Marijuana: Supply and Demand

This essay appeared in Real Clear Politics on Thursday, September 30, 2023

The Biden administration‘s recent recommendation to reclassify marijuana from a Schedule I to a Schedule III controlled substance provides the strongest signal yet that Democrats want progress.? The muted response from only 14 GOP congressional lawmakers, demonstrates that the tides may be turning on the other side of the aisle.? Just 5 years ago, a recommendation like this would never have come from the administration, let alone face such little opposition. With the looming reclassification of marijuana, Congress should step up quickly to prepare for the legal cannabis market, once this reclassification occurs.

Historically, the federal government has focused on policing consumer demand for cannabis – to the detriment of the 50 million Americans who regularly use it. They’ve simultaneously neglected the regulation of the cannabis market, which has allowed for crime outfits to form the backbone of the illegal drug supply chain. This neglect cannot continue after the reclassification, or it will create the type of chaos that enables bad actors to further cement their power. In short, if we want a thriving legal marketplace, we need to bring it in under federal regulation and normalize our policy approach to cannabis.

In the early 1900s, the federal government originally focused on drug supply rather than demand. The Harrison Narcotics Tax Act of 1914 first regulated and taxed opiates and cocaine, but it did not make these drugs illegal to use. The Volstead Act of 1919 followed by keeping alcohol consumption legal, while banning its manufacture, sale, and distribution for drinking purposes – upon the ratification of the 18th Amendment.

The recent focus on consumers comes from a reversal of course more than a half-century ago when Richard Nixon flipped the switch. His ill-fated "War on Drugs" shifted the underlying mandate of drug policy from regulating and controlling supply chain operators to enforcing against drug users.

Five decades of failed policy provided American jurisprudence with mandatory sentences, three-strikes laws, and amplified punishment for crack cocaine offenses vs powder that were designed to intimidate low-level traffickers and chronic users. Adding small-timers and addicts to the overcrowded criminal justice system exacerbated our mass incarceration problem.

This folly of enforcing policy on drug users instead of market regulation has allowed bad-acting suppliers to reap the benefits. With the federal government's attention distracted, international drug trafficking organizations bring fentanyl and other dangerous drugs through our biggest ports, where they enter an organized, US -based logistics system that carries many other drugs, weapons, and stolen goods.?

One of the main cash crops supporting these underworld suppliers is cannabis. According to US government estimates, the total amount of cannabis produced domestically each year has grown slowly from $60 billion to about $70 billion since the early 1970s. Over that period, the value of cannabis that’s been taxed and regulated has grown to approximately $30 billion today. That leaves another $40 billion of illicit cannabis sales that flow through the “dark market” controlled by Chinese and Mexican drug lords and their paramilitary organizations.

In 2019, Biden acknowledged the grave consequences of the government’s previous approach to cannabis and the failed War on Drugs. Since then, he has come to recognize the need for a new vision to deal with an age-old issue, whose time has finally come.

Three years later, as President, Biden took a surprising step forward by releasing a definitive statement in support of cannabis reform. He concluded his pre-election statement forcefully, by declaring “Too many lives have been upended because of our failed approach to marijuana. It’s time that we right these wrongs.”?

His administration’s latest efforts on behalf of marijuana will begin the process towards legalization and desperately needed market regulation. Now, Congress has the opportunity to take action on cannabis regulation by passing the SAFE Banking Act, which would normalize safe and legal cannabis banking across the nation.

This historic, heavily negotiated, bipartisan legislation, emerged from Senate Banking Committee yesterday, and it would allow normal banking in states with legal, regulated policy frameworks. If passed, the SAFE Banking Act would accelerate the transition of the marijuana industry out of the hands of shady actors and diminish a significant cash crop for the same organizations that bring dangerous drugs and weapons into our country. This would undoubtedly help keep our communities safe from the many harms of the black market, a successful result for Democrats and Republicans alike.

By returning the focus of America’s drug policy toward illicit suppliers and away from users, elected officials can address this complex situation from the proper perspective. If the US wants to get serious about controlling fentanyl, cartels, and border enforcement, we ought to bring cannabis into the legal economy. Now that marijuana reclassification is on the horizon, passing the SAFE Banking Act is a logical next step, and it's finally good politics.

Eric Spitz is a serial entrepreneur who entered the cannabis industry in 2016. He previously owned Freedom Communications, including the Orange Country Register. He now serves on the board of Rootz.ai, a technology company that provides insights about consumer retail shopping behavior.?

Related Topics: SAFE Banking Act, Congress, cannabis