Thursday, May 9, 2013

Six Months -- and Still Waiting


Six Months – and Still Waiting


The votes to legalize marijuana in Colorado and Washington are now six months old – and everyone is still waiting to see what they mean.

How will the federal government respond?  What will happen in other states?  How will legal marijuana evolve in these states?  What will congress do?  Will Mexico feel the effects?  These are just a few of the questions needing answers.

The federal government has been remarkably silent.  The Attorney General has told congress that he will make a policy statement, but has not done so yet.  The President had a meeting with the governor of Washington, but both have been close-mouthed about it.  The President has said that the government has more important fish to fry than prosecuting possessors of small amounts.  ONDCP (whose budget has shrunk drastically over the last few years) issued it annual strategy statement, saying that the emphasis would be on treatment and rehabilitation, not enforcement.

The feds are also silent about enforcement as well as on policy.  Budgetary Sequestration is imposing non-discretionary five per cent spending cuts across the entire government.  What will happen to enforcement efforts if DEA, ICS, DOJ, and the federal courts all are forced to reduce their spending by five per cent?

State action is moving forward.  At least three, probably four, states are likely to have legalization propositions on their 2014 ballots: California, Oregon, and Alaska are almost definite; and the Maine legislature will probably vote to place the issue on its ballot as well.  Legislatures in the old Midwest – Ohio, Indiana, and Illinois seem to be seriously considering medical marijuana.  Momentum is building quickly at the state level.

Action in congress is unlikely in the near future. But even there, the frozen War on Drugs mentality seems to be thawing.  More and more members are willing to at least discuss the possibility of reform.  The most remarkable event is that no congressional voices have been raised in outrage against state reform efforts; no demands for stricter enforcement have been heard.  At the least, congressional attitudes seem to be that they just hope the issue will go away.  At best, several bills have been introduced proposing several mild reform messages.  One more election may make the difference.

These moves in the states will apply pressure on the Mexican Cartels that now supply a significant part of the American marijuana supply.  These effects will spring from the downward pressures that legalization will impose on prices and from the immunity of American growers from border controls.  As medical marijuana has developed into a quasi-legal market, both of these effects have been demonstrated.

Marijuana, as an easily grown, minimally processed annual plant, should cost no more than broccoli or hot-house tomatoes ($0.99/ pound at a recent supermarket trip).  High quality illegal marijuana a few years ago brought $400/ounce, well over one hundred times what its competitive price should be.  But already in California the price has dropped to around one-quarter of what it was a few years ago.  Even with federal law still looming, state-legal marijuana of reasonable quality will probably drop to under $25 an ounce.  Mexican growers cannot compete at this price.

A grower in Washington or Colorado does not have to pass through national border security when making deliveries to Nebraska or New York.  The shipper’s risk of either confiscation or arrest will be dramatically reduced, cutting the cost of shipment by a factor of at least ten or twenty.

Cartel income will certainly decrease, and with it, the capability to buy guns and gangsters to use them and to bribe officials.  Not only will their capabilities shrink, but, since they will be unable to meet the competition, so will their incentives to remain in the business.

The last six months have been quiet, but it is the quiet before the storm.  The ball may appear to be at rest, but it has received a small nudge – just enough to start it rolling down the hill.  It will pick up speed as it goes.  We’re in for an accelerating and thrilling ride.



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