PROHIBITION POLITICS

The standard, schoolbook history of alcohol prohibition in the United
States goes like this:

Americans in 1920 embarked on a noble experiment to force everyone to
give up drinking. Alas, despite its nobility, this experiment was too
naive to work. It soon became clear that people weren't giving up
drinking. Worse, it also became clear that Prohibition fueled mobsters
who grew rich supplying illegal booze. So, recognizing the futility of
Prohibition, Americans repealed it in 1934.

This popular belief is completely mistaken. Here's what really
happened:

National alcohol prohibition did begin on Jan. 16, 1920, following
ratification of the 18th Amendment and enactment of the Volstead Act.

Speakeasies and gangster violence did become familiar during the
1920s.

And Americans did indeed keep drinking.

But contrary to popular belief, the 1920s witnessed virtually no
sympathy for ending Prohibition. Neither citizens nor politicians
concluded from the obvious failure of Prohibition that it should end.

As historian Norman Clark reports:

"Before 1930 few people called for outright repeal of the (18th)
Amendment. No amendment had ever been repealed, and it was clear that
few Americans were moved to political action yet by the partial
successes or failures of the Eighteenth. ... The repeal movement,
which since the early 1920s had been a sullen and hopeless expression
of minority discontent, astounded even its most dedicated supporters
when it suddenly gained political momentum."

What happened in 1930 that suddenly gave the repeal movement political
muscle? The answer is the Great Depression and the ravages that it
inflicted on federal income-tax revenues.

Prior to the creation in 1913 of the national income tax, about a
third of Uncle Sam's annual revenue came from liquor taxes. (The bulk
of Uncle Sam's revenues came from customs duties.) Not so after 1913.
Especially after the income tax surprised politicians during World War
I with its incredible ability to rake in tax revenue, the importance
of liquor taxation fell precipitously.

By 1920, the income tax supplied two-thirds of Uncle Sam's revenues
and nine times more revenue than was then supplied by liquor taxes and
customs duties combined. In research that I did with University of
Michigan law professor Adam Pritchard, we found that bulging
income-tax revenues made it possible for Congress finally to give in
to the decades-old movement for alcohol prohibition.

Before the income tax, Congress effectively ignored such calls because
to prohibit alcohol sales then would have hit Congress hard in the
place it guards most zealously: its purse. But once a new and much
more intoxicating source of revenue was discovered, the cost to
politicians of pandering to the puritans and other anti-liquor lobbies
dramatically fell.

Prohibition was launched.

Despite pleas throughout the 1920s by journalist H.L. Mencken and a
tiny handful of other sensible people to end Prohibition, Congress
gave no hint that it would repeal this folly. Prohibition appeared to
be here to stay -- until income-tax revenues nose-dived in the early
1930s.

From 1930 to 1931, income-tax revenues fell by 15
percent.

In 1932 they fell another 37 percent; 1932 income-tax revenues were 46
percent lower than just two years earlier. And by 1933 they were fully
60 percent lower than in 1930.

With no end of the Depression in sight, Washington got anxious for a
substitute source of revenue.

That source was liquor sales.

Jouett Shouse, president of the Association Against the Prohibition
Amendment, was a powerful figure in the Democratic Party that had just
nominated Franklin Roosevelt as its candidate for the White House.
Shouse emphasized that ending Prohibition would boost government revenue.

And a House leader of Congress' successful attempt to propose the
Prohibition-ending 21st Amendment said in 1934 that "if
(anti-prohibitionists) had not had the opportunity of using that
argument, that repeal meant needed revenue for our government, we
would not have had repeal for at least 10 years."

There's no doubt that widespread understanding of Prohibition's
futility and of its ugly, unintended side-effects made it easier for
Congress to repeal the 18th Amendment. But these public sentiments
were insufficient, by themselves, to end the war on alcohol.

Ending it required a gargantuan revenue shock -- to the U.S.
Treasury.

So, if the history of alcohol prohibition is a guide, drug prohibition
will not end merely because there are many sound, sensible and humane
reasons to end it. Instead, it will end only if and when Congress gets
desperate for another revenue source.

That's the sorry logic of politics and Prohibition.

Donald J. Boudreaux is chairman of the Department of Economics at
George Mason University in Fairfax, Va. His column runs twice monthly.