The face of the river, in time, became a wonderful book . . . which told its mind to me without reserve, delivering its most cherished secrets as clearly as if it had uttered them with a voice. -- Mark Twain

Legalize to Subsidize

Posted: September 29th, 2010 | Author: | Filed under: Uncategorized | 1 Comment »

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.
Marijuana Legalization Pros and Cons

Bureau of Labor Statistics
Alternative Measures of Labor Underutilization for States
Q2 2009 through Q1 2010

Conservatives on Marijuana Legalization (video)

Drug Policy Alliance
California Lawmaker Sees Tax Revenue in $14 Billion Marijuana Crop
Tommy McDonald and Stephen Gutwillig
February 23, 2009

Hempcar Transamerica
Petrol vs. Hemp

Huffington Post
Time for California to End the Unwinnable Marijuana War
Kevin Zeese
September 11, 2010

One Comment on “Legalize to Subsidize”

  1. 1 Randall said at 12:52 pm on October 4th, 2010:

    Good stuff, Jenny! Sometimes it’s hard to find the voice of pragmatism amidst all the shrieking and hand-waving on both sides of the subject of recreational THC. I like your blog.

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