Articles

Saturday, January 05, 2013

Drinking for the State

There was a time when the United States government ran on hooch. Hard up for cash, taxes on whiskey and beer funded the Civil War. With 40 percent of government revenues coming from liquor taxes, alcohol made the dramatic post-war expansion of government possible so that by the 20th Century, the Federal government would have been unrecognizable in scope and function to a man of the 1800s, but would have been all too familiar to us.

The Department of Education was created in 1867, the Department of Justice in 1870, the Department of Agriculture in 1862 and the Department of Commerce and Labor in 1903. Within that time, the Federal government had become concerned with every aspect of life throughout the country. After the Civil War, the same whiskey taxes that had paid for cannons, aerial balloons and widows' pensions began paying for the transformation of the government into a booming engine of social change.

During the same period that the government was being unrecognizably reshaped, the major cities were being transformed by a tremendous immigration boom. Immigration had made it possible for the Union to win the war by providing an endless supply of fresh bodies to throw into the fight. German, Irish and Jewish immigrants came by the hundreds of thousands and made the Union victory possible.

Republican Progressives had looked forward to freeing the slaves, but were far less enthusiastic about filling the country with Catholics and Jews, who were not only bound for Democratic precincts, but did not share their faith. Germany had produced a liberal variant of Judaism that was rather close to Unitarianism and had prospered nicely among upper class Jews in the United States, but the Jewish immigrants who were arriving were members of a more traditional faith in Russia and Eastern Europe. But it was the Catholics who truly worried them.

The Draft Riots during the Civil War had to be put down with the military and the armories were a hulking reminder that the cities could go up in flame at any moment if the Democratic Party's radicals chose to light a match. Those same Catholic immigrants had been invaluable to building the Union, but with the South defeated, and the expansion of the Union underway, they had become a problem.

Progressive reformers cast an uneasy eye on the slums and the Democratic political machines that ran them and pursued a grab bag of strategies for curing their ills, from birth control to temperance to socialism.

The progressive vision of a New America was being funded by liquor taxes, but a combination of bigotry and health-nuttery, which was another of the elements of the modern country taking off, brought quite a few reformers around to temperance. Associating Catholics with liquor, they went after liquor itself. But liquor could not be outlawed, without also outlawing big government.

For the practical politician the link between liquor and big government was a web that should not be touched. The drinking American was making big government possible and should be left to drink in peace. But progressive reformers are ever deaf to such logic and quick to cut Gordian knots. Faced with a liquor revenue problem, they contrived a solution in the form of the personal income tax.

The personal income tax was unconstitutional, but with the end of the post-Civil War era and the revival of the Democratic Party as a progressive political movement, the country had entered a period where the Constitution meant very little. During the Wilson and Roosevelt administrations, that document, then not very much more than a century old, had come to be regarded as an outmoded work with very little relevance to modern times.

The Anti-Saloon League, rising out of the mists of an uncertain time, had assembled a coalition encompassing Klansmen, Suffragists, Socialists and Preachers focused on a single-minded agenda, but pushing whatever laws it had to along the way to reach its goal. And the road to Prohibition lay through such policy territories as the personal income tax.

Prohibition today is remembered mainly for the quaint scenes of smugglers and lawmen chasing each other on dark roads, speakeasies where liquor made in massive illegal stills was served, and the end of national integrity as an age of national hypocrisy was ushered in by wet politicians who voted dry. But Prohibition as a phenomenon matters little compared to the ways in which the campaign to achieve it and then hold on to it transformed the country.

Before the income tax, the progressive expansion of government had been built on a hypocrisy that reformers had denounced. A better world was being built with whiskey money, some of it, though far from all of it, coming out of the slums where the new immigrants worked and died. Afterward all that whiskey money went to a mob built out of the worst elements of the slums while the government fattened itself on a new source of tax revenue.

But the income tax was not nearly enough. The Federal government had been running shocking deficits in the 1930s. The budget deficit hit $903,000,000 in 1931, and then more than doubled in 1932 to $2,472,000,000. A 2.4 billion dollar budget deficit might not attract much attention today, but that same year revenues stood at only 1.9 billion dollars making the deficit larger than the revenues. A comparable budget deficit today would not be our usual trillion dollar booms, but something in the range of three trillion dollars.

With the Great Depression underway and the ultimate progressive Democrat with a big government agenda in the White House, the liquor taxes were sorely missed. Republicans lost 100 seats in the 1932 congressional election and with FDR in the White House, it was time to put an end to Prohibition and put all the lost revenue from liquor sales to work funding the New Deal.

By 1935, revenues had jumped to 3.6 billion dollars, nearly double what they had been only a few years earlier, but the budget deficit had gone up to 2.8 billion dollars because spending had surpassed 6 billion dollars reaching nearly 10 percent of the country's Gross Domestic Product. It would eventually reach 24 percent of GDP, a figure only matched by another Democrat. Obama.

Roosevelt's New Deal had drunk deeply of liquor taxes, but kept spending money like a drunken sailor, and even with the income tax and legal liquor sales, and a variety of other revenue raising gimmicks, the government had dug itself into a deeper fiscal hole than ever.

Social Security was born two years after the end of Prohibition. One of the creators of Social Security was Senator Pat Harrison of the Cullen-Harrison Act which legalized the sale of low alcoholic beer as a trial balloon for ending Prohibition.  What had been thought a sin by progressive Unionists had become the salvation of progressive New Dealers who were less interested in moral reform and more interested in building the institutions that would give them permanent political power. And if those institutions had to run through the saloon, so be it.

The expanding government had gotten a heady taste of how good steady revenues from sin taxes could taste, and from that day on it was hardly ever sober again, imbibing greater and greater quantities of the stuff. One tax led to another and then another. The more the tax revenues rolled in, the faster they were spent on creating and funding the bigger and bigger institutions of the perpetually expanding system of infinite progressive government.

Prohibition proved to be less about morals than about economics and the ways that governments try to make the unworkable policy keep on going just a little longer. That could be taken as a reference to the prohibition of liquor, but it applies equally well to the economic infrastructure of tax and spend policies. Prohibition had less to do with morals than it did with political power, immigration and taxation.

On a social level, temperance had less to do with liquor and more to do with attempts to reform a country whose cities were becoming unrecognizable megalopolises packed with immigrants who were building the modern vision of the world of tomorrow and threatening the world of today. Prohibition became a reminder that modern technology and techniques were ultimately no match for the will of the people. It was the first real destructive test of the modern government's abilities and it failed socially and economically, forcing the government to go wet to finance its own operations. 

Prohibition is long gone but the consequences of it, including the cat and mouse game between organized crime and national law enforcement, the personal income tax and the budget deficit, the pressure group that forces the will of the minority on the majority and the promise that the government can perfect the men it rules over and the national orgy of hypocrisy that follows are still with us today.

With the end of Prohibition, the State accepted the idea that it had to corrupt in order to uplift, damn in order to save and do evil in order to do good. It had to become truly corrupt to be truly moral in the service of the greater good.

14 comments:

Edward Cline said...

This column describes so well what I have always dubbed "political schizophrenia." The reformers and progressives and other Big Brotherish movements target a "social ill" – smoking, drinking, "illegal" drugs, gambling, leaded gas, you name it – and campaign to have it regulated with punitive taxes in hopes of eliminating it. But then government becomes addicted to that tax revenue, because the "social ill" hasn't been quashed. It's been driven underground, or to the fringes. Government creates its budgets based largely on that revenue. The politicians who imposed the taxes did so without any intention of eliminating the "social ill." They'll increase the taxes and also create loopholes and also pontificate about the evils of the targeted "social ill." In the meantime, the reformers and progressives and Big Brotherish types also continue to harangue the public with propaganda about the evils of the "ill." But the only beneficiary of the crusade has been government and its swelling ranks of employees. This is one method that enables statism and authoritarianism to advance.

Anonymous said...

Gun controll? Drug legalization? Think of the economic benefits that have happened every time the progressives call for gun control. They know Chicago is worse than ten Newtowns.

Anonymous said...

Daniel, the last paragraph describes the mind of a Progressive to a tee. Evil is good. Wrong is right. Immorality is morality. Vice is virtue. They have learned that in order to stay in power they must emphasize the animalistic side of human nature; encourage vice while at the same time, pretend to want to eradicate it. They are masters of hypocrisy.

Elaine

Anonymous said...

" far less enthusiastic about filling the country with Catholics and Jews, who were not only bound for Democratic precincts, but did not share their faith"
multiculturalism in America

Anonymous said...

The Department of Education was created in 1979 under Jimmy Carter.

Daniel Greenfield @ the Sultan Knish blog said...

The Department of Education was created in 1867 and then recreated as a Cabinet level office by Carter.

Empress Trudy said...

This is the nature of all sin taxes. In every state now they want to jack tobacco taxes to the sky to pay for god knows what because as we all know almost none of it goes where it's supposed to - to health care and of course schools. But it's double edged sword because on the one hand they really want the cash and on the other they're proud of how their absurd taxes are 'making people smoke less' which is likely true. But eventually when they've made it too expensive for people to smoke both the tax dollars will evaporate AND they'll have created a black market in illegally cigarette smuggling which is precisely what happened in Canada a generation ago. In any case I do hope the stoners get their way and we legalized weed with enormous taxes piled on top of that. Taxes that maintain price parity with the illegal drugs now.

Anonymous said...

Thanks for the history lesson. The more I learn about history, the more I realize that Regressivism (blanket term for everything against American Judeo-Christian Conservatism) had its long arm involved in everything you can think of.
Slavery? Check.
Jim Crow? Check.
Prohibition? Check.
The idea of racial superiority? Check.
Nazism? Check.
Eugenics? Check.

More and more besides. I've been astounded to learn that the colonization of America was largely driven by the Protestant Reformation, as persecuted Christians fled Europe. And that the Barbary War was merely the latest in a 1000-year history of Islamic conquest, as muslim pirates tried to pillage US merchants, and the first action the US Marine Corps ever saw was in Libya fighting "religion of peace" followers.

Daniel, your efforts in pushing back against the Revisionist Histories of the Left will be remembered long into the future. Thanks for putting in the time, and I hope you don't get stressed out or burnt out because of it.

Lily said...

The Civil war draft was brutal.Immigrants right off the boats were forced to sign up. Knowing English wasn't a requirement and ,depending on the state, males from 14-50 years old were drafted.Some of the original draft books are on ancestry.com

Prohibition was a dangerous experiment led by groups of minorities and religious factions.The government traded the country's moral standard to expand it's control and financial gains. And it has never fully regained or deserved the public's trust since.

"Frustrated that people continued to consume so much alcohol even after it was banned, federal officials ordered the poisoning of industrial alcohols manufactured in the United States, products regularly stolen by bootleggers and resold as drinkable spirits. The idea was to scare people into giving up illicit drinking. Instead, by the time Prohibition ended in 1933, the federal poisoning program had killed at least 10,000 people."
PBS Documentary on Prohibition

Anonymous said...

A previous Department of Education was created in 1867 but was never more than an Office in 1868.[3][4] As an agency not represented in the president's cabinet, it quickly became a very minor bureau in the Department of the Interior. In 1939, the bureau was transferred to the Federal Security Agency, where it was renamed the Office of Education. In 1953, the Federal Security Agency was upgraded to cabinet-level status as the Department of Health, Education, and Welfare.

Daniel Greenfield @ the Sultan Knish blog said...

If you're going to get your information from Wikipedia, you should probably post the unedited version, rather than altering it

Here's the actual Wikipedia text

"A previous Department of Education was created in 1867 but was soon demoted to an Office in 1868.[3][4] As an agency not represented in the president's cabinet, it quickly became a relatively minor bureau in the Department of the Interior. In 1939, the bureau was transferred to the Federal Security Agency, where it was renamed the Office of Education. In 1953, the Federal Security Agency was upgraded to cabinet-level status as the Department of Health, Education, and Welfare."

I think we can agree that there is a significant difference between

"but was never more than an Office in 1868"

and "but was soon demoted to an Office in 1868."

Anonymous said...

Daniel: You wrote: "I think we can agree that there is a significant difference between

"but was never more than an Office in 1868"

and "but was soon demoted to an Office in 1868."

Words matter.

David said...

I read the blog post and it's all over the map, more a free association than any sort of coherent history lesson. There are inaccuracies and semi-facts connected like some marquee luring tourists in Roswell, New Mexico. Alas, some will drink this Kool-Aid. If there is a rational argument against Progressivism (I think that's what he is saying) it is not to be found here. Maybe the poster is a secret Progressive seeking to discredit the other view.

Daniel Greenfield @ the Sultan Knish blog said...

"Maybe the poster is a secret Progressive seeking to discredit the other view."

Finally you uncovered my evil plot.

Post a Comment