Posted By Daniel Greenfield
On January 4, 2013 @ 12:32 am
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 in 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 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 a 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.
Progressive reformers however cast an uneasy eye on the slums 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 bigotry 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 the reformers, faced with a
liquor revenue problem, contrived a solution in the form of the personal income
tax.
The Anti-Saloon League assembled a coalition encompassing Klansmen,
Suffragists, Socialists and Preachers focused on a single-minded agenda, while
passing whatever other laws it needed along the way to achieve its final
goal.
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 government revenues stood at only 1.9 billion dollars so that
the size of the deficit was actually larger than the revenues. A comparable
budget deficit today would not be the usual trillion dollar booms in the age of
Obama, but a figure more than three times that size.
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.
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 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 turn
corrupt in the service of the greater good.
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