CHRIS EDWARDS, CATO INSTITUTE
The federal shutdown revealed some of the ways that the government needlessly shackles the economy through subsidies and regulations. The microbrew industry is a microcosm of the general problem.
Beer companies take federal loan guarantees and they need federal approval for business activities such as launching new beer labels and opening facilities. The idea that we need the government providing business loans is ridiculous, as discussed here. And the permitting of new facilities ought to be a local government activity.
As for beer labels, the Washington Post reports, “Last year, the federal government received 192,000 applications for new lines of wine, spirits and beer, including more than 34,000 for beer.”
Taxpayers are paying for goodness knows how many high-paid bureaucrats to study 192,000 bottle labels a year? That seems absurd. Even if federal review of labels made sense, why do we need a system of preclearance? Why don’t we at least allow companies to proceed with their new products without delay, but allow for later review by the bureaucracy if noncompliant labels are suspected?
Here is the Washington Post on the shutdown’s disruption of small brewers:
Chris Burns thought he had escaped the uncertainty of working for the federal government when he left his IT contracting job five years ago to open a craft brewery in the D.C. suburbs.
But even with the government shutdown over for now, he cannot widely distribute two new beers and had to cancel the release of a third. He also could face delays opening a second location.
“It’s been real,” Burns, the owner of Old Ox Brewery in Ashburn, Va., said about the consequences of the 35-day shutdown.
President Trump and congressional lawmakers reached a short-term deal Friday, but the pain isn’t over for the nation’s craft brewers.
They lost revenue they will never recoup and will continue to lose money while they wait for federal agencies that process labels, brewery permits and small-business loans to clear a backlog built up during the shutdown.
During the closure, the Alcohol and Tobacco Tax and Trade Bureau within the Treasury Department stopped approving new labels, hamstringing businesses that consistently churn out new products.
“Growth in our industry is driven by innovation,” said Bill Butcher, the founder of Port City Brewing Co. in Alexandria. “If we can’t introduce new beers into the market, it stalls our business.”
His company spent the last four months of 2018 planning release and production schedules for six new beers. The shutdown threw those plans “out the window,” he said.
… Last year, the federal government received 192,000 applications for new lines of wine, spirits and beer, including more than 34,000 for beer.
… Colorado brewer Zac Rissmiller recently contracted with a Baltimore brewer to produce beer under the name 1623 Brewing Co., a reference to the distance between him and his Maryland-based business partner and cousin.
They ordered a big batch, planned to sell it in the D.C. area, Northern Virginia, West Virginia and Pennsylvania, and submitted their label application. Three days later, the government shut down. They’re sitting on 1,000 cases worth about $30,000, with a shelf life of 120 days.
… Burns’s family, which owns the brewery, recently purchased a new building in Middleburg, Va., for a tasting room and a second brewery. It needs a permit from the federal government to open. They could lose $40,000 to $75,000 for every month it languishes.
… Port City Brewing made a $2 million investment in a new bottling line financed by a Small Business Administration loan. During the shutdown, the SBA was closed, and Butcher couldn’t lock in an interest rate, potentially costing him thousands of dollars.
I enjoyed Port City’s excellent beer Saturday night in Alexandria with friends Dan and Kimberly, but we were surprised that the facility does not serve any food. We asked a bartender why and he said, “We stick to what we do best.”
I suggest the same for the federal government—stick to the basic constitutional duty of ensuring an open national economy, and get out of business loans, beer labels, and needless micromanagement of American industry.
Chris Edwards is the director of tax policy studies at the CATO Institute and editor of www.DownsizingGovernment.org. He is a top expert on federal and state tax and budget issues. Before joining Cato, Edwards was a senior economist on the congressional Joint Economic Committee, a manager with PricewaterhouseCoopers, and an economist with the Tax Foundation.