Carter Was a Deregulatory Leader. Biden Can Be, Too.
When it comes to beer and liquor delivery, consumer preferences have evolved. So should regulations.
For Democrats, āderegulationā long ago became a dirty word. They take it to mean rolling back environmental or safety rules, or āRepublican corporate welfareā to benefit favored industries.
But it used to be the case that there was some deregulation Democrats could support. During the Carter years, the airline market was changing. You could still smoke on planes, but it wasnāt like those old-timey videos of everyone wearing their Sunday best on a flight. (Apologies to Tom Nichols.) People wanted discount airlines to help them fly cheaper and more frequently, and the Carter administration helped give America our current airline market, including popular favorites like Southwest, which at the time were limited because of an entity called the Civil Aeronautics Board (CAB).
Jimmy Carterās appointee to run the CAB, Alfred Kahn, an economist at Cornell and a firm believer in marginal cost theory, changed airline travel in America for the better.
As John Howard Brown observes in the Independent Review:
The regulation of airlines commenced with the Civil Aeronautics Act of 1938. The act established the Civil Aeronautics Board (CAB) as a regulatory agency with comprehensive powers over the industry. The CAB was empowered by the statute to control entry and exit into both the industry and individual routes. It also had the authority to regulate fares in a manner similar to the Interstate Commerce Commission. In addition, it exercised regulatory control over industry mergers and intercompany contracting, while immunizing firms in the industry from antitrust scrutiny. Finally, the CAB was charged with offering subsidies to promote air service and preventing deceptive trade practices and unfair methods of competition.
One of the effects of CABās interference in the marketplace, Brown writes, is that new entrants were āessentially blockadedāāwhich meant that āthe only truly competitive city-pair marketsā existed within states big enough to have intrastate airlines.
Kahn was able to help shepherd through the U.S. Airline Deregulation Act of 1978, because, as his Cornell obituary notes: āHe showed that flexible pricing was beneficial for both customersāwho have saved billions of dollars in fares since Kahnās effortsāand the U.S. airline industry.ā
Another deregulatory effort that Carter is credited for, perhaps too generously, is signing into law a bill in 1978 that effectively legalized homebrewing. But it wasnāt all Carter. As John Harry writes for the website of the Smithsonianās National Museum of American History, it was Democratic Senator Alan Cranston who led the deregulatory effort. Carter just signed the bill.
In 1976, a group of homebrewers in California, where homebrewing had become popular, lobbied Senator Alan Cranston for federal legalization. After two years of failed attempts, Cranston was finally able to incorporate the legislation into a transportation bill to avoid scrutiny.
Of course, this didnāt legalize brewpubs overnight. That was a state-level issue that came a few years later. But it inspired lots of tinkerers to start perfecting their own concoctions. Homebrewing, of course, poses far less of a threat to public health than home distilling, which is an age-old American tradition that still exists in the shadows, even if it has become reality TV about as real as wrestling.
But once you open a brewpub and start to see some success, how do you grow? Just like airlines under the Civil Aviation Board, youāre restricted to a regulatory regime that has an incentive to deal only with the successful oligarchs and cast aside the ankle-biting newcomers, such regimes have long been decided by states and alcohol distributors.
At my wedding, I was regaled by stories of a family friend telling me about āCannonball Runsā from Saint Louis to the closest place you could get precious Coors beer to sell at a profit, only to find out that blue laws restricted the alcohol-by-volume content on Sundays to 3.2 percent, a percentage beer that people under the age of 21 could then legally drink.
Thankfully, most āblueā laws have been repealed. But many states still control their liquor sales, and states vary widely in their strictness. Virginia, where I live, still has state-run liquor stores because privatizing them would hit state coffers too hard and sucker-punch the stateās pension fund.
A 2005 Supreme Court decision, Granholm v. Heald, opened up the direct-to-consumer wine business, as the Wall Street Journal reported around the time. The Court ruled that states could not pass laws that allowed their wineries to ship directly to consumers while at the same time forbidding wineries from neighboring states to ship to them, too. Pick one: Allow direct shipping to the consumer, or donāt. States tried finding ways around the ruling, but Congress didnāt bite.
Now President Joe Biden has taken action here that, if followed through upon, can really demonstrate a few helpful things: that deregulation isnāt always about helping out your friends once you achieve power, and that deregulation is often an acknowledgement that markets, consumer preferences, andāin the case of alcoholātastes, change. The Washington Post reports:
The president directed the treasury secretary, in consultation with the attorney general and the chair of the Federal Trade Commission, to submit a report within 120 days assessing āthreats to competition and barriers to new entrants,ā including unlawful practices; consolidation in the three tiers of production, distribution and retail; and unnecessary regulations such as bottle sizes, permitting and labeling. Treasuryās Alcohol and Tobacco Tax and Trade Bureau, or TTB, was given 240 days to initiate rulemaking to correct any identified problems, including āreducing any barriers that impede market access for smaller and independent brewers, winemakers, and distilleries.ā
It took years for some of the respected older brands, like Rolling Rock (before being bought out by ABInBev), Yuengling, or Sam Adams, to migrate across the countryābut it was often hard for them even to cross over borders of neighboring states due to politics and the decisions of local distributors, who might wish to favor the people who live in their area who might make a product that isnāt preferred to something from another state. After all, shelf space is finite.
Like with the CAB, consumer preferences and behaviors have changed. We can order goods, including fresh foods from across the country and across the world, delivered to our front door. That includes alcohol: People are now able to get beer and wine delivered to their house from Instacart. In some places, customers can even get bottles of liquor delivered by Drizly (Washington, D.C. allows this; Virginia does not).
A few years ago, a married couple that shares my last name responded to my email about their Texas whisky, which produces a wonderful single malt, about its availability in states other than Texas. Since I was a member of the media, they were kind enough to send me a bottle, gratis, which is allowed for review purposes. Availability outside of Texas is limited, and I canāt have, even if Iām pushing 40, one of my two in-laws in Texas mail me a bottle with ID requirements.
Alas, while the market has evolved, the law hasnāt. The 2005 Supreme Court decision in Granholm v. Heald paved the way, along with smartphones, RealID, and ecommerce, for wineries to ship California red directly from Sonoma, California to āāSkowhegan, Maine. But microbreweries and distilleries still havenāt been permitted to cut out the middleman. The cultural shift of the pandemicāwhen consumers got used to āFauci Pouchiesā and takeaway cocktails to support restaurants in their neighborhoodāmakes the restriction look even more outdated.
Thereās no reason consumers shouldnāt be able to support, or at least try the wares of, far-flung producers of alcohol. The infrastructure already exists and the only things standing in the way are the government and wholesalers. Anyone who knows how much a keg weighs knows the wholesale distributors will still have an industry, built over the course of close to a century, that is not going away anytime soon. The cost of shipping is too damn high.
