Could Legally Getting High Reduce the Deficit?

The US is closer to ending prohibition on marijuana than at any time since the Marihuana (sic)Tax Act of 1937, which first made possessing or selling cannabis illegal in the country.

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Unlikely bedfellowsRep. Ron Paul (R-TX) and Barney Frank (D-MA) plan to introduce a bill on Thursday that would end the federal prohibition on marijuana.

Theirs are not the only voices calling for marijuana to be legalized.

U.N. Secretary-General Kofi Annan and past presidents of Mexico, Brazil and Colombia have also called for a debate on decriminalisation.

“The U.S. needs to open a debate,” former Colombian President Cesar Gaviria, told media at a Global Commission on Drug Policy event earlier this month. “When you have 40 years of a policy that is not bringing results, you have to ask if it's time to change it.”

Some economists believe that there would be substantial economic benefits to legalizing drugs such as cocaine and heroin.

“There is a strong case for legalizing drugs,” Jeffrey Miron, senior lecturer in economics at Harvard University and a senior fellow at the Cato Institute, told CNBC.com. 

“This is based on economic reasoning, but it is broader than just ‘economic effects’,” he said.

Miron estimates that the US would be around $88 billion a year better off if drugs were legalized, with $41.3 billion saved on enforcement of drug-related laws and $46.7 billion garnered in tax revenues.

“The case for legalization is that prohibition harms drug users by forcing them to pay higher prices, to buy from criminals, and to risk incarceration,” he continued.

One of the arguments made by those who back legalization of drugs is that the war on drugs is rapidly becoming unwinnable.

“Prohibition increases violence, crime, and corruption by creating a black market,” said Miron.

“Prohibition inhibits quality control, which would ordinarily allow consumers to know what purity they are buying.   Prohibition is bad for civil liberties.  Prohibition disrupts other countries.  Prohibition inhibits research on medical uses of drugs.”

There now seem to be more influential decision makers willing to admit to have taken drugs than there were a decade ago.

The current President of the United States has admitted taking cocaine, while less than 20 years ago Bill Clinton had to maintain that he did not inhale marijuana to smooth his path to the White House.

“The level of drug use has reached stratospheric highs since prohibition was introduced, as the clampdown in the 1960s coincided with the rise of the drugs subculture,” Danny Kushlick, head of external affairs at Transform Drug Policy Foundation and a former drug counsellor, told CNBC.com.

“The recession means there’s less money to spend on the war on drugs. There are also countries which are in trouble because of the drugs trade, such as Mexico, and several in West Africa, which is replacing the Caribbean as a trade route.”

While Obama called the war on drugs “an utter failure” in 2004, since taking office, his administration has increased its budget. In its 2012 budget, the White House requested $1.7 billion for drug prevention programs, up by 7.9 percent from the previous year. This would bring the total 2012 national drug control budget to $26.2 billion.

“Legalization would also reduce criminal justice expenditure and raise tax revenue,” said Miron. That is certainly a plus.”

"We cannot have one recipe. It’s not so easy to say, 'Stop the war on drugs and let’s legalize'; it’s more complicated than that," former Brazilian President Fernando Henrique Cardoso, chairman of the Global Commission on Drug Policy, told media earlier this month. "Between prohibition and legalization there is an enormous variety of solutions in between."

So, if drugs were legalized, would an industry the size of the tobacco industry or the alcoholic drinks industry spring up?

Kushlick believes that if drugs are legalized, tough regulations would be needed on their sale.

“My guess is that if drugs were ever legalized, they would be controlled to some degree,” said Miron. “Maybe like alcohol, maybe more.  But my own judgment is that less regulation would probably be better than more regulation. That is, treat legalized drugs like coffee, not like alcohol.”