Biden Administration

As I was thinking about what to write for today’s post, I came across a post from November 2008 that I wrote about the incoming Obama administration. We are in the first few weeks of the Biden administration which I think has been going very well and is a great change from the previous regime.

The post is one of those that I wrote before I had a wordpress blog; when Network Solution hosted my website. It is interesting that twelve years Obama was facing a huge financial crisis and that today Biden is facing multiple crises including Covid and the economy. Since I can’t link to the original post, I decided to post it today.

November 18, 2008

The New Administration

It is interesting that President-Elect Obama is reading Abraham Lincoln since there are many parallels between Lincoln’s first term and Obama’s. Lincoln was the first Republican president; he faced the mammoth task of financing the Civil War as well as staffing all of the departments and agencies of the government. Many loyal Republicans sought rewards for their support of the party and the President.

Here is an excerpt from Brewing Battles: A History of American Beer  about the issues the new government faced.

From the moment Southern troops fired on Fort Sumter the Federal government required large sums of money to finance the Civil War. A Special Session of the Thirty-Seventh Congress (July­?August 1861) attempted to meet this need by increasing certain customs duties, imposing a direct tax of $20 million on the States, and instituting an income tax.[1]

It soon became clear that these measures alone could not relieve the country’s financial burdens. Secretary of the Treasury Salmon P. Chase was hoping to raise $85 million and sent a bill to the Thirty-Seventh Congress. Congress, which reconvened on December 2, 1861, reviewed his request for a small increase in the income tax and excise taxes on manufactured goods. Distilled spirits, malt liquors, cotton, tobacco, carriages, yachts, billiard tables, gross receipts of railroads, steam boats and ferries, and playing cards all became taxable items. Signed by President Lincoln July 1, 1862, the measure became effective the following month.[2] By the 1870s Congress had repealed most of the excise taxes; the liquor tax, however, has remained in effect until today. The Internal Revenue Act of 1862 marked the entrance of the federal government into the affairs of the liquor industry; it has never left.

On July 22, 1862, President Lincoln appointed George Boutwell to be the first Commissioner of Internal Revenue. A two-time Governor of Massachusetts, Boutwell had been a Whig and a moderate anti-slavery man. This work plus political alliances with the Governor of Massachusetts, John A. Andrew, and Senator Charles Sumner led Secretary of the Treasury Salmon P. Chase to give Boutwell the job.[3]

Staffing and organizing the Bureau preoccupied Boutwell, who had almost four thousand jobs at his disposal. The size of the Federal Government expanded tremendously during the Civil War; the Treasury Department was no exception. The endless patronage possibilities caused both Boutwell and Secretary Chase to devote the first year of Internal Revenue’s existence to staffing. They paid little attention to other administrative or regulatory concerns. On August 7, 1862 Chase complained that he had “very little accomplished as yet, though much, I hope, in the train of accomplishment. Engaged nearly all day on selections for recommendation of Collectors and Assessors.”[4]

Six months after Boutwell took office, he had the department organized, at least nominally. The majority of employees were in the field. There were 366 collectors and assessors, 898 deputy collectors, and 2,558 assistant assessors. The Washington office consisted of the Commissioner, fifty-one male clerks and eight female clerks. The law authorized the establishment of collection districts which corresponded roughly to congressional districts. There were 185 districts in the loyal states.[5]
[1] U.S. Department, Internal Revenue Service, History of the Internal Revenue Service 1791-1929prepared under the direction of the Commissioner of Internal Revenue, (Washington, D.C.: U. S. Government Printing Office, 1930), 2.

[2] Ibid., 3; Charles A. Jellison, Fessenden of Maine: Civil War Senator (Syracuse, N.Y: Syracuse University Press, 1962), 149; Leonard P. Curry, Blueprint for Modern America: Non-Military Legislation of the First Civil War Congress (Nashville: Vanderbilt University Press, 1968), 149?181; Bray Hammond, Sovereignty and an Empty Purse: Banks and Politics in the Civil War (Princeton: Princeton University Press, 1970), 52; Charles Estee, The Excise Tax Law (New York: Fitch, Estee, 1863), passim.

[3] Thomas H. Brown, George Sewall Boutwell: Public Servant 1818-1905, (Ph.D. dissertation, New York University, 1979), 53, 56, 59, 110.

[4] Salmon P. Chase, Inside Lincoln’s Cabinet: The Civil War Diaries of Salmon P. Chase, ed. David Donald (New York, 1954), 110-111.

[5] History of Internal Revenue, 4; Schmeckebier and Eble, Bureau of Internal Revenue 8; Estee, Excise Tax Law, 310.

©

Copyright, Algora Publishing, 2007.

A few points about this history: It makes clear the large burden of setting up a new presidential administration especially during a crisis. It is also clear that in times of financial need the federal government often turns to the liquor industry and taxes for help. It is entirely possible that the Obama administration will eventually look at excise taxes for help with financing projects and reducing the deficit. State governments will probably follow suit.

Jay Brooks at Brookston Beer Bulletin has been writing a fair amount about taxes recently and nicely cited Brewing Battles as a sourceOne slight correction however- Jay maintains that the taxes stayed after the Civil War due to pressure from temperance advocates and prohibitionists. It is more accurate that the taxes remained because they developed into a steady, secure source of revenue for the federal government. It was not until a new source, the income tax, developed in the early twentieth century that the federal government could contemplate losing the money from liquor taxes. The prohibition movement had an ambivalent relationship to the federal liquor tax. They often decried the legitimacy the tax provided to the industry.

Of course when the federal government, in the depths of the Great Depression, needed a quick source of revenue, the 18th amendment was repealed. The liquor industry and the liquor tax became legal on December 5, 1933, seventy-five years ago. I will be writing more on the subject of Repeal in the coming days.

Shelton Brothers

Earlier this month, the big news in craft brewing was the closing of beer importers, Shelton Bros. The company existed for twenty-four years and were early importers of craft beers. They introduced America to different beer styles, such as sour beer. The company’s bank pushed them into liquidation; a victim of COVID-19 and the recession. You can read more about the closing of Shelton Bros. here.

I found this news interesting  because of a personal  connection to the firm. One of the Shelton brothers is Will. He is the dad of Zach and Max who are among my son Alan’s best friends. I have  known Will for over twenty years.

For a while he owned a brewery in Western Massachusetts, High and Mighty, which made great beer. I gave a book talk about Brewing Battles at the Jones Library and we served Will’s beer.  The brewery only lasted a few years and then Will moved to California. There, for a while,  he worked with Pete Slosberg from Pete’s Wicked Ale.  He then started a new brewery, Concrete Jungle. Will is now back in Massachusetts.

The demise of Shelton Bros. reflect changes in the brewing industry. The country has over 7,000 breweries. Many of them are very local and supply farm to table restaurants. American brewers now make many of the unusual and exotic styles that Shelton Bros imported, making them less competitive. You can read more about Shelton Bros, in an article from 2017 by Andy Crouch.

 

Great American Beer Festival

Friday and Saturday evenings I attended, virtually, the Great American Beer Festival. The first event on Friday was the Awards Ceremony. This was the session that had the greatest attendance; over three hundred people watched. It was open to the public and available on YouTube. All of the other events required you to spend $20 and get a GABF Passport.

There seemed to be an endless number of awards with many specific categories. Obviously the fewer contestants in a category gave an individual brewer a greater chance of winning. The Juicy or Hazy India Pale Ale category had the most entries; 377. Spellbinder, Wren House Brewing Co., Phoenix, Arizona won the gold medal.  You can read  more about this style of beer here. I don’t think I have ever had it.

The Brewers Association sponsors the GABF. Justin Crossley, from the Brewing Network, was the host for all the session except the Awards Ceremony. Most of the events had around 150 viewers. That doesn’t seem like a large audience. I don’t know how many people usually attend the GABF but I assume it is more than 150.

Attending the GABF virtually meant the presenters were on Zoom or a similar platform. That meant there were various technological problems which led to poor production quality in some of the sessions. There were several interesting panels which I will discuss in separate posts in the coming weeks.

Schaefer Beer

Pabst, which does not brew any beer but owns the rights to many iconic brands from the 1950’s and 60’s, is bringing back Schaefer Beer. Schaefer is associated with Brooklyn, but it is not being brewed there. F.X. Matt in Utica, N.Y. is producing the beer. You can read more about it here.

This is an excerpt from Brewing Battles, about Rudy Schaefer and Schaefer beer during World War II.

Rudy Schaefer, the owner of Schaefer Brewing, had become president of the USBA in 1941. Schaefer Brewing had begun in 1842 and was one of the country’s first lager brewers. Frederick and Maximilian Schaefer emigrated from Russia and eventually operated a brewery near Grand Central Station. Rudolph, Maximilian’s son, took over the brewery in 1912 and moved it to Brooklyn in 1915. During Prohibition, Rudolph Schaefer died, and his two sons, Frederick and Rudolph, Jr. took over. In 1927 Rudy, a Princeton graduate, gained sole control of the brewery. Having survived Prohibition, the company expanded with additional plants in Baltimore and Albany. In 1938 the brewery produced one million barrels and was consistently one of the nation’s top ten breweries. Rudy Schaefer was a long time participant in the USBA.[1]

At the beginning of 1942, Schaefer, in his capacity as president of the USBA, offered his assessment of the state of the brewing industry and its planned participation in the war effort. The good news was that “public acceptance of beer as an essential food” had increased. Tax increases were a less positive development. Schaefer maintained that the industry could not withstand any additional taxes, and that an increase would have a diminishing effect on federal revenue. After all, the industry paid over four hundred million dollars in state and federal taxes in 1941, making beer brewing the fourth most heavily taxed industry in the country. Despite this strong participation in the country’s economy, Schaefer wanted the industry to make a specific contribution to the war effort, and pledged sales of defense bonds to all of the over 60,000 employees in the industry. On a personal level, Schaefer became vice-chairman of the carbonated and fermented beverage committee of the Red Cross War Fund of Greater New York.[2]

[1] Jos. Dubin, “The War’s Effect,” Modern Brewery Age, December 1941, 8-9.; Downard, Dictionary of the History of the American Brewing and Distilling Industries (Westport, CT: Greenwood Press., 1980), 166; F. & M. Schaefer Brewing Company, To commemorate our 100th year : the F. & M. Schaefer brewing co. : America’s oldest lager beer (Brooklyn, N.Y. : The Company, 1942); Will Anderson, The Breweries of Brooklyn: An Informal History of a Great Industry in a Great City (New York,: Anderson, 1976), 6, 7.

[2] Modern Brewery Age, January 1942, 18, 82, 85; “Beer is Accorded Wider Acceptance as a Food, Says President of Brewers,” New York Times, January 2, 1942, 39.

© Amy Mittelman October 7, 2020.

Here is Louis Armstrong singing the Schaefer Jingle, from MjayzToonz:

September Beer Roundup

Here are some articles about beer that I thought were interesting.

“September 9 Day of Action Planned to Urge Passage of Craft Beverage Modernization and Tax Reform Act.” The Brewers Association  and other allied trade associations such as American Mead Makers Association are spending today lobbying  for passage of the Craft Beverage Modernization and Tax Reform Act, S.362/H.R. 1175. The bill would make the temporary tax benefits that brewers, distillers, and other actors in the liquor industry received from Trump’s tax cuts of 2017 permanent Those tax cuts flowed mainly to very rich people and corporations while poor and working-class people received little benefit. Brewers did not complain since they were also beneficiaries of the law.

The liquor industry like other businesses has suffered during the pandemic. If the tax cuts go away, it could worsen their economic situation. This article reports that two breweries with beer gardens and beer-to-go in Everett Massachusetts have closed because a customer went bar hopping while awaiting the results of a COVID-19 test.

The Great American Beer Festival has been held for thirty-nine years. This year it will be virtual. I have always wanted to go but I haven’t made it out to Denver yet. The upside of everything being virtual during the pandemic is that you can attend events that in real life you might not have been able to go to. It runs October 16–17. On the 17th Marcus Baskerville, Weathered Souls Brewing Co. , will be speaking about the Black is Beautiful brewing project that I wrote about here.

Magic Hat

Last month, the owners of Vermont’s Magic Hat Brewery, FIFCO USA, a subsidiary of Florida Ice and Farm Co. announced it was moving all Magic Hat production to the Genesee Brewing headquarters in Rochester, N.Y. This move, during COVID-19, meant that forty-three people lost their jobs. Magic Hat had employed forty-six people in Vermont.

Bob Johnson, the original brewer, and Alan Newman co-founded the brewery in 1994. Newman sold the company to North American Breweries in 2010. He feels that was the end of Magic Hat as an innovating craft brewery. KPS Capital Partners formed North American Breweries to manage its beer investments.

Companies like KPS buy breweries as an investment; they do not really have any interest in running the company or building the business. They cut expenses, which usually involves cutting jobs, extract value and then sell the company. That is what happened to Magic Hat. In 2012, Magic Hat and the brewing investments were sold to FIFCO for $388 million dollars.

In 1994, at the time of Magic Hat’s founding, there were only a few other breweries and a few brew pubs in the state. Greg Noonan founded Vermont’s first brewpub in 1988. Today, Vermont has 61 breweries. In 2018, Vermont breweries produced 350,000 barrels (61 gallons per barrel) which had a value of $362 million dollars.

Magic Hat’s story of being a pioneer in craft brewing, seeking to expand and then being sold for investment value could be the tale of many of the country’s over 7,000 brewers as they faced the economic consequences of COVID-19.

For more information about Magic Hat’s move, click here

 

 

Black is Beautiful

Since George Floyd’s murder and the ensuing demonstrations, industry has responded with statements of support, many stating Black Lives Matter. The craft beer industry, at least its trade organization, the Brewers Association, has been an exception.

The BA’s website has no formal statement about police brutality and systemic racism. It does have a link to a project, Black is Beautiful, that Weathered Souls Brewery initiated. The black-owned brewery created a stout base and is encouraging other brewers to produce a beer from it.

Over 800 breweries are participating, from all fifty states and fifteen countries. According to the BA, there are over eight thousand brewers in the United States. Weathered Souls Brewery is asking the brewers who participate in the Black is Beautiful initiative to do three things:

  • Donate 100% of the beer’s proceeds to local foundations that support police brutality reform and legal defenses for those who have been wronged
  • Choose their own entity to donate to local organizations that support equality and inclusion
  • Commit to the long-term work of equality

The brewery, as part of its fundraising efforts, is also sponsoring a virtual 5k.

The craft beer industry is overwhelmingly white and male. Lees than one percent of brewers are black. Craft brewers market their product as authentic, local, and having roots in the community. The lack of diversity in the industry belies that claim.

Black is Beautiful is a project worth supporting. I plan to drink one of the beers produced if I can find it.  I can’t run a 5k, but I can walk three miles and Weathered Souls gets the $35 either way.

For more information on this topic, you can read this and this.

 

 

 

 

 

 

 

 

 

Belgian Beer

A few years ago, we visited both Bruges and Brussels in Belgium. When I started seeing some articles about Belgian brewing and Covid-19 I was interested.

During this pandemic, things have changed quickly. A good example is the Belgian brewers. When Corona first hit and businesses closed, Belgian craft brewers were doing well. Later, the situation changed.

In April, about month into the pandemic, the New York Post had an article about Belgian brewers developing a delivery process because all the bars were closed. It highlighted one craft brewer whose business was expanding due to delivery sales. At this point the picture might have looked rosy.

By May, the situation ad changed. The Belgian Brewers Federation announced that production of beer had dropped 50 percent in April.  The drop in production affected small brewers the most and one third of brewers had ceased producing any beer.

At the beginning of the pandemic, Eoghan Walsh who has a blog, Brussels Beer City, stated a podcast, Cabin Fever. On the podcast where he and other people involved in aspects of the craft brewing industry talk about what they are doing during the pandemic and what they are drinking. I have enjoyed listening to it because it is an easy going way to learn about how the pandemic is affecting the beer industry.

Brussels, 2017

The Liquor Industry and COVID-19

At the beginning of the year, thing were looking pretty good for all segments of the brewing industry. Local and state municipalities see craft beer as an important economic driver, That’s why a tax cut was part of Trump’s disastrous tax bill and why this year the industry got an one year extension for that tax reduction. Then COVID-19 happened.

Most states have closed bars and prevented restaurants from providing in house service. They are allowed to provide grab and go service. How has this affected brewers and distillers?

Here is a roundup of articles about how the liquor industry is faring during the pandemic. Like everything else in our society, regulations surrounding certain practices are being  loosened or abandoned. When this is over, many thing will be different.

Deschutes Brewery has laid off  over 300 workers and is not presently offering any to-go services.

The governor of Rhode Island  issued an executive order  that allows limited sale of beer and wine when people are getting takeout from restaurants.

Last Saturday, some Milwaukee brewers had a pop-up  brewery drive-through in a parking lot.

Before the virus, only  twelve states allowed  delivery of all  kinds of liquor while thirty-one states allowed  delivery of beer and wine. This article is arguing for a permanent change in these regulations.

Reminiscent of Prohibition, distilleries are producing hand sanitizer. The relief bill passed last week allows distilleries to do this without having to pay the excise tax.

I hope everyone is safe and stays well.

Mexican Beer

The next two weeks I will be on vacation. Part of the time I will be in Mexico City. In honor of my trip here is a post about Mexican beer. I will resume regular posting on March 11.

Before 1910 most beer in Mexico was brewed by small brewers. In the 1890s big modern breweries developed and by 1899 five firms controlled sixty three percent of the market. By 1910 the major brewers distributed nationally. The companies were vertically integrated, holding monopolies in everything from bottles to the railroads.

Corona Extra is the sixth largest beer brand in America and the top import. Constellation Brands owns Corona and Modelo. Modelo is the seventh largest beer brand. An industry analysis of Constellation  stated “Constellation’s story includes … a powerful demographic tailwind. Its core consumer base skews towards Hispanics, a sizable demographic whose primacy will only increase over the coming years. We find it fairly intuitive that Hispanics place a premium on Mexican beer, as it speaks in part to a shared culture and heritage, and in our view, these dynamics are at the heart of Constellation’s superb operating profile…”  There are some stereotypical assumptions in this analysis. For the full analysis, click here.

In 2010 Heineken bought the Mexican brewer Femsa; its brands are Dos Equis and Tecate. The company had a 43 percent share of the Mexican beer market. Dos Equis is twentieth. A german brewer in Vera Cruz created it in the nineteenth century. Tecate is 29th; Since  2013 it has had a 35 percent decrease in shipments. For the  full list of the top 31 brands, go here.

Mexico has a small craft brewing segment. These brewers produce ale; the majority of Mexicans drink lager. Most Mexican craft beer is exported since there is not really a market for it within Mexico. Mexico is third in global exports of beer, most of which goes to Canada and the United States.

 

 

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