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Town crier.

Former Congressman Ray McGrath (R-NY) was appointed as president of the Beer Institute in January of this year. He served previously as the Representative for New York's Fifth District. While in the House, McGrath gained a reputation as an effective member of the House Ways and Means Committee, where he was highly regarded as a pragmatic legislator.

MBA: You seem to be guiding the Beer Institute towards greater activism. Would you say that is accurate?

McGRATH: Yes. I'm trying to respond to deceptive claims that are being used by government groups and self-proclaimed neo-prohibitionists to deceive the public. We're trying to react to those charges, and to the phony science that they use to support these claims..

In addition, one thing I've found since I've been here is that there are a lot of things the industry does that nobody knows about. The industry has spent a lot of money on moderate drinking campaigns and public service announcements (PSAs) discouraging under-aged drinking and drinking and driving. As an example, we do six public service announcements a year for the holidays on drunken driving.

The industry also gives out a lot of money each year to alcohol education groups in states around the country. We contribute, as an industry, about $2.5 million dollars a year to ABMRF (Alcohol Beverage Medical Research Foundation)...but nobody knows about it.

My intention is to change the perception of the industry from one where people are saying, "Those guys are not good corporate citizens and they are deserving of sin taxes," to one where our industry is perceived as caring about the use of our product. And, frankly, so that our industry is not looked to every time a need for revenue comes up.

I think that one of the reasons the industry has been vulnerable to sin taxes is because many responsible things that we do as an industry are not known. We intend to remedy that.

MBA: Do you think the perception that the brewing industry is made up of poor corporate citizens is widely held on Capitol Hill?

McGRATH: I don't think that it's a perception that's widely held, but I think that for a long time we've been perceived as an easy mark for sin taxes.

It's our job to change that perception. We have to prove that we are not an easy mark and that there is a cost for taxing us.

If the industry is taxed again, there will be a reduction in the economic benefit that our industry provides. We lost 31,000 jobs as a result of the |91 tax increase. And we have been desperately trying to tell people that our contribution to all levels of government in terms of taxes is $14 billion a year and we indirectly or directly affect two and a half million jobs in this country.

I think people ought to know about that before they decide to start taxing us and reducing employment. In addition, if they are too successful in reducing moderate consumption, they will never realize the taxes that they anticipate.

One of the classic ironies of the '91 tax increase is that they made a revenue projection of about $2.1 billion over a period of years and they realized was about $700 million. In my view, that was completely predictable.

We have reached a point of "no return." Additional taxes will result in fewer revenues, not more, and legislators have to realize that.

I think they are starting to get the picture. There have been studies by responsible tax enterprises in this town that have come to that conclusion, and hopefully the new administration will see that as well. We'll see when we get their proposal for health care reform.

MBA: You believe that industry taxes will be in that package?

McGRATH: Well, some people say that they are saving us for that, but in my judgment that would be a mistake on their part. The last thing they want to do is project huge revenues from excise taxes to pay for health care reform - and not be able to pay for it.

I think that they probably want a reliable revenue source...rather than an excise tax that proven historically to generate less revenue than expected.

MBA: What sort of tax proposals have been floating around?

McGRATH: Well, there is a single-payer bill pending in the Senate, sponsored by Senator Wellstone, which would pay for itself by increasing the taxes on alcoholic beverages and cigarettes. As it pertains to beer, it would increase the tax per barrel from $18 to $81.

Now, if they want to see the industry disappear, let them go ahead and enact something like that. Fortunately, I think there are wiser heads looking at the financing picture within the health task force, and certainly within the committees of jurisdiction.

Years ago, when the Congress attempted to do something about health care reform, we found that it is easy to propose programs and new services, but it is a lot tougher to pay for them.

They have to be careful what they propose in order to get these things. The cost of health care in this country would almost double, if some of the proposals that have been leaked out were enacted. This is in terms of covering all those who are presently uncovered or undercovered; mental health reimbursements; prevention activities; long-term care, etc. It would be phased in, of course, but eventually it would double the cost of health care. Right now, health care represents about $914 billion of expenditure. With these new add-ons, it will probably come to one trillion, five hundred billion dollars over a period of years.

You can't get there with beer taxes. You could confiscate all of the assets, of all of the companies that produce beer, or distribute beer, or even sell beer in this country and you can't get there through the beer industry. So why destroy an industry that is a corporate good citizen? That pays its fair share of taxes, employs two and a half million people? And after all that, still not be able to satisfy your needs for revenue?

MBA: Do you put any stock in Clinton's public statements about avoiding beer taxes?

McGRATH: We would like to believe him, but we won't take any solace in that until we see what comes out. In the meantime we are going to keep sending out our message to the policy makers in the executive branch and on the Hill.

MBA: Have you been focusing most of your efforts on the tax issue?

McGRATH: Well, we were trying desperately to make sure we stayed out of the stimulus package and reconciliation, and we were successful in getting our point across there.

We have also been fighting warnings on advertising so far with some success, but we have a long way to go on that one.

There has also been some talk that they'll take a run at denying the deductibility of advertising expenses. We are promising a good political fight on that one, and not only on first amendment grounds.

It's not fair to deny a business deduction for one firm and not for somebody else. For instance, if I decided to market my product by fixing up my office and having my clients come in, every dollar of that would be deductible. But for those of us who decide we are going to market our products by advertising through the electronic media and print media, that's not deductible? It's not fair. So we have to make a fight on, not only first amendment grounds, but also on fairness. And hopefully we'll prevent it.

MBA: What was the brewers charge to you when you took over here?

McGRATH: Well, I think they wanted a more active association in promoting the mission and objectives of the industry. As articulated by the chairmen of all three of the major brewers, they would like to see us embark on a mission to change the image of the industry. We intend to do that.

We want to get a better bang for our buck in terms of promoting groups and programs around the country that do the legwork in the moderate drinking campaigns, the under-aged drinking campaigns and the drunken driving campaigns. We intend to do a better job of farming out our grant money to those activities... spread them out a little bit better around the country.

We intend to spread more money around and do it with less overhead.

MBA: You mentioned that you will be trying to change the image of the industry will you go about that?

McGRATH: On a practical basis, as I stated to you before, I won't be satisfied until we get to the point where we are not the first entity or business looked at every time that the government needs revenue.

As we discussed, I think they see us as easy marks, and I reject that. I think one reason they think that is because we haven't done a good enough job in the past in telling our story: Our economic benefit story, our corporate good citizenship story, stories that would portray us in a different light than what we are portrayed in now. I want to make sure those stories get out.

MBA: Have you seen any change in attitude in the federal health bureaucracy in the new administration?

McGRATH: Well, not yet.

Secretary Shalala has not tipped her hand to this point, in how she will treat us in terms of financing health care.

Also, it's important to note that many appointments to agencies that have interest in our industry have not been made to this point.

In terms of the BATF, we don't know. They are in flux over there. We would hope that the responsibilities of that particular agency wouldn't be bifurcated into four or five different agencies around town. That way we would have to deal with so many different personnel and personalities that our job would be a lot tougher. We don't always get what we want out of ATF, but at least we know where to go.

MBA: Have the neo-prohibitionist groups been active in cultivating the new administration?

McGRATH: I have heard from the newspapers, when we are asked to attempt to respond to the neo-prohibitionist's phony science from time to time.

As soon as the secretary for health is appointed over at HHS I would hope that he or she would meet with me and discuss what we are doing.

I want them to know what we are doing as an industry to promote some of the concerns that they have. We are up to our eyeballs in programs that deal with moderate consumption, underage drinking and drunken driving. We have embarked on training programs for servers so that they will not serve those who are either inebriated or under age, we have taught them techniques, we've given them brochures and materials to identify under-age drinkers.

We've made our point very well in our public service announcements. The theme of the PSAs was "21 means 21." If you are under 21, we don't want your business. And we've said that in 13 different cities and around the country.

Our PSAs are currently playing on radio stations and television stations throughout the country, and we are monitoring the penetration.

MBA: How do you respond to neo-prohibitionists who characterize these campaigns as self-serving?

McGRATH: Would they rather we not do them? I had that question asked of me down in Little Rock [at the economic summit]. We introduced some of our programs down there and we were questioned by the press, and a fundamentalist of the Christian Right went off on that question.

I turned around and I said, "Well, would you like us not to do these? Isn't this what you want us to do in terms of education of the young, telling them not to drink until they are 21? Do you want us to do just the opposite?" No, no, he said. He said the question was one of intensity. Well, how much is enough?

Hell, we've spent a couple of million dollars on this most recent program, and we're going to generate millions of dollars more in free air time between us and the broadcasters. How much is enough?

We continue to do more and more each year, but sometimes you just can't satisfy everybody. Plainly, most of these people have a different agenda. They would like us to go out of business and for us not to resist. And that is not going to happen.

MBA: Do you think some of the neo-prohibitionists have crossed the line into active prohibitionism?

McGRATH: Their agenda is to put us out of business. Not to have anybody drink at all, and forget about the fact that drinking alcohol beverages goes back thousands and thousands of years.

Can you imagine going to a ball game without a beer, or a picnic without a beer? You come home at night, and you go to the refrigerator and have a beer. They want to take that away.

Eighty million people drink our product and a very small percentage of them abuse it. Neo-prohibitionists would like to put all Americans who drink beer responsibly at the mercy of those who abuse it.

Our theory is this: Go after those who abuse it. Educate those who abuse it. Treat those who abuse it. Sanction those who abuse it, particularly those who drive while they are intoxicated. We are for all of that.

But don't go after the people who cause no trouble at all, and incorporate beer into a moderate lifestyle.

MBA: Each year at the Beer Institute's annual meeting, there is a call for unity among the different member companies. Have you seen greater efforts this year to realize that goal?

McGRATH: Every industry has its problems. If you look at the trade associations for the health insurance industry or the life insurance industry you will see similar kinds of problems among and between the members.

I see a lot less of it here. Perhaps it's because the industry is so dominated by a few brewers, but I have had no trouble in trying to convince members to go in the direction that would be helpful.

We are all constrained by finances these days, but to the extent that I can show that some measure will contribute to the direction that they want to go, I have been given just about all the latitude that I need to achieve our objectives.

MBA: Numerous smaller brewers have joined the Institute in recent years. Are you encouraging other small brewers to join?

McGRATH: We are trying to expand our membership on a subscriber basis, to encourage brewers to join us in a grass-roots operation which we have initiated this year. Our intention is to be active in every Congressional district where we can be.

I operate under the belief that it's better to send four small businessmen from Kansas in to see Bob Dole than to send the CEOs of one of the senior members. I think it has more of an impact on legislators to meet with people who actually live in their state, live in their district.

It has more impact, and it's probably wiser politically as well. So, to the extent to which we can enlist all brewers into our grass roots army, it is something that we intend to do.

I think we had 155 subscriber members last time I checked.

MBA: How many new people have you added to your staff since you came aboard?

McGRATH: We are going to go through a reorganization this year. We've added Kirsten Fedewa, our new vice president of political affairs.

We've also added a federal representative to monitor hearings and we'll probably add another person in that area, someone to oversee that operation. We also intend to enlist somebody to direct the grass roots program.

MBA: You seem to be sending out more government affairs information these days, with your newsletter and your legislative alert bulletins...

McGRATH: We send out bulletins every time there is a break, a district work period break, for members of congress. We send out position papers and encourage our members to go out and talk to their legislators about these particular issues and then report back to us and see what they say.

MBA: Will a renewed concentration on legislative affairs be a hallmark of your administration here?

McGRATH: We are going to be great legislative monitors, and I want the Beer Institute to be a terrific information source to our members and subscriber members.

We will also build our grass roots operation, so we can broaden the influence of the industry. We will encourage our grass-roots army to make itself heard in Washington, and we are going to monitor responses from legislators and coordinate activities to influence legislators as we see fit.

MBA: Thank you for your time, Mr. McGrath.
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Title Annotation:Beer Institute President Ray McGrath
Publication:Modern Brewery Age
Article Type:Interview
Date:Sep 20, 1993
Previous Article:Taking the lead.
Next Article:Beer, health & taxes.

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