has no provision for recognizing anything but certain bottle sizes. Ask the bars in Philadelphia that were raided, and had legal beers confiscated, because the state liquor control board because said board couldn't keep accurate track of the way they themselves listed the beers it regulated.

I could go on and on and on about the stupidity of various liquor laws in the United States, and other have already done so and will continue to do so. See http://noplcb.blogspot.com/ for one of the best examples. If there were really "deregulation" worthy of the name, then we wouldn't be able to--or at least it wouldn't be as easy as shooting fish in a barrel with a double-barrel shotgun.

Volker @ Brewer's Art said...

I would say that the legalization of homebrewing led to the diversification of united stated beer culture, and enabled the craft beer revolution, but deregulation is not he word I would use either.

I think the argument here is primarily due to semantics.

FWIW, the federal government exercises fairly little regulation on an operation like mine. It inspects the brewery, OKs my labels and tells me what adjuncts are taboo. I don't see any of this as particularly oppressive. (Well, OK, there is the Excise Tax...) The state, on the other hand, is VERY restrictive, in some cases due to laws designed to protect the almighty wholesaler.


stevejones said...

As a relative newcomer to the country I don't know enough about the subject to add anything to the discussion, but I wanted to commend you for an excellently written and engaging post (including follow up commentary). Keep up the good work!

Jeff Alworth said...

Ah, finally! Ever since that flurry of identical posts ravaged the blogosphere last week citing the "deregulation of brewing," I've been scouring the intertubes to find out what it referred to. I was goint to post something exactly like what you've written here.

What's weird is that I can imagine a beer blogger making this error, but not a political blogger.

As a long-time politics AND beer blogger, this really hit my sweet spot. But why hadn't I heard of the bill? Why hadn't it become part of the beer canon--like Carter's homebrew legalization (justifiably famous)? Thanks for putting proof to the overstatement.

Legalizing homebrew is cool. It had nothing to do with the beer industry--though lots of lawmaking was needed to get craft brewing off the ground. But laws were changed at the state level to make it possible for the wee folk to enter the market. The laws governing sale and distribution of beer--the federal laws--weren't changed by Carter.

(Oh, and as a beer blogger, politics blogger, AND an Oregonian, I can confirm that inevitably, discussions always devolve into our strange little law mandating gas station attendants pump gas.)

Unknown said...

Good job actually looking into this. Should have known better myself.

Unknown said...

Jeff touches on another subject. Carter, didn't write the legislation, he merely signed it into law. And his reason for doing so probably didn't have anything to do with home brewing. So if we're going to hold anyone "responsible", it ought to be the original sponsor of the bill, who actually inserted the home brew language. William (Bill) Steiger (R-WI)... We salute you!

Tom Hilton said...

Excellent post, and thanks for the link & quote. I was astonished (and appalled) at how quickly some phantom law that nobody identifies with any particularity can suddenly become part of the conventional wisdom without anyone (except Mr. Mitchell, myself, and probably a few others) asking the very basic question of what law are you talking about?

@E. D. Kain: Firstly, it's patently ridiculous to say that 'deregulation' of individual behavior (in which commercial application is expressly prohibited) counts as market deregulation.

Secondly, if the homebrewing law really was what you meant in the first place, why haven't you edited your post to clarify that? The extraordinary thing about the Stevens (RIP) Tubes is that, yes, you can actually go back and add information to something you've written (Mr. Mitchell provides salutary examples of the form in this post).

Look: you didn't originate the misidentification (that was Carlson), but you did pick it up without checking it. Fine; your bad, but no capital crime if you simply admit your mistake and move on. Instead, you're trying to rationalize it as not really a mistake even though it was clear from the context of your post that you really weren't talking about HR 1337. That's just egregious intellectual dishonesty.