Dollars and Sense: The Economic Reality of National Cannabis Policy

Welcome to Part Three in our series on the state of marijuana in these United States. Here we look at the ways in which prohibition has largely failed to reach its goals while wasting billions of dollars in government spending and lost revenue each year. We’ll also explore some of the absurd barriers at the heart of the struggle to legalize marijuana nationally, like archaic drug classification rules and restrictions on research.

An Expensive and Ineffective Policy

Proponents of legalization point out that prohibition has failed to notably limit marijuana access or use, while instead squandering billions of dollars and resulting in hundreds of thousands of racially biased arrests every year.

By contrast, a 2018 study found that legalizing marijuana nationwide would create at least $132 billion in tax revenue and more than a million new jobs across the US in the next ten years. New Frontier Data forecasted that if legalized nationally, the marijuana industry could create an entirely new revenue stream for the government, generating millions of dollars in sales tax and payroll deductions.

The study also calculated that there would be 782,000 additional jobs nationally if pot were legalized today, a figure that would grow to 1.1 million in just over five years. That includes workers throughout the supply chain, from farmers to transporters to distributors.

An earlier study by the Cato Institute similarly predicted a surge of billions in revenue annually, half of which would come from reduced spending (particularly for drug enforcement and incarceration), and the rest from taxing marijuana like alcohol and tobacco.

Ideally, these potential new revenue streams could be directed toward addressing bigger needs. A re-envisioning of national drug policy could mean shifting resources away from marijuana enforcement towards more sane and humane drug treatment policies—like battling the opioid epidemic. Legalization would allow the federal government to tax sales to fund new programs, like addiction prevention and treatment for people with drug use disorders.

It is apparent that the US war on drugs was a resounding failure, and countries with more liberal policies that favor decriminalization and treatment consistently produce lower crime and addiction rates. The US could borrow from their playbooks and move forward in a more humane and effective way.

The Catch-22 of Legalization

The national view on legalization seems to have reached a critical tipping point. According to a survey published by the Pew Research Center in January, around 61% of Americans think weed should be legalized. That support has translated to significant changes in policy. In the November mid-term elections, three out of four states voted in favor of liberalizing their marijuana laws, with Michigan legalizing recreational marijuana, and Utah and Missouri voting to legalize medicinal marijuana. Recreational marijuana is now legal in 10 states; medical marijuana is legal in 33.


In spite of this apparent shift in favor of marijuana in America, cannabis remains designated as a Schedule 1 substance by the federal government. Schedule 1 drugs are classified as having no medical value whatsoever, and legally regarded as more dangerous than even methamphetamine and cocaine (which are Schedule 2 drugs). This system makes it nearly impossible to legally study the benefits of marijuana, which paradoxically, would be almost certainly required to change its classification in advance of a more liberal national pot policy.

Although it appears that even on this front there is some governmental willingness to move the dial forward. In June of this year, a key Senate committee ordered the National Institute on Drug Abuse to “provide a short report on the barriers to research that result from the classification of drugs and compounds as Schedule 1 substances.” The senators’ criticism of the inherent roadblocks in marijuana’s classification indicates some momentum to reclassify it under federal law.

This process—like so much in the federal government—is not likely to move quickly. Nevertheless, the movement towards national legalization may be inching slowly forward as the federal government watches with interest state-level experiments in legalization and the benefits they reap.


Map Source: Business Insider

The featured photograph was shot was taken at the Item 9 Labs farm in Arizona