Cannabis Legalization Is Key To Economic Recovery
Our nation is in the midst of the greatest crisis in generations, with the Covid-19 pandemic impacting Americans’ physical and emotional well-being, while plummeting the nation’s economy into the worst economic downturn in our lifetimes.
As the country begins what is likely to be a slow climb out of economic morass, federal, state, and local governments will be looking for new sources of revenue to replenish dwindling budgets and provide jobs to millions of Americans who find themselves out of work.
The situation is reminiscent of what the country faced during the Great Depression nearly 100 years ago. At that time, one of the government's solutions was to end its 13-year experiment with alcohol prohibition.
Today, the very same factors that caused the government to pull the plug on alcohol prohibition should result in the final nail in the coffin of the country’s much longer standing but equally unjust policy of marijuana prohibition.
Already, states across the country have been turning to cannabis businesses as a source of much needed tax revenue and jobs for their citizens.
Nearly every state with legal cannabis has deemed marijuana businesses to be essential during Covid-19-fueled shelter-in-place orders. Massachusetts was the only state with a functional adult-use cannabis market that did not deem it essential during the shutdown, and just this week Governor Charlie Baker reversed course, allowing cannabis businesses to reopen on May 25 for curbside sales.
States have been bucking the federal government on marijuana since Colorado and Washington voters made their states the first to legalize cannabis for adults in 2012, with 11 states now allowing adults over 21 to purchase, possess and consume cannabis legally.
This mirrors a trend from the days of alcohol prohibition, where cities like New York openly flouted prohibition laws and refused to enforce criminal penalties against the myriad of speakeasies that arose to quench New Yorkers’ thirst for booze.
Without an equivalent of the 18th Amendment to the Constitution for cannabis, states that oppose federal prohibition are able to set up regulatory structures to license cannabis businesses, removing the need for unregulated speakeasies of the alcohol prohibition era.
It’s no surprise that states across the country have looked to cannabis to help their ailing economies. The cannabis industry currently employs nearly 250,000 full time jobs, more than four times the number of coal industry workers in the country, and the same number of jobs estimated to have been lost by the ratification of the 18th Amendment that outlawed alcohol production and sales. And these numbers only scratch the surface for an industry that remains illegal federally and in nearly 80% of the states.
While alcohol prohibition was enacted during the “Roaring 20’s,” a time of economic prosperity and largess, by the time the Great Depression hit, the mood of the country had shifted substantially in favor of repealing prohibition, fueled by arguments from anti-prohibition advocates that legalizing alcohol would provide much needed tax revenue and jobs to an ailing economy.
It is estimated that the federal government alone forfeited $11 billion in alcohol related taxes during prohibition years, a number the government could hardly afford during a period of runaway unemployment and economic pain.
Today, unemployment claims have reached record highs once again, with 36 million Americans having filed for unemployment benefits during the past two months of the Covid-19 crisis, a spike unmatched at any time since the country began tracking such figures shortly after WWII.
At a time when Americans need jobs in record numbers and governments need new sources of tax revenue, continuing the country’s 70+ year experiment of cannabis prohibition, when two thirds of Americans support its repeal, is simply economically reckless.
According to a recent study by New Frontier Data, national legalization in the United States could result in $128.8 billion in tax revenue, and an estimated 1.6 million new jobs. Indeed, the numbers from states with legal cannabis during this health and economic crisis back up these claims. Even in a time of economic downturn unprecedented since the Great Depression, cannabis sales remain robust in states where they are legal.
April cannabis sales in Illinois, the first full month of sales under the state’s stay-at-home order, eclipsed $37 million, making it the second highest month of sales since the state program began in January. In Oregon cannabis consumers bought $89 million in legal cannabis, a 45% increase over the same month in 2019. States across the country have reported similar sales increases.
As the country emerged from alcohol prohibition, these kinds of increases in tax revenue and employment did in fact come to pass. While repealing prohibition alone did not end the Great Depression, it provided a substantial portion of the money needed for critical New Deal projects that put millions of Americans to work during the bleakest of economic times.
Alcohol and other excise taxes brought in $1.35 billion to the federal government in 1934, the first full year following the end of prohibition, compared to just $420 million from income taxes. As states continue to deal with the budget fall out of the current economic crisis, many will undoubtedly look to legalization, and the resulting boom in cannabis taxes, as an obvious solution to replenish depleted state coffers.
Alcohol prohibition also had an unintended consequence that has become the stuff of American storytelling legend: the rise of organized crime and the gangster era typified by brutality of criminals like Al Capone and Lucky Luciano who took over control of the alcohol trade in the absence of regulated and licensed businesses.
After all, prohibiting alcohol never stopped Americans from seeking it out and consuming it, much like millions of Americans today enjoy cannabis even in states where it remains illegal to do so.
Gang violence from the illegal alcohol trade overwhelmed cities across the country, culminating in the St. Valentine’s Day Massacre of 1929, where seven people were gunned down by several of Al Capone’s men dressed as police officers, in his attempt to consolidate control of the city’s alcohol trade.
Over the decades of cannabis prohibition, control of the marijuana trade has led to a rise in gang violence in the United States, as well as countless civilian deaths and terror south of the border in the decades long Mexican drug wars.
It is estimated that 30% of Mexican drug cartel revenue is derived from illicit cannabis trafficking, something that would largely disappear with legalization, much like ending alcohol prohibition dried up a substantial portion of these gangster’s profits.
Like today’s enforcement of marijuana prohibition, alcohol prohibition famously clogged our criminal justice system with alcohol related cases, many for relatively minor offenses. The justice system was so overwhelmed that a large backlog of cases led to the emergence of the “plea bargain,” where defendants would plead guilty to a lesser offense in order for the courts to clear throngs of cases in one fell swoop.
Today, this practice is commonplace in our criminal justice system, driven largely by non-violent drug offenses and more than 660,000 marijuana arrests per year. It has gotten so pervasive that today only 3% of federal drug cases actually go to trial, with the rest being settled through plea bargains rather than a real determination of guilt or innocence.
The court time and resources, not to mention the time and money spent by police departments enforcing these laws, could be far better spent on violent crimes with real victims, and could help reverse some of the lack of trust in law enforcement driven in part by people who resent being branded criminals for engaging in behavior that never should have been criminalized in the first place.
Much like the days of alcohol prohibition, the continued criminalization of marijuana in the United States is sending much of the economic benefits of cannabis business north of the border. With alcohol production legal in Canada during America’s prohibition era, Canadian companies became the largest alcohol smugglers into the United States.
In fact, Seagram's, still one of the largest alcohol brands in the world, came to prominence thanks to the Bronfman family’s smuggling operation during prohibition, before going fully legit in the United States after repeal.
While modern Canadian cannabis companies do not dare risk their valuable licenses sending cannabis products across the border, they have enjoyed outsized growth and influence in the cannabis market due to Canada having legalized federally in 2018.
Canadian public cannabis companies like Canopy Growth, Tilray, and Aurora Cannabis enjoy valuations upwards of ten times as high as their American multi-state counterparts, despite operating in a country with a population smaller than California alone.
Much like Canadian companies became some of the dominant players in the American alcohol industry after prohibition repeal, these companies are already using their large market caps to position themselves to enter the U.S. cannabis market once cannabis prohibition ends. Canopy Growth, the largest cannabis company in the world by market cap, already has a deal in place to buy American multi-state giant Acreage Holdings for $3.4 billion once it is legal in the U.S.
Despite the multitude of reasons for states and the federal government to end prohibition, the question remains as to whether the political will is there for governments to take such a bold and forward-thinking action. Similar questions existed during the time of alcohol prohibition, given that no constitutional amendment had ever been repealed to that point. According to Daniel Okrent, author of “Last Call: The Rise and Fall of Prohibition,” even after the societal ills of prohibition started to become apparent to many Americans, “The very idea of repeal had been beyond the imagination of even the most ardent ‘wet.’”
Even by 1930, three years before the 21st Amendment ended alcohol prohibition at a time when the country was already in the grips of the Great Depression, ardent prohibitionist Senator Morris Sheppard declared “There is as much chance of repealing [Prohibition] as there is for a hummingbird to fly to the planet Mars with the Washington Monument tied to its tail.”
Similarly, marijuana legalization has often been seen as a political third rail in American politics. Conventional political wisdom has kept even supporters of legalization from speaking out in fear of being branded as “soft on crime.”
But American attitudes towards legalization have shifted dramatically over the past decade, with Gallup finding support for legalization having risen 30% between 2005 and 2018, with 66% of Americans currently in favor of legal cannabis.
When legalization has been put before voters through state ballot initiatives, it has passed 10 out of 11 times, demonstrating widespread support among the American public.
Politicians have started to take notice, with more prominent elected officials now openly supporting the cause of ending cannabis prohibition. Governors of major states have ardently defended their legalization program, including designating cannabis businesses as essential during the current pandemic.
Governors in Illinois, New Jersey, and New York have successfully campaigned on promises of legalization and have lobbied their state legislatures to send them bills to sign that would end prohibition in their states.
Heading into the 1932 election, opposing prohibition had previously been seen as a losing political issue. In 1928, anti-prohibitionist Democrat Al Smith had been soundly defeated by Herbert Hoover, who had called alcohol prohibition, “a great social and economic experiment, noble in motive and far-reaching in purpose.”
Hoover’s 1932 opponent, New York Governor Franklin Delano Roosevelt, had previously waffled on the issue of alcohol prohibition.
But after becoming the nominee in 1932 Roosevelt adopted an anti-prohibition stance and the Democratic Party included ending alcohol prohibition in its party platform as a means of providing economic stimulus to an ailing economy.
Heading into this November’s presidential election, the Democrats again find themselves with a party nominee in Joe Biden who has historically not been a supporter of ending marijuana prohibition. In fact, for most of his career as a Senator, Biden was one of the most ardent drug war supporters on the Democratic side of the aisle, much of it spent during the “just say no” and “tough on crime” eras of the 1980’s and 1990’s.
But as the times have changed, Joe Biden has softened his position on this issue and now calls for national decriminalization and expungement of criminal records for those with cannabis possession convictions. While this still puts him to the right of the mainstream within his party, it is a marked shift in the right direction for someone who was a fervent supporter of tough marijuana laws for most of his career.
While President Trump has largely continued the Obama era policy of allowing states to implement their own cannabis policies, he remains publicly opposed to legalization and has yet to take note of the political advantage he could reap from being the first sitting president to embrace reform.
This opens up the possibility of Joe Biden earning votes from the growing number of Americans who support legalization, especially the young progressive voters that he has struggled most with at the polls.
Facing the worst economic downturn since the Great Depression, Biden should look to his Depression era counterpart, FDR, and adopt an anti-prohibition position as part of a platform to rebuild America’s economy in the wake of the Covid-19 pandemic and resulting recession.
Doing so could not only help him capture the presidency that he has sought for over three decades, but could become an important pillar in an economic recovery agenda that provides much needed jobs for ailing Americans and tax revenue for ailing federal and state budgets.
The lessons from alcohol prohibition and the role of its repeal in helping the country dig out of the Great Depression are very much applicable to the position we find ourselves in today. If the nation is going to implement a comprehensive strategy to recover from the pandemic induced economic downturn, ending marijuana prohibition should be an important and prominent part of our country’s political agenda.