Legalize to Subsidize

This November Californians will be voting on whether or not to legalize marijuana for personal recreational consumption. Proposition 19, otherwise known as the Regulate, Control and Tax Cannabis Act of 2010, would legalize a variety of activities related to the use and cultivation of marijuana, and would allow government to regulate those activities, impose fees and taxes, and uphold penalties for violation of related code. The legalization of marijuana is an issue that polarizes the public, and there are important points to consider on each side of the argument. One of the most compelling aspects of the prospect of legalization at this particular time is that it looks like a very promising source of revenue for a state that is falling apart at its financial seams.

California is grappling with huge losses of revenue due to the ongoing bust in housing and the broader downturn rippling out from that. Not only has the golden state already seen property values decline by almost 50% since the bubble’s peak in 2006, but it is currently enduring an unemployment rate of 12.4%, with the broader U6 measurement of underemployment coming in at 22%. With the now defunct king of exotic mortgage companies Countrywide having been headquartered in Calabasas and a record number of lending outfits having sprouted like, well… like weeds, all through Los Angeles and Orange Counties during the bounty years, Southern California was epicenter to the housing boom. Prices exploded through the roof throughout the whole state. Santa Barbara and the Bay Area alternately held the title of most expensive places to buy a home in the US during the run up. A huge workforce in financing and lending was established to satisfy the public’s demand for toxic mortgage products. Another huge workforce was established in construction, in order to fulfill demand for new homes and for the expansion and remodeling of existing homes made possible by a proliferation of home equity lines of credit. Yet another army of agents grew to record proportions around the need to show and sell all that property. Home Depots, furnishing and gardening stores and design centers popped up in every strip mall. There was a boom in all employment related to housing.

California unwisely put all its eggs in one basket.  It was nice while it lasted.  Whole neighborhoods were born again from the ashes of disrepair, and gentrification elevated many neglected urban areas like a flock of phoenixes rising as utopian visions manifested in a new landscape all across the state. Suburb after suburb was built, expanding ever outward to accommodate the hoards of new homeowners, each with its own set of markets, malls, and amenities to make it home. A boom in commercial real estate grew along with the demand for residential real estate. The whole economy was growing at the speed of light, fueled by easy credit. But of course that all came to a crashing end. Now California finds itself falling short. The state foolishly continues to balance its budget using revenue projections based on outmoded data from the boom years. Each year there is a dramatic shortfall and drastic measures have to be taken to accommodate for the continuing losses.  All the wealth and employment that came with the housing boom was just unsustainable, and most of those jobs attached to housing will not be coming back… ever.

Now Proposition 19 offers the possibility of a new means of revenue for California. Legalize marijuana, regulate it and tax it. Marijuana is California’s largest cash crop, worth double the value of the state’s vegetable and grape crops alone. As things stand, the drug cartels of Mexico are collecting most of the revenue from marijuana trade, and they are even using California state parks to grow their product. It is estimated that 60% of the money earned by the Mexican cartels stems from marijuana related business. This is all happening at a tremendous expense to the Mexican people along the border towns where gangs rule. Tens of thousands of innocent citizens have lost their lives over the turf wars of the black market. Already the legalization of marijuana for medical use in California has cut into the profits of these deadly cartels, as patients grow small legal crops of the weed to meet the demand for quality product in the burgeoning health care system. The passage of Proposition 19 promises to keep profits from California marijuana sales in the state and cut funding to the cartels responsible for so much loss of life.

It is primarily over concerns for the situation in Mexico that an unlikely spokesman has stepped up in support of the legalization of marijuana in the United States. Recovering alcoholic and conservative Mormon Glenn Beck has joined the ranks of more familiar activists like Cheech Marin and Tommy Chong to raise awareness about the situation in Mexico and speak out against the inconsistencies in laws regulating marijuana. I was surprised during my research of the topic to find several prominent conservatives speaking on behalf of legalization, including Sarah Palin, Congressman Ron Paul, and Judge Jim Gray. Marijuana legalization advocacy has historically come out of the liberal left fringe and organized groups of users. Perhaps the rise of a stronger Libertarian view amongst the right and the attainment of political power by the baby boomer generation has allowed for a shift in views toward the regulation and use of the drug.

Another surprising push to legalize marijuana is coming out of the law enforcement sector. Several groups have emerged, including Law Enforcement Against Prohibition and the National Black Police Association, arguing for the passage of Proposition 19. According to a recent article in the Huffington Post, these officers, judges and prosecutors point out that legalizing pot would:

• Stop wasting police on non-violent marijuana offenders and enable them to focus on preventing violent crime
• Cut off funding to violent gangs and drug cartels
• Reduce marijuana access to children by instituting strict age-limits
and public safety controls
• Protect the lives of police officers now at risk in the “drug war”
• Restore mutual respect and good relations between law enforcement and
communities bearing the brunt of the current marijuana laws.

There are many questions regarding the social effects of legalizing the marijuana industry. For some there are moral questions. For others there are questions of health, responsibility and the need to protect children from harm. Effects on the environment are a consideration. I will not delve into all these questions here, as it is beyond the scope of this particular inquiry. However, the bottom line for marijuana legalization in California looks encouraging financially. In addition to providing the state a possible 1.4 billion dollars in tax revenue, it would expand the economy by 16 to 23 billion dollars annually. This doesn’t even include the possible revenue from other hemp related products, which could support a whole tertiary market including the potential growth of domestic biodiesel and ethanol fuel industries.

In addition to generating revenue for California, legalizing marijuana would save the state tens of millions of dollars due to the reduction of people in prisons and on parole for possession charges, and would provide major reduction in state and local costs for enforcement of marijuana-related offenses and the handling of criminal cases in the court system. Currently 47.5% of drug arrests in the United States are marijuana related, costing $150 billion a year. The savings would be significant in California.

As of now Proposition 19 is ahead in the polls, though not by much.  If it passes, California will not only be at the forefront of a social revolution regarding the place of marijuana in society, it will be a lot closer to finding its way out of the black market and into the black ink.

About.com
Marijuana Legalization Pros and Cons
http://usliberals.about.com/od/patriotactcivilrights/i/MarijuanaProCon_2.htm

Bureau of Labor Statistics
Alternative Measures of Labor Underutilization for States
Q2 2009 through Q1 2010
http://www.bls.gov/lau/stalt10q1.htm

Conservatives on Marijuana Legalization (video)
http://www.youtube.com/watch?v=vsfCWl9Bk4k

Drug Policy Alliance
California Lawmaker Sees Tax Revenue in $14 Billion Marijuana Crop
Tommy McDonald and Stephen Gutwillig
February 23, 2009
http://www.drugpolicy.org/news/pressroom/pressrelease/pr022309b.cfm

Hempcar Transamerica
Petrol vs. Hemp
http://www.hempcar.org/petvshemp.shtml

Huffington Post
Time for California to End the Unwinnable Marijuana War
Kevin Zeese
September 11, 2010
http://www.huffingtonpost.com/kevin-zeese/time-for-california-to-en_b_713414.html

Bill and Ted’s Bogus Recovery

Bogus recovery is…

1)  When unemployment is worse today than it was at the lowest dip of the recession you are supposedly recovering from.

2)  When housing sales just fell 27% at the same time foreclosures rose 25%, yet you need to be amongst the top 25% of earners in order to afford a median priced house in many areas of the country.

3)  When unlisted foreclosure inventory is twice as big as actual “for sale” listings, and actual listings are at record highs.

4)  When you hear the recession has been over for almost a year and a half but you still haven’t gotten back those hours that were cut from your work schedule even after it had already ended.

5)  When you are entitled to use the prefix “Doctor” before your name, but your address is the same as your parent’s.

6)  When the party tent that once doubled as a garage for the vacant house around the block has corroded to the point where all that remains is a cracking white plastic frame surrounded by strewn scraps of discolored canvas, yet there is still no “for sale” sign out front.

7)  When the government’s best plan for creating jobs means your grandchildren will be paying for infrastructure improvements to bridges and roads designed for cars they will no longer have the fuel to power.

8)  When the whole banking system is floating on top of a vast pool of rotting mortgage related assets but is still using property values based on peak bubble prices to balance it’s books.

9)  When you just graduated last spring with $150K in student loan debt, but your best strategy for actually getting a job is to lie on the application at the seasonal Halloween costume outlet and pretend you never went to college.

10)  A jobless recovery.

Market Watch
Believe It or Not
Irwin Kellner
September 21, 2010
http://www.marketwatch.com/story/recessions-end-means-relapse-2010-09-21

Fox News
US Homes Lost to Foreclosure Up 25 Percent
September 16, 2010
http://www.foxnews.com/us/2010/09/16/homes-lost-foreclosure-percent/

The New Face of Dr. Doom

Welcome to Summer Slam 2010! The crowd is abuzz with anticipation. Tonight is the night the reigning heavyweight champion defends his belt against a mysterious new contender in a knock-down-drag-out wrestling match for the coveted title of DR. DOOM. Electric guitars scream over the din of double base drums as the audience writhes in the pulse of the heavy beat. We’ve got ringside seats. A hush spreads over the crowd as the lights dim and the announcer takes the mic.

“In the far corner wearing a black smoking jacket and purple shorts is tonight’s defending champion, world renowned NYU economist and author, Nouriel Roubini!”

The crowd cheers wildly. No one is more pessimistic than Roubini. Who would dare to enter the lair of this dragon? A spotlight hits the back of the stage above the ring, and a great door slides open revealing nothing but darkness. The music shrieks and pounds louder. Suddenly a masked stranger steps from the shadowy space into the spotlight, seemingly taller than the door itself. He approaches the ring and with one arm swings up over the top rope, landing face to face with his contender. Who ever could this masked man be?  The stranger pauses, breathing slowly, his hulking muscular form gleaming against the dark smokey backdrop. He reaches up slowly with one hand and tears the mask from his face, revealing his identity.

The glare of an enormous white smile sends a shock wave through the audience. Could it be…? Is it possible…? Before us stands none other than the king of personal power himself, motivational speaker and human potential coach Anthony Robbins! Fists pumping the air overhead, he circles to greet the whole audience with all the bravado and determination of a great warrior. Then, turning back to his opponent and adjusting the microphone on his headset, he bends and leans in to begin the match.

“Let’s get ready to rumble!”
The announcer steps away, and the fight is on.

Wow, and what a fight it turned out to be. Surely a night to remember. Roubini moving from overhead chop to stinger splash and Robbins countering with a flying clothesline. No one expected to see the stink face that night… and then both of them ending up in a double hair pull! It took twenty minutes for the ref to untangle them. We still don’t know what the outcome was. I suppose Robbins won, since he grabbed the belt and ran. The guy is unstoppable. However, the organization is still investigating whether or not he actually qualified in the first place. He’s not a licensed economist, after all.  I’m sure everything will fall into place in time. As they say, it’s not about whether you win or lose, it’s how you play the game. These guys put on a hell of a show.

Anyone following economics will be familiar with Nouriel Robini’s pessimistic views of our future trajectory. He was one of the earliest economists to predict the housing bubble and economic crisis that would ensue. His predictions were initially met with skepticism and even disdain, earning him the nickname “Dr. Doom.” His latest book, Crisis Economics: A Crash Course in the Future of Finance, tells all. You can hear some of Nouriel Roubini’s current views in his latest interview on the Charlie Rose show. A link is provided below.

The surprise appearance in the doom-n-gloom arena is that of Tony Robbins. He has made a living cultivating the power of positive thinking. Can he really be pessimistic on the economy? The answer is yes. He warns of a major retraction ahead, describing this time as the beginning of an economic winter and urging us to steer clear of exposure to the stock and housing markets. But in perfect powerful and positive form he also looks at the crisis from a larger perspective, diminishing fear and pointing to opportunities that will arise out of the disaster. He even lays out a step-by-step plan to survive and emerge profitably from the dark times. As coach to some of the world’s most successful investors and business people he might just understand a thing or two about what’s in store and how to weather it.

Nouriel Roubini interviewed on Charlie Rose
May 11, 2010
http://www.charlierose.com/view/interview/11003

Anthony Robbins Business and Finance Blog
An Important Note of Caution
August 3, 2010
http://business.tonyrobbins.com/78/an-important-note-of-caution/

A few changes to the boat

Excuse our wet floors.  We’ve just swabbed the poop deck!

• The port of call is now paperboat.studiopod.com.
• The FeedBurner feed has been changed to thepaperboat which is worth noting if you’ve previously subscribed via [RSS] reader.  Re-subscribe or update your reader.
• If you wondered why a notification for 10 older articles appeared in your email this morning, that was FeedBurner getting really excited to see more items in our feed, which now is set for 20 summaries instead of 10 complete articles.
• And finally, we’re waiting for FeedBurner (recently assumed by Google) to inherit the proper return address in the email announcements.  If you happen to Reply to those email announcements, it should be jenny at studiopod.com instead of stuiopod.com (missing ‘d’), which was a typo.

Thank you all … raise the mainsail!