A look at Bush, Obama, through the wine glass

I've tried to make this blog a mix of posts, ranging from my interviews to commentary I see throughout the blogosphere or in print. Saw this note from Jim Tresize of the New York Wine and Grape Foundation about what's ahead under a new adminsitration. Or at least some thoughts on what's ahead for the wine industry at what ultimately amounts to this crossroad Americans are approaching.


FEDERAL GOVERNMENT will soon include a new President and Administration, larger Democratic majorities in both the Senate and House of Representatives, and a New York delegation which also grew in Democratic Representatives. What will a President Obama and his Administration be like in terms of grape and wine policy, and how about the Congress? During the eight years of George W. Bush’s presidency, there have been a few positive developments for grapes and wine—repeal of the Special Occupational Tax (SOT) on wineries, a law allowing consumers to ship wines back home that they couldn’t take on airplanes, the dramatic expansion of interstate direct shipment, a new and improved Farm Bill.

These changes weren’t because of him—he vetoed the Farm Bill, for example, but was overridden by Congress; and direct shipment resulted from a landmark Supreme Court decision—but in general the theme seemed to be “do no harm.” By contrast, the first President Bush, who pledged “no new taxes,” raised wine excise taxes from 17 cents to $1.07 per gallon, immediately putting an end to true “wine” coolers because the producers (including major wineries) switched to a beer base which was much less expensive because that tax rate did not go up. That excise tax increase hurt the American grape industry significantly. Given the huge issues of this election cycle—the economic meltdown, two wars, health care, and so much more—wine (and even agriculture) was understandably not a focus, so there are very few clues (other than a few generalities on the Obama Web site) as to how the President-elect will approach these areas.

So to a great extent, we will be relying on Senators Clinton and Schumer, and the agricultural advocates in our Congressional delegation, to make sure the new Administration is well aware that New York is a major farm state; agriculture is a major part of our economy; the New York grape and wine industry generates $3.4 billion for New York’s economy annually; wine is now made in all 50 states; and the American grape, grape juice, table grape and wine industry generate over $162 billion for the U.S. economy each year. Fortunately, we have WineAmerica—the national organization of American wineries—to keep a close eye on developments in Washington and interpret them to us. WineAmerica’s fall meeting is next week, and should be interesting. As I have said many times before, every American winery should be a member of WineAmerica.

STATE GOVERNMENT in New York State also experienced a major shift of its own, with the State Senate now controlled by Democrats for the first time since the New Deal. That means, as at the federal level, one party will control the executive branch and both legislative branches. This has huge implications for the New York grape and wine industry. We’re fortunate to have a Governor, David Paterson, who understands the importance of our industry; a great Commissioner of Agriculture, Patrick Hooker; and Chairman of the Assembly Agriculture Committee Bill Magee who has been a great champion of grapes and wine. But the Senate has also been key: Virtually all Senators representing grape and wine regions have been Republicans, creating a solid statewide coalition of support on legislative and budget matters.

In Albany, perhaps even more than in Washington, the difference between being in the majority versus minority is enormous in terms of legislative initiatives and access to money. Our annual budget process has for decades been widely known as “three men in a room”. Since the Governor, Speaker of the Assembly (Sheldon Silver), and likely Senate Majority Leader (Malcolm Smith) are all from New York City, there is concern in some quarters that much of the program funding will be shifted to The Big Apple, with little left for upstate or eastern Long Island. There is also the question of attitude and strategy: Will this be “payback time” for Senate Democrats, relegated to minority status for decades, to even the score with their Republican colleagues?

ECONOMICS is probably the clearest but also the scariest part of the current situation. The economic meltdown is global, not local, even though New York (Wall Street) is at the epicenter of the financial earthquake.

Politicians everywhere are desperately looking for solutions, often including counterproductive measures: This week, Governor Arnold Schwarzenneger of California—which produces 90% of American wine—unveiled an emergency budget proposal that included the revival of a simplistic and ill-conceived “nickel a drink” excise tax increase on alcohol. That doesn’t sound like much until you do the multiplication into bottles and cases; and unfortunately, “sin taxes” are often an easy sell politically.

Our Governor, David Paterson, has called a second emergency legislative session for November 18 to discuss New York’s budget crisis this year, next year, and beyond. The headlines are not pretty: Global Meltdown; Wall St. Crisis; 401k’s Plunge; Widespread Layoffs Across the Economy. Are we in a recession leading into a depression? What are the solutions, and who has them? For the New York wine industry, this has been a roller coaster year.

We haven’t had the resources to commission a formal economic impact study, so what I say here is based on daily conversations with wineries across the state. At the beginning of the year, it seemed pretty much like last year (neither up nor down) in terms of numbers of visitors and their spending habits per person; as gas prices went up, fewer people came but they spent more, suggesting they were on a pleasurable wine-buying mission; when gas climbed to $4 a gallon, people disappeared; as gas prices went down, people came back, especially this fall which seems even bigger than last year.

To the extent these are accurate portrayals, they suggest that there is now an acute sensitivity of economic circumstances which directly affect wine. Another measure of the impact is the devastating effect on lower Manhattan restaurants which used to count on free-spending Wall Street executives who often chose the most expensive bottle of wine—because they could (and it also fed their egos). Those days are gone. Is wine recession-proof, as some have suggested based on past data? I guess we’ll see over time.