Reality Check: Marijuana won’t boost economy

Reality Check: Marijuana won’t boost economy
22 comments, 01/03/2009, by , in Opinion

First and foremost, let me say that I would love to see marijuana legalized in the United States. As a user, with some growing experience, I believe it will be the best thing in the long run for this nation. Let’s continue…Now that I am down from the high – that is, the high I got from hearing that California may legalize marijuana outright and NJ’s attempt at medical marijuana – I realize or at least believe that marijuana will not be that great of a boost to the economy. In fact, I’ll go so far as to say that it’s the worst idea yet regardless of what side your on – for the economy or for legalization. In fact, I believe, if anything, it may be a boost to anti-marijuana groups in the long term when it does NOT work to boost the economy as many expect.

Problem One: Fallacy of Worth

Today, marijuana is the number one cash crop valued at about $40 Billion in the United States alone. No one argues that figure. California alone expects to reap in $1 Billion of that in tax revenues if they are successful at legalizing it. But, anyone with any business acumen, if they think about it carefully, knows that is not true. When gauging the worth of a product, we take in all factors – costs, supply vs demand, taxes, profit margin, etc.

If we discuss the costs, all one needs to remember is the very reason marijuana is such a high value cash crop is due to prohibition. The fact that it’s illegal drives up the price considerably. Take away the prohibition and the prices plummet from cultivation to trafficking to the final point of sale. No prohibition = no risk = lower operational costs.

Supply vs Demand
Also, it’s a given that growers will not only grow more marijuana but will be less likely to lose crops to DEA/police raids and theft. Factor in the long term potential that marijuana may have foreign suppliers from all over the world. All of this leads to a greater supply and much lower costs of cultivation along with the competition from many different suppliers from around world. Any kid, after a high school economics class, will tell you all about that supply vs demand chart. Granted, once prohibition is lifted, demand will increase but it will be wrong to imagine that competition alone won’t drive down the prices especially if US growers are competing with South Africa or Zimbabwe where you can get damn good landrace sativas for around $20 USD per pound.

Califorina Assemblyman Tom Ammiano proposed a fixed tax of $50 per ounce of marijuana. How feasible is this when marijuana prices hit rock bottom? You get more than an ounce of tobacco in a carton of cigarettes which you can buy online for $10-$20. Imagine paying another $50 for marijuana that not only costs considerably less but probably isn’t even rolled for you.

When NY started to increase the taxes on a pack of cigarettes, it opened up a black market. I recently gassed my car at a Hess station off the University Heights bridge and there was a sign stating $7.56 for a pack of cigarettes, “lowest price allowed by law.” You can get the same pack on the street for $4. While I believe in taxation, we need to be equitable and reasonable in taxing policy, something the United States has not done very well intelligently.

All one needs to do is look up information on the 1920 and 1930’s era of alcohol prohibition to understand the TRUE value of marijuana as a cash crop [Wiki].

When [the] repeal of Prohibition occurred in 1933, organized crime lost nearly all of its black market alcohol profits in most states (states still had the right to enforce their own laws concerning alcohol consumption), because of competition with low-priced alcohol sales at legal liquor stores.

We’ve been here before. Let’s not act “new to the game”.

Problem Two: Smoker Beware

As a person with growing experience, I know what it takes to plant, care for, and process marijuana properly. One thing we don’t do as growers is use chemicals in the drying and curing process of marijuana. While I expect that to continue in the short term, in the long term, we WILL have companies like Altria (Phililp Morris/Marlboro) who infest their tobacco products with all kinds of manmade chemicals. This is to be expected if marijuana is actually legalized.

Also, let’s mention the idea that when the regulations hit, the potency will be controlled. As a user and grower, I will NOT be purchasing marijuana when they begin this practice especially when I can grow my own more potent marjuana and it should be legal for me to do so if they’re legalizing marijuana. Or, maybe I’d just get my product direct from the grower. That’s how everyone does it now, technically.

Problem Three: What about hemp?

We’re talking about legalizing marijuana but where’s the conversation about hemp and all of its benefits. It seems as though these politicians are counting on the potheads to rescue the economy without making any mention of the use of hemp as a cash crop. I’d like to assume that if the consumption of marijuana is made legal then also hemp itself, a very low-thc version of marijuana which can be used to produce food, clothing, and a million other things. I just hope my assumption isn’t far from reality.

Problem Four: Greed is always a bad idea

Legalizing marijuana because you think it will be a boost to the economy isn’t a smart reason; it’s a greedy reason. People who are greedy don’t think carefully about the actions they take. While I do believe it will be a boost in the short term as demand will increase faster than supply, in the long term, legalized marijuana will be a huge disappointment.

Legalize marijuana because it’s the right thing to do to repair the backward drug policy that does more harm to the United States than good. Even if people believe marijuana is dangerous, prohibition is a great deal more harmful to society than the substance itself. And I think with the fact that no one has ever died from marijuana use, we can safely assume that it just might be safer than drinking too much water [Water Poisoning].

Anti-marijuana ammo
In forgetting about the safety and benefits of marijuana and ignoring anti-marijuana groups’ concern for the love of money, we may give these fringe groups all the ammo they need to recriminalize marijuana in the future. Why should it be legal if it doesn’t boost the economy? It’s a pitiful backdoor attempt at legalizing marijuana, much like the people who have the audacity to piggy back onto medical marijuana efforts. I am NOT for it. NOT THIS WAY!

One Benefit: Lower Law Enforcement Costs

The greatest benefit of legalizing marijuana is the cost savings associated with the paring down of law enforcement expenditures. I’ve written about this recently [Budget cuts? Police first!]. I’d rather the United States, or California, make the smart decision to legalize marijuana instead of thinking it will be a major boon to the economy.

Perhaps, the short term boost is all this economy requires. But, then what?

About anthonytaurus

  • @AnthonyNyc
    it’s amazing how impractical you’ve gotten. this is typical of people who don’t care about HOW marijuana is legalized as long as it’s legalized. Then to sit there and say that it sounds like I believe marijuana will get more potent is the most ridiculous and misguided statement on my potential beliefs I’ve ever heard. That’s not even a subject I’ve bothered to touch on my entire blog!

    You’re basically making it up.

    It’s sad because you’ve developed a complete scenario to make yourself believe that you do know and $50 an ounce won’t be a problem. What are YOU basing YOUR information on?

    You say I have no evidence to back up my hypothesis but then what is alcohol prohibition but pure evidence. Many people have failed to learn that lesson on both sides which is why I stand in the middle of this issue. Have you looked into alcohol prohibition pricing? How it changed dramatically after legalization? Do you know how, or at what rate, alcohol is taxed today? How about cigarette taxes?

    Let me tell you, the reason legalization of alcohol worked for America is because of that quote: “…because of competition with low-priced alcohol sales at legal liquor stores.”

    The issue is competition. If the “criminals” can beat legal prices, and so far it seems they will, then legalization fails. If California doesn’t reap in the billion dollar benefit, then legalization fails. This blind greed on both sides – greed for money politicians and greed for weed advocates – is what will cause legalization to fail.

    $50/ounce tax is precisely why government would mess up legalization efforts. The $3.56/pack difference is directly responsible for driving the black market of cigs in NYC and that’s evidence by itself. $50/ounce of marijuana is not a reasonable or a fair number. Look up taxes imposed on alcohol and cigarettes around the nation. We’re looking at no more than $0.20 per gallon of beer to $5 per gallon of hard alcohol. Cigarette taxes are as low as $0.07 per pack to just over $2.

    If you believe that $50/ounce is a smart number, then you’re being dishonest with yourself and everyone you speak to about this issue. The reason I take this SOBERING approach is so that people will be more honest in the debate. If politicians and potheads think California will reap a billion in tax revenues per year, they are sadly mistaken. Perhaps in the first year, it’s feasible. But, once the dust settles, California will NOT see that amount of tax revenue from marijuana.

    I can see maybe $250 million or less, which is still fantastic, but that’s a REAL number and more along the lines of what advocates and politicians should expect. But, as I’ve said, people are blinded by greed on both sides. I refuse to be so blind or greedy.

  • Anthony NYC

    The 3.56/pack is a DAILY expense for cig smokers which equates to roughtly $110 per month at a pack a day, $220 at 2 packs a day and this is to keep a person in supply of something that they are physically addicted to. MJ is NOT physically addicting whatsoever.

    Like anonymous said, the $50 per ounce would be an annual or bi-annual expense on average and a monthly expense at most for daily pot users (those of which who are too lazy to grow their own)and so is less than half of what it took to create a cig black market in NYC.

    Also, if the current price of $400/ounce drops to $40 and then a $50 tax pushes it to near $100, who in their right, or even stoned mind would complain about a 75% decrease in price??!? I think I hear demand going up, up, up! (I predict that $400 will drop to $200 and so the retail cost would end up around $250-300 so still a significant savings).

    Do you really think you wont be able to hit up a local boutique pot shop for some of the worlds best strains as opposed to the “bud light” equivalent at stop n shop if its legal? Wonderful landrace sativas from South Africa, Thailand, Burma, Nepal etc. grow just as well in a properly set up basement as in their native land (as long as you have a tall ceiling for em!). As a former grower you should know this. A manufacturing tax of $5500 is proposed for growers along with a $2500 annual fee in CA.

    It sounds like you really believe the crap about pot becoming much more potent over the past 20 years and that this potentcy is bad for your health(?) These myths couldnt be farther from the truth. Do you think regulators, after LEGALIZING IT, will still fall back to this fallacy? It goes against the entire reason for legalizing in the first place.

    Is alchohol’s potentcy regulated? Only beer in Utah and Idaho and you can still get hard liquor the same proof as anywhere and alchohol can kill you!

    Every blog post i read on this issue that isnt completely for legalization/taxation has the same argument: Legalization is a good thing but the government will screw it up. You have absolutely no evidence to back this hyPOThesis up besides your own fear and loathing for the government. Up until a couple months ago I would have agreed with your sentiment but with Obama in place its a whole new bowlgame. 🙂

  • true.. it will still be a money maker but i also believe it will be a bigger disappointment than than anything because of the high expectations. my real problem is that this nation, as a whole, still is not viewing marijuana in a fair light regardless of it being favorable or not, it’s very dishonest. all i wish to see happen is some real honesty in the debate and not people desperate for a dollar.

    and you have a point about the $50 but then again you have people who risk dealing with the black market for $3.56 on a pack of cigarettes every single day. i think a lot of people would risk dealing with the black market for $50. look at us now. we risk dealing with the black market and massive police aggression now. i don’t see why we should stop now.