Shortly after the election, James Farley, one of Roosevelt’s key aides and, as postmaster general, the main dispenser of patronage in the new administration, announced that any Democrat who did not support repeal of both the Volstead Act and the Eighteenth Amendment would receive no patronage. Many new wets had been elected not only to Congress but also to state legislatures. The House had at least 343 wet members; the Senate, 61. At the same November 1932 election in which Roosevelt had won, Washington State voters had dumped Senator Wesley Jones (R-WA), author of the draconian Jones Act, and had passed an initiative repealing all the state’s prohibition laws except one restricting the drinking age to twenty-one. Eight other states had voted to end state prohibition or enforcement. While dry Democrats in the South such as Bishop James Cannon railed against the trend, elected Democratic officials cultivated the new administration. Amid 25 percent unemployment, patronage jobs were even more important than usual, and all Democrats in Congress wanted to be seen as supportive of Roosevelt in order to receive federal help for their states or districts.
Roosevelt knew that legalizing alcohol was a concrete action that could easily be taken early in the administration. The Great Depression was a far more difficult problem, experts disagreed about how it should be handled, and the economic issues could not be quickly solved in any case. Meanwhile, Roosevelt could get Congress to modify the Volstead Act to allow legal beer, and he could start on the more difficult task of repealing the Eighteenth Amendment. Moreover, legal beer would increase the pressure to repeal the amendment, and the early availability of beer would enhance Roosevelt’s reputation as an effective political leader. Most likely to be impressed were urban working-class drinkers who had often failed to vote in the past. Legal beer would demonstrate that Roosevelt, despite his upper-class origins, was a true friend of the working class and not just a member of the elite who sought working-class votes on Election Day.
The outgoing Congress decided to enact the Twenty-First Amendment, repealing the Eighteenth, even before Roosevelt was inaugurated. After an attempt to pass the wet amendment failed narrowly in the House in December 1932, the Senate considered a slightly different measure in early 1933. Senator Morris Sheppard mounted an ineffective filibuster, and the amendment, which did not require any action from outgoing President Herbert Hoover, passed the Senate, 63–23. “The taxpayer has paid the police to catch the bootlegger,” declared Representative William Oliver (D-AL), “and has turned around and paid the bootlegger to evade the police. It’s time we made his money count for something.”9 On February 20, the House voted 289–121 to send the measure to the states for ratification. The new amendment turned over management of alcohol to the states with the exception that the federal government pledged to stop interstate sales into any state where state law barred such sales.
The United Repeal Council, headed by Pierre du Pont, had studied repeal in depth. The council was a temporary alliance of the AAPA, WONPR, the Crusaders, the American Hotel Association, and the Voluntary Committee of Lawyers. The American Legion and American Federation of Labor also collaborated with the council. Acting on the advice of the lawyers, the council insisted that the Twenty-First Amendment not be sent to state legislatures for ratification because of the fear that rural majorities in some legislatures might block ratification. “Thirteen dry states with a population of less than that of New York State alone,” noted the wet attorney Clarence Darrow, “can prevent repeal.”10 Instead, Congress decided to send the amendment to state ratifying conventions. Special elections to select convention delegates provided the opportunity for voters to express their views on prohibition.
Aided by the AAPA and WONPR, Postmaster Farley used patronage and party workers to push for speedy elections and to get out the vote. Congress had created one other form of pressure when it had passed temporary federal income and excise tax surcharges; these measures were set to expire automatically if repeal won. Experts estimated that repeal would raise $500 million annually in federal alcohol taxes and an equal amount in state and local revenues. The legal alcohol industry would create 500,000 jobs. The administration organized these special elections, which were held on different dates in each state. The national popular vote for repeal was 73 percent; in New York City the margin was more than 40 to 1. But even without urban votes, repeal would have won. Of the thirty-nine states that voted, all except the Carolinas rejected prohibition. Each state convention met on a different day, and all completed work in one day. On April 10, Michigan held the first state convention to ratify the amendment. Al Smith presided over the unanimously wet New York convention, which was broadcast on radio. Utah became the thirty-sixth and final state to complete ratification, on the afternoon of December 5, 1933, and the Twenty-First Amendment went into effect immediately. The amendment was ratified more quickly than any amendment in history. The WONPR held a celebratory dry dinner in Washington, DC, and immediately disbanded.
During the 1933 campaigns to select delegates to state repeal conventions, dry speakers such as Clarence True Wilson toured the country in vain to rally the faithful. Washington State Historical Society
On March 4, 1933, shortly after Congress sent the Twenty-First Amendment to the states, Roosevelt was inaugurated. Just nine days later, while awaiting the amendment’s ratification, Roosevelt proposed modification of the Volstead Act to allow beer that contained 3.2 percent alcohol. When the measure was introduced in the House, the gallery chanted, “Vote—vote—we want beer.”11 A representative of the brewers argued, “In every glass there is a step forward toward prosperity.”12 Roosevelt signed the Beer and Wine Revenue Act on March 22. He was determined that federal, state, and local governments could collect license fees and alcohol taxes as soon as possible, and the Federal Alcohol Control Administration was set up to enforce the law. This measure went into effect on April 7, 1933, the date that marked the end of prohibition in the minds of many people.
Anheuser-Busch delivered the first new case of beer to former governor Al Smith in New York City and sent several cases to President Roosevelt at the White House. Roosevelt’s staff distributed the beer to the press corps. NBC and CBS radio covered the return of beer, and five major-league baseball teams announced that they would sell beer at their games. Within a year, 756 breweries had opened across America, although the number never reached prewar levels. Some of them had illegally produced beer during prohibition, but much of the beer came from familiar companies that had pursued other businesses during prohibition. Busch switched from soft drinks to beer quickly and already had a distribution system in place. Schlitz, which had made half a percent near-beer, started production immediately, but Pabst had sold its property and equipment and had to buy them back. Some giant breweries, such as Moerlein in Cincinnati, did not return.
On April 7, 1933, the night that legal beer returned, the Fauerbach Brewery Tavern in Madison, Wisconsin, did a roaring business. Angus B. McVicar, Photo Copy Service Collection, Wisconsin Historical Society, WHS-03493
Not every state was ready for the repeal of either the Volstead Act or the Eighteenth Amendment. State constitutions and laws had to be modified to conform to the new federal policy. In March 1933, only fourteen states were ready for legal beer. Many state legislatures took up the alcohol issue in early 1933, but others decided to wait until the Twenty-First Amendment was ratified, as few people predicted that the amendment would be adopted so quickly. In May, Florida rushed to legalize and tax beer and light wine. The state had a long coastline open to rum-runners and was desperate for revenue with the decline of tourism. Previously dry newspapers clamored for the bill because they needed alcohol ads to survive the Depression.13 Distribution of distilled spirits was more contentious. In December, twenty-four states were ready to handle legal liquor. Policies ranged from the casual licensing of wide-open saloons in Nevada to the sale of hard liquor only for home consumption in state stores in Montana.
By early 1934, most states had acted to adopt new alcohol policies becaus
e every state needed tax revenue that wine and hard liquor could now provide. Meanwhile, the Roosevelt administration, as an economy move, had stopped enforcing prohibition by abolishing the hated Prohibition Bureau in the summer of 1933. In states with weak or nonexistent enforcement, prohibition ceased to exist in early 1933. Moonshiners and bootleggers thrived until the states and federal government passed licensing and tax laws. Although Florida had legalized beer in May 1933, the state did not repeal state constitutional prohibition until a referendum in November 1934. The Seattle City Council, desperate for revenue, licensed speakeasies in 1933, even though no state law authorized such a policy. When Washington State finally enacted a new state alcohol policy and tax in January 1934, the state was forced to concede revenue sharing with cities to get the bill passed.14
Some states did make efforts to keep bootleggers from selling alcohol. Previous lawbreakers were not necessarily likely to conduct businesses according to the new state laws. Accordingly, Utah gave many of its licenses to Mormons on the grounds that they were pillars of the community who would uphold closing hours and drinking age laws. On the other hand, the alcohol industry retained its stigma, and many business leaders had no interest in being involved in a disreputable industry long condemned by evangelical Protestants. Washington State licensed speakeasies to sell beer but warned owners that any violations would bring the loss of a license. By 1941, one-quarter of the licenses had been revoked, mostly for selling Canadian bootleg liquor, for illegal sales on Sunday, or for sales to minors under twenty-one. In Templeton, Iowa, former moonshiner Joe Irlbeck got a tavern license in 1936. He later ran a beer wholesale company. Illinois more or less automatically licensed speakeasies. Owners were seen as valuable members of the community who had suffered from oppression during prohibition.
As the Roosevelt administration pursued repeal, John D. Rockefeller Jr. pondered what should replace prohibition. He decided that the federal government and the states needed to impose strong controls on alcohol sales. “If carefully made plans of control are not made,” he wrote in the New York Times, “the old evils against which prohibition was invoked can easily return.”15 Prohibition had been a reaction to the irresponsible, unregulated alcohol industry before World War I. The tied-house saloon had been the source of many social problems, and corrupt political machines rooted in those saloons had threatened democracy. Rockefeller knew that a majority of Americans did not want the return of the saloon, so he hired experts to study alcohol management in other nations, including Canada and Scandinavia, where robust government control of alcohol had been implemented as a substitute for prohibition.16
Rockefeller’s agents, Raymond Fosdick and Albert Scott, published their findings in Toward Liquor Control (1933). They argued that the federal government and state governments needed strong regulation of the alcohol industry to end the controversy over alcohol once and for all. When the book was published, major newspapers ran excerpts and reviews. Rockefeller had this book widely distributed to reporters, state legislators, and other decision makers. Rockefeller also commissioned his attorneys to draft model control laws, which became the basis for many state statutes.17 WONPR reinforced Rockefeller’s call for strict regulation and suggested government manufacture and sale of alcohol, an idea that President Roosevelt personally favored. While WONPR worked for strong state controls, AAPA opposed tight regulation in favor of a free market in alcohol.
Several principles governed the Rockefeller report, as the book was widely called. First, each state that allowed the legal sale of alcohol needed a strong alcohol control board to write administrative rules, to enforce those rules, and to collect taxes and license fees. The alcohol industry needed to be subordinated to the state because alcohol was inherently dangerous. A free market in alcohol had the potential to (again) produce bad consequences. Before prohibition, state governments had rarely taxed or regulated alcohol, which cities and counties had controlled. Afraid that licensees would cheat on taxes based on quantities sold, local jurisdictions had issued numerous flat-fee licenses that encouraged vendors to push sales, particularly by selling to drunks and minors or in violation of Sunday closing laws. The large number of licenses made it hard for retailers to make a living. Because saloons were politically powerful, local elected officials and police usually ignored violations.
The report called for the new state control boards to insulate public policy from both industry and political pressure. The governor would appoint state board members for fixed terms, and confirmation by the state senate would be required. These appointed officials were protected from local corruption, and the governor could be held accountable for the board’s behavior. Because the state would collect taxes at the wholesale level, tax cheating was minimized. Taxes would be levied on the amount of alcohol sold, which would raise prices, reduce sales, and discourage licensees from pursuing illegal sales. The board could revoke or suspend a holder’s license for violating the law or board regulations without interference from local elected officials, and the number of licenses could be restricted to ensure that vendors could earn a decent living from legal sales.
Second, the report advised, both tax policy and rules about access should recognize that different beverages had different risks. Beer, which posed only a slight public danger, should be lightly taxed and widely available at licensed outlets for both on-premises and home consumption. Because it was bulky, cheap, and hard to hide, brewers were unlikely to cheat on taxes. Accordingly, private wholesalers were appropriate, and many retail licenses would be granted. Light wine consumed with food was also benign, but wine was strong enough that if it were imbibed by itself, trouble could result. Therefore, wine should be more highly taxed than beer, and it might be sold only in restaurants with meals or in state-owned or privately licensed stores for home consumption. Hard liquor was dangerous. It should be heavily taxed, and it should be sold only in a limited number of venues, perhaps only in a small number of state-owned stores for home consumption. The report, however, noted that different states had different needs, and no one policy could fit every state.
Third, the report urged every state to impose a three-tier system to separate the producer, wholesaler, and retailer. No financial connections were to be allowed across tiers. Loans or gifts were banned, and all transactions had to be paid immediately in cash. The purpose of this separation was to prevent the return of tied houses, which the report considered inevitable without these strict legal requirements. There were also practical reasons for the three-tier system. States could not effectively regulate or tax out-of-state producers. Distilling was concentrated in a few states, and economies of scale made widespread local distilling unlikely. Most wine was imported from outside the United States or came from California. Only beer was local, but national breweries were likely to gain a large market share in most states. To collect taxes effectively, states needed to deal with in-state wholesalers rather than producers. Wholesale taxes also made the wholesaler a private enforcer to monitor the retailer. Because there were thousands of outlets, collecting taxes at the retail level was far more difficult. Wholesale licenses would be much more lucrative than retail licenses, and wholesalers would be reluctant to dodge taxes or violate regulations that would lead to revocation of valuable licenses.
State control boards had to turn over alcohol taxes and license fees to the state government, which might redistribute part of the money to cities, but boards had less reason to worry about the loss of revenue from suspending or revoking licenses than any city government did. The report also urged states to consider state wholesaling and state-owned retail stores for hard liquor and wine. These beverages were seen as especially lucrative and exploitative of the public. “Only as the profit motive is eliminated,” wrote Rockefeller in the introduction, “is there any hope of controlling the liquor traffic in the interest of a decent society.”18 The public, however, was less keen on state control than was Rockefeller. While the public accepted control boards and three-tier distributi
on to stop tied houses, the majority of states adopted private wholesaling and retailing. To many dry Americans, the idea of a government-owned liquor store constituted state complicity with the devil. Wets were afraid that state stores would be poorly stocked with overpriced mediocre products, which did sometimes happen.
In November 1933, just before repeal became effective, the Roosevelt administration decided to regulate the alcohol industry by establishing the Federal Alcohol Control Administration. Until Congress could pass a new statute in 1934, beer, wine, and spirits were to be governed under the National Recovery Act (NRA). Separate NRA administrative codes covered beer, wine, and spirits. In other industries, leading producers drafted the code for each particular industry, but the administration wrote the three alcohol producer codes. Brewers, vintners, and distillers had to abide by certain manufacturing standards, and they had to recognize labor unions, but the most important provision in the new codes banned tied houses. The federal government licensed producers, distributers, and retailers separately, and the alcohol codes allowed no financial ties across these three tiers.
To mesh with federal policy, almost all states established state alcohol control boards to regulate the time, place, and manner of sales, and almost every state adopted the three-tier system to prevent tied-house saloons. Many states restricted retail licenses to stop cutthroat competition, regulated advertising, and fixed retail prices. While all states used private wholesale and retail licensees for beer, regulations about wine and hard liquor varied. States along the Canadian border worried about untaxed bootleg liquor from Canada, and moonshine was a chronic problem in Appalachia. Some states treated wine like beer, other states lumped wine with spirits, and still others put wine into a separate category, as the Rockefeller report had recommended. After the US Supreme Court voided the NRA, Congress incorporated most of the NRA code provisions for the alcohol industry into the Federal Alcohol Administration Act (1935), which established the Federal Alcohol Administration. In 1936 the $2.60 a gallon federal tax on distilled spirits and $5.00 a barrel tax on beer brought in 13 percent of federal tax revenues.
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