SALT LAKE CITY — Pittsburgh, Pennsylvania is affectionately known to locals as a "drinking town with a football problem." But you won't find beer in their grocery stores. In fact, the few large grocery chains that actually go to the trouble of selling beer can only do so if they have a license for a separate café adjacent to the building. On top of that, the café must have at least 30 seats, and beer must go through a separate check out. And still, no more than two six packs at a time. Meanwhile, wine and distilled spirits are only found in state-controlled stores.
Pennsylvania actually has some of the toughest liquor laws in the country, including liquor sales in state-owned stores. But that could be changing, as pressure grows for privatizing alcohol sales. Pennsylvania is not alone. The state of Washington recently privatized its liquor sales, and Virginia and Michigan are both toying with liberalization. Here in Utah, some state legislators continue to look for solutions that would get the state out of the liquor sales business without fully unleashing the market.
Arguments for privatization differ from one location to the next. Some are libertarians and free-market Republicans who want to shrink government, while arguing that consumption and abuse will not increase. Others speak on behalf of the consumer, and some privatizers are clearly carrying water for producers and retailers who want in on the action. On the other side are health and public safety officials who argue that privatization will result in looser liquor laws and that could cause consumption among problem drinkers to go up.
"Each year, 2,500 people in Los Angeles County die from alcohol-related causes," says Los Angeles County Public Health Director Dr. Jonathan E. Fielding, the author of a recent peer-reviewed study on alcohol privatization. Fielding opposes privatization and calls for raising liquor taxes. "We should be doing everything we can to reduce consumption," he says. "We need to change the economics."
By many accounts, Utah and Pennsylvania share the title for the most rigorous liquor laws in the country. Pennsylvania also puts quotas on liquor licenses for bars or restaurants based on county population, one per 3,000 residents. Licenses are in high demand, and there is only one type, so bars compete directly with chain restaurants. There's a hot market for licenses, which can run as high as $400,000. This makes Pennsylvania arguably more demanding than Utah, where more overlapping quotas allow more total licenses per capita, and because of Utah's teetotaler culture, certainly more per drinker.
While Utah and Pennsylvania may be unique they are not, however, alone in wrestling to contain the well-documented negative effects of alcohol abuse. American states, counties, and municipalities have long sought to balance the role of moderate social drinking against the potent social, health and public safety problems caused by America's recreational drug of choice.
After Prohibition was repealed in 1933, the power to regulate alcohol sales returned to the states. Currently, seventeen states and one major urban county (Montgomery, MD, pop 950,000) directly control alcohol sales. While Utah and Pennsylvania have some of the tightest restrictions, Oregon, Montana, Alabama, North Carolina, and Vermont also directly control the sale of distilled spirits. Idaho, Maine, New Hampshire, Ohio, and Virginia, meanwhile, control retail spirits above a given alcohol content.
Washington was a control state until last year, when a ballot initiative allowed retailers with over 10,000 square feet of floor space to sell all types of alcohol. Costco pumped $22.5 million into what became the most expensive initiative in state history. The "Costco law" also allows Washington retailers to bargain directly with distilleries, removing a barrier in the distribution chain. So not only will alcohol be more widely available, but also likely cheaper. Washington has thus offered itself as a natural experiment in alcohol privatization.
But it is not the first. Last February, a task force led by Fielding, and comprised of prominent independent researchers appointed by the U.S. Centers for Disease Control, released its study of alcohol privatization in Finland, Sweden, Canada, and the United States. They found that consumption of newly privatized beverages increased an average of 48 percent, while beverages that remained under state control actually dipped 2 percent. Their peer-reviewed report will be published in the American Journal of Preventive Medicine in April.
The task force found that when total usage goes up, "consumption changes across the board, but mostly among those who drink excessively" and concluded that "government control of off-premise sale of alcoholic beverages is one of many effective strategies to prevent or reduce excessive consumption, which is one of the leading causes of preventable death and disability." Public health experts interviewed for this article were in strong agreement on two key principles. First, they agreed that alcohol consumption responds robustly to changes in price and availability. In other words, alcohol outlets competing and advertising on price means more consumption. They also agreed that 90 percent of the alcohol consumed in the U.S. is drunk by 30 percent of the users, meaning that even a small increase in average consumption reflects significantly higher abuse among problem drinkers.
If these researchers are right, Washington should see lower prices with privatization, but the boon to the alcohol consumer will likely be canceled by losses to taxpayers and crime victims. Phillip J. Cook, a professor of public policy, economics, and sociology at Duke University, has studied alcohol economics for over 30 years. He finds robust data showing that "from highway fatalities to liver cirrhosis" price increases result in lower levels of alcohol abuse and fewer negative consequences.
But it's not just the increased risk to public safety that worries Cook when it comes to liberalization. Over the years, Cook has watched with frustration as inflation has steadily eroded tax deterrents. Federal alcohol taxes, Cook says, are framed in pennies—so many cents per gallon—rather than percents, and have been rarely updated for inflation. Most states fall into this same trap. California, for example, has seen its liquor taxes erode by one third since they were last updated in 1991.
Even as taxes erode as a limiting force, pressure to privatize distribution grows. In Pennsylvania, the move is championed by State Rep. Mike Turzai, whose plan would dump state control in favor of licensing and oversight. Turzai is sensitive to the public health arguments, and cites new safeguards in his bill to protect safety. But if Fielding's task force is correct, Turzai's bill would increase consumption, and do so disproportionately among problem drinkers.
In both Virginia and Pennsylvania, think tanks have plunged into the fray, issuing studies that back privatization policy. The difficulty with such reports, says Mark Price, an economist with the Keystone Research Center in Pennsylvania, is that they "take a fling at complex data with lots of variables, a loose analysis without peer review."
Price and his team did a reanalysis of one widely-cited study by the Commonwealth Foundation in Pennsylvania, which seemed to support the safety of privatization. The reanalysis found that the study had failed to control for two key variables on a study of auto fatalities and liquor control. When they added the missing variables, the results reversed.
The dominant thread underlying privatization efforts is a libertarian impulse to treat alcohol as a legal product with untrammeled market access. Critics respond that alcohol's externalities, or costs imposed on bystanders, are out of all proportion to any other legal product, and these costs are borne by society at large, not just by the drinker. Hence, the title of Philip Cook's 2007 book, "Paying the Tab," published by Princeton University Press.
Pat Bird, who oversees prevention programs for the Utah County Department of Drug and Alcohol Prevention and Treatment, suspects moderate drinkers see themselves as typical users, relying on intuitive impressions rather than statistics. Because they are their own model, he says, they don't realize that "a small fraction of the drinkers consume the vast majority of the alcohol, and that increased availability means greater consumption disproportionately among problem drinkers, which then impose costly externalities on society, including health costs, fatal accidents, domestic violence, and crime."
Richard Nance, Pat Bird's supervisor at Utah County, agrees. Although he does not himself belong to the state's predominant faith, Nance thinks Utah should be proud of its uniqueness. "We must be doing something right," Nance says: "Our people are healthier, our DUI rates are lower, teen binge drinking is lower, quality of life is higher, and Forbes just named us the best state for doing business in the country. Some of that is the state's unique culture, but our policies reflect and enhance that culture, and vice versa."
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