Endorsement: NO on Prop 19

Yup...you read that title correctly. I am opposed to Prop 19. And, here's why:

You may have read all the reasons why legalization of Marijuana in CA will help the economy, undercut the drug cartels and possibly stem some of the violence that has been the end-result of the illegal marijuana trade, south of the border. That is the desired result of Prop 19. But, once reality sets in, legalization of marijuana won't be so desirable:

Legalization would help revive the CA Economy: Some reports have said that legalization of marijuana would pump as much as $2 billion into the CA economy in the form of taxes ($50/ounce proposed). I don't dispute the fact that the prop will funnel some money to the economy. In fact, we must always find innovative ways to get us out the deficit hell we are in. But, the numbers may be a little too optimistic. The uncertainty comes from how the prop is written (which is something I will harp on throughout this piece). If we were to have UNIFORM legalization, then the numbers proposed would be relatively accurate. But, the prop gives freedom to any county or city to opt out. Any opting out would seriously undercut the tax money that would be funneled back into the state. Just look at the polls - right now support is about 50/50, which means that those who are really against it will most likely push their locality to opt out.

Here is my political answer: legalization is sidestepping the issue (much like I will) of proper governance. CA is ungovernable, and the first thing we should be doing is eliminating the 2/3 majority to pass a budget and Pension reform. Keep the 2/3 majority to pass a tax, as that is a CA sacred cow.

It would undercut a source of income for the Mexican cartels and (by association) stem violence south of the border - Not so much, says (credible) RAND Corps. Their report on methods to stem Mexican drug violence says that the percentage of cartel marijuana consumed in the US (60%) is way overblown. The actual number ranges between 15-26%. If CA represents 1/7 of the marijuana consumption in the United States, according to RAND, the prop would only cut 2-4% of the cartel's marijuana revenue. If the known revenues of marijuana smuggling from Mexico to the US is around $2 billion (conservative estimate), then it would only cut their take by $40-80 million. For drug cartels, who practically control parts of Mexico, that is a drop in the ocean in regards to revenue (think of the OTHER, more lucrative drugs they smuggle into the US).

CA is also a hub through which Mexican marijuana (and other drugs) can be distributed throughout the United States (as in AZ, NV, TX, NM, etc). So, the only way that this prop will stem the distribution of cartel marijuana would be if CA marijuana out-competed Mexican marijuana on all levels (cost, potency, access, etc.). Adding to the uncertainty would be problems about taxing the marijuana before it heads to other states and how state and federal officials would react to such a dispersion (what some might call "positive leakage?").

As the report notes, the assertion that the prop would contribute to a stemming of violence south of the border is highly speculative and most likely false. They assert that it will probably lead to more violence over the perceived loss in revenue, regardless of how small it is. There are also problems of turf warfare between cartels that will occur regardless of whether or not pot is legalized. The ultimate uncertainty is whether or not CA marijuana will outperform and push Mexican cartel marijuana out of the markets in other states.

Structural Flaws in Prop 19 - While its intentions are certainly noble, Prop 19 has a major structural flaw that will create regulatory uncertainty. The law allows for every county/city (I call "locality") to decide whether or not it wants to legalize (and tax) marijuana or make it outright illegal. This allows for each city/county to create its own set of regulatory procedures, leading to enforcement uncertainty. It also leads to aforementioned loss in tax revenue if a locality decides to opt out.

Leakage and Federal Prosecution - If Prop 19 passes, I am almost certain there will be a higher demand for CA legal weed. But, what happens when this legal weed begins to travel from one state to another? Once that happens, and someone is caught, it becomes a federal matter because of the Fed's power over interstate commerce and the violation of federal drug enforcement laws. Marijuana is still a federally designated class 1 narcotic (DEA), as much as we would like to see a reassignment. While the government will probably not actively enforce marijuana laws, if a state decides to prosecute someone who comes from CA with legal weed then it is up to the state to enforce under their laws or federal laws. And, what is going to stop the US Justice Dept. from filing suit and injunction to stop Prop 19 because of its conflict with federal law? It is their duty to file against any law that comes into conflict with a federal statute. That's why they are filing against an injunction on "don't ask don't tell" and state laws that go against DOMA (Defense of Marriage Act). That's why they sued the state of Arizona for passing an immigration law when it is clearly the Fed's duty.

Wake up and smell the Profit loss - If you are a good dealer, you will understand clearly that legalization will take a huge chunk out of your bottom line. The environment for dealers and sellers (legal or otherwise) is favorable towards high profit. There is a lack of enforcement, the president has diverted resources from CA and the price per ounce is high enough to attract business and make a killing (no pun intended) doing it. What will stop these dealers from trying to return to the good old days of high profit after Prop 19 passes? Nothing. The market for weed is primarily underground and informal. If Prop 19 passes, that market might cause an abatement in the sliding price of weed. While underground markets for goods are usually a drop in the ocean in regards to the formal markets, the one for weed in CA will be a big player. If you think otherwise, you are being naive.

Solution? One just passed a couple days ago. The Governator signed a law, going into effect on 01/01/11, that will reduce the punishment for possession of an ounce or less to an infraction. That is a fine comparable to a speeding ticket, with no mark on your record. Coupled with lax enforcement, this is practically a legalization in-and-of-itself.

Conclusion I support the legalization of marijuana. It is the least addictive controlled substance and it is an innovative way to raise money for the state (and snack food companies). But, Prop 19 is badly written, will create regulatory and enforcement uncertainty and will most likely lead to intervention by the Federal government. While this is a healthy step and represents a near mandate for legalization, it must be rewritten to be uniform, or it will fail as a policy.