Carter Was a Deregulatory Leader. Biden Can Be, Too.
For Democrats, “deregulation” long ago became a dirty word. They take it to mean rolling back environmental or safety rules, or “Republican corporate welfare” 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 wasn’t 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 Carter’s 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 CAB’s interference in the marketplace, Brown writes, is that new entrants were “essentially blockaded”—which meant that “the only truly competitive city-pair markets” 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: “He showed that flexible pricing was beneficial for both customers—who have saved billions of dollars in fares since Kahn’s efforts—and the U.S. airline industry.”
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 wasn’t all Carter. As John Harry writes for the website of the Smithsonian’s 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 didn’t 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, you’re 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 “Cannonball Runs” 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 “blue” 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 state’s 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 don’t. States tried finding ways around the ruling, but Congress didn’t bite.
Now President Joe Biden has taken action here that, if followed through upon, can really demonstrate a few helpful things: that deregulation isn’t always about helping out your friends once you achieve power, and that deregulation is often an acknowledgement that markets, consumer preferences, and—in the case of alcohol—tastes, 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 “threats to competition and barriers to new entrants,” including unlawful practices; consolidation in the three tiers of production, distribution and retail; and unnecessary regulations such as bottle sizes, permitting and labeling. Treasury’s Alcohol and Tobacco Tax and Trade Bureau, or TTB, was given 240 days to initiate rulemaking to correct any identified problems, including “reducing any barriers that impede market access for smaller and independent brewers, winemakers, and distilleries.”
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 country—but 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 isn’t 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 can’t have, even if I’m 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 hasn’t. 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 Skowhegan, Maine. But microbreweries and distilleries still haven’t been permitted to cut out the middleman. The cultural shift of the pandemic—when consumers got used to “Fauci Pouchies” and takeaway cocktails to support restaurants in their neighborhood—makes the restriction look even more outdated.
There’s no reason consumers shouldn’t 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.