Marijuana legalization holds particular interest as a public policy issue in the United States. Currently, the regulation of marijuana use consumes a portion of the National Budget that could be more effectively allocated, and current legislation against marijuana also bogs down both the criminal justice system and the penal system; however, like many other public policy issues, the topic of total legalization of marijuana remains largely polarized. This controversial issue has a variety of positive and negative aspects in all areas of society, with economic results in a position of particular importance. The economic side of this issue is multifaceted. It includes such diverse aspects as the cost-effectiveness of enforcement of anti-marijuana laws, the impact on the domestic economy from costs of personal marijuana use, the potential for government revenue, and the possibility of the formation of new marijuana-based industries. All of these economic issues play a key role in determining the validity and effectiveness of steps towards the legalization of marijuana.
The cost for government marijuana-law enforcement consumes a significant portion of the budget, on both federal and state levels, and it is difficult to quantify the effectiveness of such enforcement. Advocates of legalization argue that the economic repercussions of enforcement far outweigh its effectiveness. Opponents of legalization point out negative health aspects caused by drug use, and they also cite the idea of marijuana as a “gateway drug.” Gateway drugs lead users into the realm of “harder” drugs, such as acid, cocaine and heroin. Opponents of legalization use this connection to other illegal substances as grounds for keeping marijuana illegal as well. Proponents argue that the amount of time and money spent on the enforcement of anti-marijuana laws is a burden to society; on the other hand, those opposing drug use argue that such time and money are well spent. By arresting these marijuana users and dealers, it keeps the substance off the streets and out of the hands of children, a factor worth any cost incurred.
On the federal level in 2003, roughly “19 billion” was spent on the War on Drugs, and in 2007, figures are again nearing nineteen billion dollars (Drug Sense). A large amount of valuable tax dollars are spent combating illegal drug use, and although marijuana is not the only drug chased in the War on Drugs, it represents a large drain in funding. Approximately “42.6 percent of all drug arrests in the United States” involve marijuana (Drug Sense). One can assume that with this percentage of marijuana drug arrests, this substance leeches a significant portion of the drug war budget.
Approximately “one third of all federal drug defendants [are] charged with marijuana offenses,” causing an overload for the penal system and a corresponding financial burden (“Untangling the Statistics” 20). Many marijuana advocates imply from this statistic that most inmates in prison are being held for minor possession; however, only “2.3%” of federal inmates are sentenced for possession, and “97.7%” of federal inmates are imprisoned for marijuana trafficking (“Untangling the Statistics” 20). Opponents of legalization also point out that trafficking is their secondary or tertiary reason for incarceration.
Aside from the consequences in the budget and the cost to the penal system, there still remains one major consequence of enforcement: the heavy burden placed on the criminal justice system, even assuming that all arrests are “simple cases involving no prior use of police time or resources and taking no more than two hours to process, then marijuana prohibition costs law enforcement a minimum of 2,400,000 man hours annually” (NORML Part V). In addition to the costs to the criminal justice system, there are costs in the judicial system as well. The number of man-hours spent processing these trivial cases could be allocated to more benefit elsewhere, for example, combating violent crime or enforcing prohibition of more malignant drugs. While these statistics are derived from NORML, an agency devoted exclusively to reforming marijuana laws, their information is given conservatively and thus fairly accurately.
Employers ask for criminal history or a history of incarceration in their applications or in their interviews, and any history, however minor, serves to screen out otherwise qualified candidates, and for this, agencies fight to repeal prohibition laws, “having been prompted by the failure of current policies to deter large numbers of users, the consequent criminalization of large numbers of young Americans,” the criminalization results in a narrowing of opportunity for “large numbers of young Americans” (“An Analysis…”).
“In 2000 U.S. residents spent $10.5 billion on marijuana. This estimate relies on a range of assumptions about the marijuana market, and modification of these assumptions might produce a higher or lower estimate,” and this estimate also takes into account inflated prices given by the ONDCP (Miron “Expenditure…Prohibition”). The marijuana market consumes an exorbitant amount of dollars from its users, with a cost at $900-1800 a pound; the cost of a gram of marijuana is $10 (NDIC “Availability”).
Habitual use of marijuana steadily drains many incomes. “Heavy” or habitual marijuana users smoke anywhere from 1 gram to 4 grams of marijuana daily, with some variations. The projected cost for a gram of marijuana is $8-10, though this figure fluctuates depending on region and grade. Using a simple, conservative calculation at 2 grams of marijuana a day at $8 a gram, weekly costs add up to about $112. The price far overshoots the cost of a heavy tobacco user smoking a pack a day at $3-4 dollars a pack, approximately $28 weekly. By the end of the year, the cost of use reaches approximately $5800, more than doubling the $2800 annual price for smoking cigarettes.
The nature of the illegality of the substance drives up the cost, and thus proponents claim that the “risk premium is making a lot of criminals, many of whom have ties to organized crime, very wealthy” (Moffatt). Proponents point out that money should go back into the domestic economy, instead of into the hands of drug traffickers and thus organized crime. Advocate use this theory as a cornerstone of many of their main arguments for complete legalization, asserting that the legalization would drop the price and put more money into the domestic economy. Opponents to legalization admit that some sort of economic boost in the domestic economy may occur, but the actual potency of such a boost cannot be significant, be accurately measured, or be reasonably predicted. Opponents may also point out that elimination of the presence of marijuana would also allow most domestic spending.
Two major courses of action seem to dominate the economic side of the issue. Opponents want to increase the budget in order to fight against crime and prevent the drug trafficking, as a result potentially cauterizing the leak of money into marijuana. Advocates seek to legalize marijuana in order to prevent the inflation of the prices of marijuana, potentially regulating and taxing it. Either approach shows effective paths with which to approach the problem of the effects of marijuana use. Sweden exemplifies an effective non-legalized marijuana policy, as the country with the fewest users per capita. However, many countries, such as Mexico with decriminalized marijuana, or France, with regulated marijuana, and countries with legalization for personal use like Portugal, have very low economic impacts due to their marijuana laws, with little to no enforcement necessary.
With the total amount spent on marijuana purchases estimated at “10.5 billion” dollars, the government stands to make a potentially significant amount of revenue by tapping into and regulating marijuana in a similar fashion to the alcohol industry and the tobacco industry (Miron “Expenditure…Prohibition”). Many economists argue for the legalization of marijuana. Harvard Economy Professor Miron assumes “that an excise tax on legalized marijuana doubles the price. If general taxation accounts for 30% of the price, this additional tax would then make tax revenue account for 80% of the price. This doubling of the price, given an elasticity of -0.5, would cause roughly a 50% increase in expenditure, implying total expenditure on marijuana would be $11.85 billion (=$7.9 x 1.5). Tax revenue would equal 80% of this total, or $9.5 billion. This includes any standard taxation applied to marijuana income as well as the sin tax on marijuana sales” (Miron “Tax Revenue”). He analyzes the potential for taxation in such as fashion that gives a comprehensive overview of the possibility of using marijuana to generate revenue for the government. If regulation occurred nationally, these figures would give the most reliable prediction of the revenue.
Other sects take other approaches, involving comparison between industries and their corresponding statistics. NORML, or the National Organization for the Reformation of Marijuana Laws, gives a more simplified, conventional look at excise taxes and potential resultant revenue, specifically focusing on California. NORML approximates that “based on experience with the cigarette tax, total revenues of $1.5 - $2.5 billion might be realized” (Benefits…Legalization).
NORML analyzes other industries in order to estimate the types of growth that would result from complete legalization. For example, based on comparing it with the activity of the wine industry, NORML predicts that “the total economic activity generated by legal marijuana could be nearly three times as great as retail sales, around $8 - $13 billion” (Benefits…Legalization). This activity, composed of “Amsterdam-style coffeehouses,” would produce over “1.4 billion in wages” (Benefits…Legalization). It would essentially emulate the tourism industry in Amsterdam. Other industries also have the potential to sprout post legalization, for example, the industrial hemp industry, worth about 3.4 billion dollars in California alone (Benefits…Legalization). This industry exists in other countries already, it deals with the manufacturing of stronger rope, clothing, and sometimes paper.
Arguments both for and against the legalization of marijuana have solid points. The law has financial burdens like all other laws. Marijuana advocates believe expenditures on enforcement unnecessary and argue that legalization presents a better economic option, especially in face of ineffective enforcement; however, such a route has proven effective in some countries, such as Sweden. At an individual economic level, a large chunk of income goes into marijuana use; opponents aim to eliminate this through stronger enforcement of prohibition, and advocates seek to minimize this through legalization. The government could feasibly regulate and tax marijuana for a significant revenue, opening up potentially negative health effects in trade for economic gain. Complete legalization could birth new industries. In short, legalization offers a sounder economic solution, given concessions to negative consequences of actual marijuana use.
by Andre Hansel
Works Cited
Boaz, David. CATO Institute (Jun 16 1999). Drug Legalization, Criminalization, and Harm Reduction (Exerpts). (Dec 5 2007). http://www.cato.org/pub_display.php?pub_id=5059
California National Organization for the Reform of Marijuana Laws. Benefits of Marijuana Legalization in California. (Dec 5 2007). http://www.canorml.org/background/CA_legalization.html
Drug Sense (Dec 2007). People Arrested for Cannabis Law Offenses this Year. (Dec 5 2007). http://www.drugsense.org/wodclock.htm
Miron, Jeffrey A. Marijuana Policy Project (Jun 2005). The Budgetary Implication of Marijuana Prohibition. (Dec 5 2007). http://www.propeller.com/viewstory/2006/11/19/costs-of-marijuana-prohibition-economic-analysis/?url=http%3A%2F%2Fwww.prohibitioncosts.org%2Fendorsers.html&frame=true
Moffat, Mike. About. Should Governments Legalize and Tax Marijuana. (Dec 5 2007). http://economics.about.com/od/incometaxestaxcuts/a/marijuana.htm
National Drug Intelligence Center (Dec 2001). South Carolina Drug Threat Assessment. (Dec 2007). http://www.usdoj.gov/ndic/pubs07/717/marijuan.htm
National Organization for the Reform of Marijuana Laws (Mar 17 2002). Part V. (Dec 5 2007). http://norml.org/index.cfm?Group_ID=4433
Schaffer Library of Drug Policy. Any Analysis of Marijuana Policy. (Dec 5 2007). http://www.druglibrary.org/schaffer/library/studies/nas/comparing.htm
Whiter House Drug Policy (Dec 3 2007). Untangling the Statistics. (Dec 5 2007). http://www.whitehousedrugpolicy.gov/publications/whos_in_prison_for_marij/untangling_the_stats.pdf
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