Economic Effects of Prohibition Repeal

Report Outline
Current Proposal for Modification or Repeal
Effect of Repeal on Federal and State Revenues
Effect of Prohibition Repeal Upon Employment
Effect of Repeal on Agriculture
Summary of Economic Effects of Repeal
Special Focus

Current Proposal for Modification or Repeal

One treasury deficit and the prospect of another, continuing unemployment and the ever-present perplexity of the farm problem are bringing forth a variety of proposals for the simultaneous solution of these difficulties. Conspicuous among them is the proposal for modification of the Volstead act or repeal of the 18th amendment. Modification or repeal, it is asserted, would at once bring vast new revenues from liquor taxes into the federal treasury, employ thousands of men in a revival of the brewing and distilling industry, and open a great market for farm products used in the manufacture of beer, wines, and spirits. Three serious national problems would be quickly solved, or at least greatly ameliorated, it is argued, by the prompt adoption of this one simple, far-reaching remedy.

The proposal for change in the Volstead act or repeal of the prohibition amendment has been brought forcefully to public attention during recent weeks in statements by bankers, labor leaders, and wets in and out of Congress, and by the declaration by the American Legion favoring submission by Congress to the states of a new amendment for “repeal or modification of the present prohibition laws.” Leaders of farm organizations, however, have been silent on the issue, thus raising doubt whether they place any value upon change in the prohibition laws as a measure of farm relief.

According to Otto H. Kahn, New York banker: “By repealing an experiment which, however rightfully intentioned, has failed with lamentable consequence, we should raise vast revenues for the government, we should greatly help agriculture, we should substantially decrease unemployment.” John J. Raskob, chairman of the Democratic National Committee, has pointed out that revenues from liquor taxation might be sufficient to obviate the necessity of a federal income tax. Senator Wagner (D., N. Y.) in a Labor Day address advocated modification of the Volstead act as likely to afford substantial relief of unemployment and to help meet the federal deficit. Rep. Beck (R., Pa.) said the deficit could be wiped out “if Congress would declare light wines and malted liquors non-intoxicating in fact and impose a heavy tax upon these luxuries,” and Rep. Dyer (R., Mo.) estimated that a reopening of the breweries would provide direct and indirect employment for 1,000,000 men, besides bringing an increase of $1,000,000 in revenues of the federal, state and local governments. John Sullivan, president of the New York State Federation of Labor, declared that modification of the Volstead act would yield to the federal government $400,000,000 a year and would give employment to 1,500,000 persons. The effect of this step, he thought, would be to stimulate greatly both industry and agriculture and contribute profoundly to a revival of trade.