Marijuana: it’s not the last dance

Marijuana: it's not the last dance

By Ilene 

Don't break out the Cheetos or gold fish too quickly.

~ Colorado Gov. John Hickenlooper

Two states, Washington and Colorado, voted in yesterday's elections to legalize marijuana for recreational use.  They are among 18 states that already permit medical use.

Will the Federal government listen to the will of the people in WA and CO? The federal government still views marijuana as a Schedule I prohibited substance and has cracked down on states that allow medical marijuana. (Voters Ease Marijuana Laws in 2 States, but Legal Questions Remain) These new laws go further, opening more doors to lawsuits with the Federal government (as federal law still trumps state law, Supremacy Clause.) 

The legalization of marijuana is good news for the states' economies. Estimates for WA's and CO's gains from the legalization are $500 million (probably way too high) and $60 million (savings plus revenue), respectively. The Washington law calls for a 25% tax rate imposed three times: sales from grower to the processor, sales from the processor to the retailer, and sales from the retailer to the customer. CO will impose a 15% excise tax on retail transactions, in addition to other state and local taxes. 

Below are excerpts from an assortment of articles on legalizing pot, the benefits to states, the risks, and additional discussion.  

Two U.S. States Become First to Legalize Marijuana

By Maia Szalavitz, TIME

What would legalized recreational use mean? For one, both Colorado and Washington don’t simply lessen the penalties for users from criminal charges to fines. The states also legalize and tax sales— a step that not even countries like the Netherlands, where wholesale selling and growing remains illegal, but small retail sales are officially tolerated in licensed “coffee shops,” has taken.

Washington’s law involves a licensing regime, to be handled by the state’s liquor control board, for growers and sellers. Initiative 502 bans sales to people under 21 and sets a 25% tax on both wholesale and retail sales, which will be used to fund drug prevention, schools and health insurance.

Unlike most prior initiatives, I-502 was widely supported by state officials and mainstream media, including the state Democratic party and local newspapers. It also sets a legal limit on THC, the active ingredient in cannabis, blood levels for driving. The law bans growing for personal, non-medical use.

Colorado’s new law is somewhat different: Amendment 64 allows personal possession and growing for one’s own use or to give away.  Sales, however, will require a license from the Colorado department of revenue and will be taxed to fund school construction, at a rate of up to 15%...

Both measures passed by comfortable margins — I-502 garnered an estimated 55% of support and Amendment 64 earned 53% of the vote. Colorado’s enthusiasm is especially significant given that the state already has a medical marijuana establishment with 204 outlets in Denver — about three times its number of Starbucks and McDonald’s, combined.

The federal government, however, remains a cloud that hangs over the ballot victories… Full article here >

The Obama administration has authorized over 170 raids on dispensaries and issued more than 61 federal indictments, according to the Huffington Post.  President Obama's explanation, that seems disingenuous considering that he changed his position from supporting states to disclaiming any control: “I can’t nullify congressional law. I can’t ask the Justice Department to say, ‘Ignore completely a federal law that’s on the books.’ What I can say is, ‘Use your prosecutorial discretion and properly prioritize your resources to go after things that are really doing folks damage.’” In a shocking about-face, the administration has launched a government-wide crackdown on medical marijuana:

Back when he was running for president in 2008, Barack Obama insisted that medical marijuana was an issue best left to state and local governments. "I'm not going to be using Justice Department resources to try to circumvent state laws on this issue," he vowed, promising an end to the Bush administration's high-profile raids on providers of medical pot, which is legal in 16 states and the District of Columbia.

But over the past year, the Obama administration has quietly unleashed a multi­agency crackdown on medical cannabis that goes far beyond anything undertaken by George W. Bush. The feds are busting growers who operate in full compliance with state laws, vowing to seize the property of anyone who dares to even rent to legal pot dispensaries, and threatening to imprison state employees responsible for regulating medical marijuana. With more than 100 raids on pot dispensaries during his first three years, Obama is now on pace to exceed Bush's record for medical-marijuana busts. "There's no question that Obama's the worst president on medical marijuana," says Rob Kampia, executive director of the Marijuana Policy Project. "He's gone from first to worst." (Obama's War on Pot)

Legalizing marijuana will be economically good for the state budgets by increasing tax revenue and saving money spent on administering criminal justice and prisons. Including lost tax revenues, a 2007 study found that enforcing the marijuana prohibition costs tax payers $41.8 billion annually.

According to Forbes: "The U.S. marijuana is a $113 billion annual business that costs taxpayers $41.8 billion in enforcement costs and lost tax revenues." Economist Stephen Easton estimated that legal marijuana could be a $45 to $100 billion industry. It's estimated that illegal marijuana is a $36 billion industry according to MadameNoire. (14 Ways Marijuana Legalization Could Boost The Economy)

How much damage will legalizing marijuana cause (apart from the costs of the fighting the Federal government)? Many argue that marijuana is less dangerous than alcohol and tobacco. It does not "often produce disinhibited behavior that triggers the risk of violence." It does not appear to cause lung and other common cancers.

Marijuana’s active ingredient, THC, however, is a mild hallucinogen that also has sedative properties. Cannabis intoxication does impair memory and cognition, and marijuana addiction, as with any drug, can lead to serious impairments in judgment and result in harm.  Experts agree, however, that marijuana addiction tends to be less severe than cocaine, heroin, methamphetamine or alcohol addiction.

But whether marijuana’s status as a legal or illegal drug influences how often it is misused remains unclear. Studies conducted in Holland, which has come closest to full legalization of cannabis, and Portugal, which completely decriminalized possession of all drugs, so far do not show negative effects on either addiction rates or misuse by young people.

There is also the complicated relationship between the intensity of law enforcement and the rates of marijuana use and addiction, with no clear expectation that increased enforcement will lower use or related problems. As Dr. Evan Wood a professor of medicine at the University of British Columbia and founder of the International Centre for Science in Drug Policy says, “No scientific evidence demonstrates an association between the amount of money governments spend on drug law enforcement and rates of drug use. And some nations like the U.S., which spend the most, have among the highest rates of drug use.” 

One factor that does influence drug use is price, and legal marijuana would almost certainly be cheaper than that on the black market.  A study conducted as California voters considered legalization suggested that the price would drop by 80% (TIME)

Growing pot in a legal environment will decrease the costs of production significantly. A drop in price is likely to lead to greater consumption. An indirect consequence of legalizing pot – lower prices/increased use – is the effect on car accidents. Some research suggests that marijuana might substitute for drinking, which would lower driving risks. However, other research indicates that the risks are additive. The matter is unsettled. 

Legalization will cause the price of marijuana to drop dramatically.  Matthew Yglesias suggested that we might even be able to Get High for Free. Or practically free (don't forget taxes!). According to California NORML Director Dale Gieringer,

We should expect legal pot to cost about the same amount as 'other legal herbs such as tea or tobacco,' something perhaps '100 times lower than the current prevailing price of $300 per ounce—or a few cents per joint.'

This would make pot far and away the cheapest intoxicant on the market, absolutely blowing beer and liquor out of the water. Joints would be about as cheap as things that are often treated as free. Splenda packets, for example, cost 2 or 3 cents each when purchased in bulk.

These data either bolster or undermine the case for legalization, depending on your point of view. On the one hand, despite the apparent widespread availability of pot even under prohibition, it seems likely that radically lowering the price would lead to a much larger increase in consumption than people have in mind. On the other hand, it seems that you could tax the hell out of marijuana and still leave consumers better off than they are today. An extraordinarily high tax, of course, would spark tax evasion… (Get High for Free, Slate)

The marijuana industry will change dramatically as the trend towards legalizing and loosening restrictions on pot continues and the Federal government's hold on the issue erodes (my expectation is that it will). As the Slate article noted, the "knock-on effects for casinos, bars, and other possible complements or substitutes for pot—would be enormous. The superficial ineffectiveness of prohibition masks a huge impact on the supply side that, for better or for worse, is what stands between America and much cheaper highs."  

Harry Bradford, The Huffington Post, reviewed 14 Ways Marijuana Legalization Could Boost The Economy (click on this link for the slide show):

It's not just stoners and Democrats who should be exhaling a deep cough of relief — economists too may find the news worthy of some bubbles or bubblers.

The states could see a major economic boon because of the legalization. The new measure is expected to bring the two states more than $550 million combined, with more than 300 economists previously estimating that legalizing pot could save the U.S. up to $14 billion a year. That's not even taking into account the extra Funyun consumption.

Marijuana legalization decision, Washington, Colorado, Oregon: Can pot stimulate the economy

By Aaron Smith, CNNMoney

It's not clear exactly how much tax revenue legalization would bring in. Estimates for the Washington measure run as high as $500 million — a figure analysts say is overstated.

[…]

"[The feds] will do whatever they can to interfere with marijuana legalization in any state," said Jeffrey Miron, senior lecturer of economics at Harvard University and a senior fellow at the Cato Institute, where he has conducted economic studies on nationwide drug legalization.

Miron said that state legalization would likely lead to federal challenges in the Supreme Court. "I think it will be a mess," he said. "I think it will be awhile before it gets sorted out."

Marijuana: Economic stimulant, or just a can of worms