Glen48
Money can't buy Poverty
- Joined
- 4 September 2008
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Hear is the answer is Blowing......in the Wind:
From New York Times.
LONDON: Want to help fund the bank bailout, ease the California budget crisis and shore up strained U.S. finances? Legalize drugs, tax the trade and save on interdiction, domestic enforcement and the prison and court system.
I'm only partly joking.
It would not solve all of the United States' problems and, lord knows, it would cause some new ones, but the money is undeniably big enough to make a dent.
After all, it certainly helped President Franklin D. Roosevelt, who legalized alcohol in 1933 in the midst of the Depression and after more than a decade of Prohibition, thus bringing a half a billion in 1933 dollars into public coffers in the form of tax revenue. By 1936, alcohol taxes were 13 percent of U.S. federal revenue.
Governor Arnold Schwarzenegger of California has a similar opportunity. He is facing a $42 billion budget deficit, his prisons are filled to bursting, in substantial part with people in on drug-related crime, and he will soon be forced by judicial edict to start freeing people.
More Coverage
James Saft
Today in Business with Reuters
Government gives details of plan to support U.S. banks
Tax suspicions grow on Swiss accounts
As Latvian economy falters, unrest grows
He also has an offer from a group call Let Us Pay Taxes, which claims to represent the marijuana industry and is willing to pay $1 billion annually in taxes if only he would legalize. No doubt they are low-balling. The United Nations estimates the value of the U.S. cannabis market at $64 billion annually, while a paper by Jonathan Caulkins and Peter Renter calculates that about half of the costs of drugs are in one way or another attributable to factors linked to interdiction and its perils.
But even if you cut the UN number in half and tax it at only 50 percent, a lower tax than many states and localities put on tobacco, you would still get more than $15 billion nationwide. If California consumes its 13 percent share, in line with GDP, and I am betting it does, you are looking at something on the order of $2 billion, even before you take account of lower costs.
The Harvard economics professor Jeffrey Miron has a lower estimate, at $7.7 billion annually in lower spending nationally and $6.2 billion in extra revenues.
Of course, these figures could fluctuate wildly, depending on levels of compliance and market factors.
But why stop at cannabis? Just as Roosevelt decided that prohibition of alcohol was a failed policy the United States could no longer afford, perhaps the costs of rebuilding the U.S. banking system and lifting the country out of a severe recession will prompt another radical plan. I would not bet on it, but strange things are happening all over.
And if we start including other drugs the billions will only mount. There is another $100 billion in annual illegal drug sales in the United States outside of cannabis, which might produce another $25 billion annually in revenue by the same math. The U.S. government spent $13 billion on the drug war in 2002, not counting prison costs.
Then there are other costs of the U.S. drug interdiction efforts internationally, not least in Afghanistan, where opium revenue fuels the Taliban. The United States spends more than $1 billion a year there on anti-drug efforts, but opium money undoubtedly raises the total costs for the United States by much more.
The stream of income from all of this extending into the future is very valuable indeed and would go a way toward paying the price of fixing the banking system.
This brings us to another point of weakness for the United States; namely its ability to fund all of the costs it has already taken on and is likely to have to shoulder in the next several years.
Not long ago, Moody's credit rating agency did what everyone has pretty much taken for granted, acknowledging that the United States' AAA credit rating is being "tested" and falls into a category below those on the top shelf like Canada and Germany.
It is not all wine and roses, though. Cheaper legal drugs might lead to a spike in use, which might hit productivity and impose many costs, like higher health and other welfare costs.
All of those prison, military and law enforcement jobs are a huge source of stimulus, and the cutbacks implied by legalization would raise transitional problems.
Moreover, drug legalization, just as for alcohol, is essentially a moral and political decision about which reasonable people can disagree. It is also, to put it mildly, not very likely.
Still the war on drugs rolls on, costing billions, creating huge incentives for violence and crime, imprisoning hundreds of thousands and seemingly never much closer to victory. The waste and misery must make it rival the sub-prime bubble as a misallocation of resources.
Perhaps one stone would end up killing two birds.
From New York Times.
LONDON: Want to help fund the bank bailout, ease the California budget crisis and shore up strained U.S. finances? Legalize drugs, tax the trade and save on interdiction, domestic enforcement and the prison and court system.
I'm only partly joking.
It would not solve all of the United States' problems and, lord knows, it would cause some new ones, but the money is undeniably big enough to make a dent.
After all, it certainly helped President Franklin D. Roosevelt, who legalized alcohol in 1933 in the midst of the Depression and after more than a decade of Prohibition, thus bringing a half a billion in 1933 dollars into public coffers in the form of tax revenue. By 1936, alcohol taxes were 13 percent of U.S. federal revenue.
Governor Arnold Schwarzenegger of California has a similar opportunity. He is facing a $42 billion budget deficit, his prisons are filled to bursting, in substantial part with people in on drug-related crime, and he will soon be forced by judicial edict to start freeing people.
More Coverage
James Saft
Today in Business with Reuters
Government gives details of plan to support U.S. banks
Tax suspicions grow on Swiss accounts
As Latvian economy falters, unrest grows
He also has an offer from a group call Let Us Pay Taxes, which claims to represent the marijuana industry and is willing to pay $1 billion annually in taxes if only he would legalize. No doubt they are low-balling. The United Nations estimates the value of the U.S. cannabis market at $64 billion annually, while a paper by Jonathan Caulkins and Peter Renter calculates that about half of the costs of drugs are in one way or another attributable to factors linked to interdiction and its perils.
But even if you cut the UN number in half and tax it at only 50 percent, a lower tax than many states and localities put on tobacco, you would still get more than $15 billion nationwide. If California consumes its 13 percent share, in line with GDP, and I am betting it does, you are looking at something on the order of $2 billion, even before you take account of lower costs.
The Harvard economics professor Jeffrey Miron has a lower estimate, at $7.7 billion annually in lower spending nationally and $6.2 billion in extra revenues.
Of course, these figures could fluctuate wildly, depending on levels of compliance and market factors.
But why stop at cannabis? Just as Roosevelt decided that prohibition of alcohol was a failed policy the United States could no longer afford, perhaps the costs of rebuilding the U.S. banking system and lifting the country out of a severe recession will prompt another radical plan. I would not bet on it, but strange things are happening all over.
And if we start including other drugs the billions will only mount. There is another $100 billion in annual illegal drug sales in the United States outside of cannabis, which might produce another $25 billion annually in revenue by the same math. The U.S. government spent $13 billion on the drug war in 2002, not counting prison costs.
Then there are other costs of the U.S. drug interdiction efforts internationally, not least in Afghanistan, where opium revenue fuels the Taliban. The United States spends more than $1 billion a year there on anti-drug efforts, but opium money undoubtedly raises the total costs for the United States by much more.
The stream of income from all of this extending into the future is very valuable indeed and would go a way toward paying the price of fixing the banking system.
This brings us to another point of weakness for the United States; namely its ability to fund all of the costs it has already taken on and is likely to have to shoulder in the next several years.
Not long ago, Moody's credit rating agency did what everyone has pretty much taken for granted, acknowledging that the United States' AAA credit rating is being "tested" and falls into a category below those on the top shelf like Canada and Germany.
It is not all wine and roses, though. Cheaper legal drugs might lead to a spike in use, which might hit productivity and impose many costs, like higher health and other welfare costs.
All of those prison, military and law enforcement jobs are a huge source of stimulus, and the cutbacks implied by legalization would raise transitional problems.
Moreover, drug legalization, just as for alcohol, is essentially a moral and political decision about which reasonable people can disagree. It is also, to put it mildly, not very likely.
Still the war on drugs rolls on, costing billions, creating huge incentives for violence and crime, imprisoning hundreds of thousands and seemingly never much closer to victory. The waste and misery must make it rival the sub-prime bubble as a misallocation of resources.
Perhaps one stone would end up killing two birds.
