Economics of Drug Policy and the Drug War

6. Estimated Savings and Added Revenue from Drug Legalization

"This report estimates that legalizing drugs would save roughly $41.3 billion per year in government expenditure on enforcement of prohibition. Of these savings, $25.7 billion would accrue to state and local governments, while $15.6 billion would accrue to the federal government. Approximately $8.7 billion of the savings would result from legalization of marijuana and $32.6 billion from legalization of other drugs.
"The report also estimates that drug legalization would yield tax revenue of $46.7 billion annually, assuming legal drugs were taxed at rates comparable to those on alcohol and tobacco. Approximately $8.7 billion of this revenue would result from legalization of marijuana and $38.0 billion from legalization of other drugs."

Miron, Jeffey A., and Waldock, Katherine, "The Budgetary Impact of Ending Drug Prohibition," The Cato Institute (Washington, DC: Cato Institute, 2010).
http://www.cato.org/sites/cato...

7. Inherent Limitations of Drug Production and Consumption Estimates

"Existing estimates about drug production and consumption are cryptic, inconsistent, and often impossible to verify. Apart from the series of studies titled What America’s Users Spend on Illegal Drugs that was produced in the 1990s under ONDCP’s auspices (see Rhodes, 1995, and Abt Associates, 2001) and the 1990s work of the Drug Availability Steering Committee (2002), many of the most-quoted estimates are not documented in a manner that allows others to assess their credibility, let alone replicate them. The large year-to-year changes in official estimates of consumption and particularly of production reduce their credibility, given the stable data on marijuana use in the U.S. population over the past decade.
"While a number of estimates are described as being 'intelligence based' or are released by intelligence agencies, this does not mean we should automatically give them high credibility. This paper identifies a number of these estimates from national and international sources that are simply implausible. Drug-market estimation is a field plagued by a lack of data and heavily dependent on assumptions; thus, estimates from both intelligence and nonintelligence agencies need to be scrutinized. Policymakers would be well served by preventing the publication of figures without peer review. If the truth is that these figures are estimated imprecisely, that fact should be noted."

Kilmer, Beau; Caulkins, Jonathan P.; Bond, Brittany M.; and Reuter, Peter H., "Reducing Drug Trafficking Revenues and Violence in Mexico: Would Legalizing Marijuana in California Help?" International Programs and Drug Policy Research Center (Santa Monica, CA: RAND Corporation, October 2010), p. 44.
http://www.rand.org/pubs/occas...

8. Estimated Combined Spending by Federal and State Governments to Address Substance Use

"Federal and state governments spent $3.3 trillion in 2005 to operate government and provide public services such as education, health care, income assistance, child welfare, mental health, law enforcement and justice services, transportation and highway safety. Hidden in this spending was a stunning $373.9 billion--11.2 percent--that was spent on tobacco, alcohol and other drug abuse and addiction. A conservative estimate of local government spending on substance abuse and addiction in 2005 is $93.8 billion.

"The vast majority of federal and state substance related spending--95.6 percent or $357.4 billion--went to carry the burden to government programs of our failure to prevent and treat the problem while only 1.9 percent was spent on preventing or treating addiction. Another 0.4 percent was spent on research and the remaining two percent was spent on alcohol and tobacco tax collection, regulation and operation of state liquor stores (1.4 percent) federal drug interdiction (0.7 percent). For every dollar the federal and state governments spent on prevention and treatment, they spent $59.83 shoveling up the consequences.

"A staggering 71.1 percent of total federal and state spending on the burden of addiction is in two areas: health and justice. Almost three fifths (58.0 percent) of federal and state spending on the burden of substance abuse and addiction (74.1 percent of the federal burden) is in the area of health care where untreated addiction causes or contributes to over 70 other diseases requiring hospitalization. The second largest area of substance-related federal and state burden spending is the justice system (13.1 percent)."

National Center on Addiction and Substance Abuse at Columbia University, "Shoveling Up II: The Impact of Substance Abuse on State Budgets" (New York, NY: CASA, May 2009), pp. 1-2.
http://www.casacolumbia.org/ad...

9. Alcohol and Tobacco Use are Responsible for Most Substance-Related Spending by Federal and State Governments

"Almost half (47.3 percent) of government spending on substance abuse and addiction cannot be disaggregated by substance. In fact, research shows that most individuals who abuse or are dependent on addictive substances use more than one drug.9 Of the $248 billion in substance-related spending that can be linked to specific drugs of abuse, 92.3 percent is linked to the legal drugs of alcohol and tobacco."

National Center on Addiction and Substance Abuse at Columbia University, "Shoveling Up II: The Impact of Substance Abuse on State Budgets" (New York, NY: CASA, May 2009), p. 16.
http://www.casacolumbia.org/ar...

10. Total State and Federal Government Spending on Drugs Other Than Alcohol or Tobacco in 2005

"Total government spending as a consequence of other drug use that can be differentiated by substance is an estimated $18.7 billion:
"• $16.4 billion in federal spending: $7.8 billion in dedicated drug enforcement, $39.5 million in drug court costs, $2.6 billion for drug interdiction, $2.5 billion for prevention, treatment, research and evaluation, and $3.8 billion in health care costs.
"• $1.9 billion in state spending: $336 million for public safety costs for drug enforcement programs, $138 million for drug courts, and $1.5 million linked to illicit and controlled prescription drugs in state spending on Medicaid.
"• $342.3 million in local health care spending."

National Center on Addiction and Substance Abuse at Columbia University, "Shoveling Up II: The Impact of Substance Abuse on State Budgets" (New York, NY: CASA, May 2009), p. 17.
https://www.centeronaddiction....

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