Lost Taxes and Other Costs of Marijuana Lawsby Jon Gettman 1. The Federal Government's Report on the Economic Costs of Drug Abuse as It Concerns Marijuana Use

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The Office of National Drug Control Policy (ONDCP) periodically updates and publishes a comprehensive report on “The Economic Costs of Drug Abuse.” The most recent version is based on the period of 1992 to 2002(4). Few of the costs detailed in this report concern marijuana use. The total annual cost of drug abuse presented in the report is an impressive $180.8 billion. These costs are divided into three categories – productivity, health, and other costs.

Over two-thirds (71.3%) of the costs of drug abuse are attributed to lost productivity, expressed in calculations of lost economic activity due to premature death, drug-abuse related illness, institutionalization, the productivity loss of victims of crime, incarceration and crime careers. Even though marijuana is the most popular illegal drug in the United States, these factors are disproportionably associated with chronic heroin and cocaine addiction. Furthermore $39 billion in lost productivity is attributed by the ONDCP report to incarceration for all drug-related offenses (regardless of the drug). This is not a cost of drug abuse but, rather, the costs of current policies.

When discussing crime careers, the ONDCP study explains that “Studies of addicts of expensive drugs such as heroin and cocaine entering treatment consistently find that on the order of a third of them rely on illegal activities, such as drug dealing and manufacture, property crime and commercial sex, to buy drugs and make a living.”(5) Similarly, the figures concerning premature death are derived from cases involving diseases such as TB, hepatitis B and C and HIV/AIDS, diseases associated with chronic dependency on heroin and cocaine and other factors not commonly associated with marijuana use.

The health care costs associated with drug abuse represent a much smaller share of the economic and social costs of drug abuse, $15.8 billion or 8.7%. These costs include nearly $6 billion for community based treatment services, $3.7 billion for HIV/AIDS related services, $1.4 billion for hospital and ambulatory care services, and $1.2 billion for federal prevention services. Marijuana use does account for portions of the treatment and prevention expenditures, however it should be noted that in 2005, for example, 56.7% of treatment referrals for marijuana were generated by the criminal justice system.(6) Many of the economic costs of marijuana use are actually generated by contemporary marijuana policies.

The cost of goods and services lost to crime is the only category of the economic costs of drug abuse that is substantially related to marijuana use, and here primarily through the costs of enforcing the nation’s marijuana laws. Criminal Justice Systems and Other Public Costs are estimated by the ONDCP report to be $36.4 billion, including $14.2 billion for state and local corrections facilities, $9.8 billion for law enforcement expenses, and $6.2 billion for federal supply reduction activities. These expenses are calculated on a simple percentage basis, that is, the percentage share of drug related arrests also represents the percentage share of overall justice system expenses. Marijuana arrests accounted for 45% of all drug arrests in 2002(7), for example, and consequently account for $16.4 billion in law enforcement costs.

When addressing costs associated with incarceration, law enforcement, and supply reduction it is important to note that these are costs associated with the implementation of current public policies that are brought about by the existing laws criminalizing marijuana use. These are not effects of marijuana use. These are the costs and effects of marijuana laws. These are measures of policy output AND NOT indications of policy effectiveness or impact. This is an elementary aspect of policy analysis. For example, a recent university textbook in public administration explains that:

“[F]rom the perspective of policy analysis, it is crucial not to confuse policy outputs with policy outcomes. The outputs do not tell us much about the performance or the achievement of a stated objective . . . only a naïve political observer would assume that a governmental purpose is achieved because a statute is enacted, an administrative agency is empowered, or funds are spent. Too much has been learned about the limits of government to assume that the output necessarily has the intended outcome.”(8)

The impact of contemporary marijuana policy in the United States can be examined by looking at the reports on marijuana’s supply, availability, price, and usage over the last twenty years as well as the economic and social costs associated with these impacts. This long term perspective is necessary to offset the tendency of policy officials such as the Director of ONDCP to focus on marginal changes in these indicators and present them to the public as evidence of successful policies, particularly when it comes to the subject of marijuana control.