Media Talk Up Pot Legalization as Possible Answer to Bad Economy

April 22nd, 2009 8:07 PM

The economy is already in rough shape, but some think we should let it go to pot - literally. Pro-legalization advocacy groups are promoting the possibility that legalizing marijuana could provide some economic relief, and the media has eagerly explored the idea.

On April 20, the National Organization for the Reform of Marijuana Laws (NORML) aired TV ads calling for marijuana legalization. They ran on CNN, Fox News Channel and were covered by CBS News.

"In the spot, Americans say of the drug, ‘you can tax it, you can regulate it, apply age restrictions...create millions of new jobs ... save our economy,'" Brian Montopoli wrote for on April 20.

With chatter that this could be a campaign issue in 2010, the new Obama Administration's relaxed policies toward the drug and some people's desperate, try-anything approach to solving the government spending deficits and economic woes, the idea of marijuana legalization is gaining traction with the media.

Talking Point: Legalization Would Help the Economy

One of the arguments pro-legalization advocates like to trot out is that if it were lawful to possess and consume marijuana, it would be a shot in the arm for the ailing American economy, as the NORML ad campaign suggested.

The direct benefit on the economy, as Leigh Gallagher of Fortune magazine claimed, would be the industries and jobs legalization would spur not just from the cultivation of the plant itself, but the "ancillary business" including accessories and paraphernalia.

But advocates usually tout the indirect benefits, which would be the decrease in law enforcement costs and the potential windfall in government revenue.

"The DEA spent $10 billion last year, $10 billion fighting marijuana," CNBC's Trish Regan said in an April 20 "Power Lunch" report. "Not every drug - just marijuana. Now keep in mind, California actually collected $11 million, small in comparison, but this is one state, in tax revenue, all from medicinal marijuana. So it shows you there is some money that can be made on the government's behalf in the way of taxes on this product."

Comparisons have also been drawn to ending Prohibition on alcohol during the 1930s - a time when the economy was undergoing the Great Depression. Rob Kampia of the Marijuana Policy Project explained to CNBC that legalizing marijuana would serve the same purpose of generating tax revenue as ending prohibition did.

"It's the same situation - 1929," Kampia said. "The stock market crashed and it was four years later that the country repealed alcohol prohibition. It was largely, but not entirely for economic reasons. There's a large industry that is not being taxed."

But according to a report by National Public Radio's John Burnett on the April 20 broadcast of "All Things Considered," the theory that legalizing this vice would bring in big bucks for the government is a myth.

"A lot of people think this taxation of marijuana will create a windfall for government coffers," Burnett said. "[J]effrey Miron is a Harvard economist who has studied and written about the economics of the marijuana market. Miron figures state and federal taxes on cannabis sales adds up to $6.7 billion annually. And he calculates the savings from not having to enforce state and federal marijuana laws, in arrests, prosecution and incarceration, at $12.9 billion a year. Excluding additional expenses, such as the public health cost of marijuana, or the cost of administering the new law, Miron figures that legal pot creates almost a $20 billion bonus."

With a federal government that is on track to be running $1-trillion deficits, that's just a drop in the bucket, and doesn't necessarily justify legalization, as advocates and some in the media suggested.

"But compared to the size of most federal government agencies, compared to the tax revenue from things like alcohol and tobacco, and certainly compared to the size of deficits that we have, this is just not a major issue, it is not a panacea, it is not curing any of our significant ills," Miron said. "There may be good reasons to do it, but the budgetary part is not a crucial reason to do it." 

Black Market Economy vs. Government-Regulated Market Economy

One thing that is often overlooked in the recent string of media coverage about marijuana legalization is what would happen to the market if it were a legal drug. The revenue-generating potential would be greatly reduced if it were legal to be grown anywhere.

Segments on Fox News April 19 "Geraldo at Large" and CNN's April 16 "American Morning" both trotted out proponents of legalization suggesting a regulated market would be better than a black market.

"We're talking about America's number one cash crop," marijuana advocate Rob Van Dam said on the April 19 "Geraldo at Large." "It's completely unregulated and untaxed. Let's take that money out of the streets. We're putting it into the black market that prohibition created and let's put that in the right hands, where we can use it with our government, by taxing and regulating it."

As CNBC's Regan confirmed in her report, marijuana is indeed the country's largest cash crop. However, legalizing the crop would cause prices to plummet, she explained to viewers.

"The price is very important," Regan said. "Because, think about this guys - it really wouldn't be this expensive if it was legal."

"You'd get a glut," "Power Lunch" co-host Michele Caruso Cabrera added.

And legal farms, like one highlighted by NPR's April 20 "All Things Considered," reflect how once government gets involved, the business incentive diminishes. Carol Ann Sayle, the wife of a legal organic marijuana farmer, explained her disappointment in the business of marijuana cultivation.

"The retailer takes a big hit off the bong, so to speak, and then the government comes in with their taxes," Sayle said. "So what's left for the farmer? After all that work and ... trying to ease people's fears that we're going to be giving it to children. So, what's left for the farmer? Stems and seeds is about all that's left."

The 4/20 (April 20, 2009) Spike in Coverage and the New President

The number 420 has had a special significance for marijuana connoisseurs. It's used on the online bulletin board and other places on the Web as code for marijuana-friendly. However, the reason why that has certain significance is not clear and has been subject to debate. Some say it is associated with the time of day the drug is consumed and some say it is the day of the year it is planted.

But 4/20, or April 20 as a date of importance hasn't gone unrecognized by the media.  The New York Times and The Washington Post both published article recognizing the date and the pro-marijuana events surround it. Fox's controversial animated series the "Family Guy" made it the subject of its April 19 episode, in which the dog named Brian is arrested for possession of marijuana, and then goes on a mission to legalize the drug.

This increase in notoriety has made the subject marijuana and its legality a topic of news coverage, as has the new administration's position on going after certain vendors of medicinal marijuana, as CNBC Washington correspondent John Harwood explained on the March 20 "Power Lunch."

"Attorney General Eric Holder told reporters this week Team Obama will take a different approach that takes note of the policies of states," Harwood said. "Quote, ‘Consistent with what the president said when he was campaigning, our focus will be on people and organizations that are growing and cultivating substantial amounts of marijuana, and doing so in a away that's inconsistent with federal law and state law.'"

According Harwood, the marijuana debate isn't going away anytime soon and, "Don't be surprised if the marijuana issue surfaces as the 2010 elections get closer," he said.

A Darker Black Market, Unrecognized Social Costs

Societal costs are often disregarded when the issued is raised - the health tolls, addiction and treatment costs and the risky behavior the drug encourages. They are often not included in the cost-benefit analysis when the legalization debate is raise.

On the New York Times Freakonomics blog on Oct. 30, 2007, Dr. Robert L. DuPont, president of the Institute for Behavior and Health and former director of the National Institute on Drug Abuse, likened legalizing marijuana to legalizing speeding. . According to DuPont, you can't ignore the costs of having the drug readily available to consumers:

Legalization of marijuana would solve the marijuana problem the way legalizing speeding would solve the speeding problem: it would remove the legal inhibition of a dangerous behavior, and thereby encourage the behavior.

Criticism of current marijuana policy typically starts by limiting the calculation of marijuana's societal costs to the costs of arresting and imprisoning marijuana users. This way of calculating the costs minimizes those produced by use of the drug itself (i.e., the costs of treatment, drugged driving crashes, and lost productivity). When the costs related to the use of marijuana are minimized, the legalization of marijuana gives the appearance of reducing marijuana-related social costs in the same way that counting only the costs of enforcing the speeding laws and ignoring the high social costs of speeding would make legalizing speeding look like a smart idea.

Asa Hutchinson, a former director of the DEA and an outspoken critic of legalization, explained there would be unintended consequences if the marijuana were legal. In an April 16 CNN debate with Neil Franklin, a former member of the Baltimore Police Department and now a spokesman for the group Law Enforcement Against Prohibition (LEAP), Hutchinson explained the criminal element would focus on more dangerous drugs to sustain the black market.

"But if you legalize marijuana, as previously Mr. [Bob] Stutman [former DEA agent] pointed out, the cartels are going to engage in cocaine, heroin, methamphetamine. There's a whole host of illegal drugs and I don't know very many people, if any, want to legalize all of those very, very harmful drugs."

And as former Oklahoma Republican Congressman Ernest Istook, a Fellow at The Heritage Foundation explained on the April 19 "Geraldo at Large," the "social costs" are rarely accounted for when reporting on the issue. Instead - the focus is emphasized on what it could do for government.

"You've always had people who've said, ‘Oh legalize and tax marijuana,'" Istook said. "They have all these wonderful promises of the finances. It's the same thing we see with lotteries. It's the same thing we've seen with legalizing other things. And they don't count the social costs. They say, ‘Well, government can make money.' How about the families that are damaged by legalizing another way for people to get high?"