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Obama Tacitly Endorses the Pot Economy

Rick Newman

There's no need to feel paranoid. That seems to be the message President Barack Obama has sent to pot smokers in Washington and Colorado.

[PHOTOS: A Brief History of Marijuana]

Since the two states each passed landmark pot-legalization laws in November, the big question has been what the federal government will do about them. The U.S. government classifies marijuana as a Schedule 1 controlled substance, in the same class with powerful narcotics such as heroin and LSD. That means it's a criminal violation of federal law to grow, use or distribute pot. And federal law trumps state law, which means the feds could legally challenge the two new statewide measures, or more aggressively enforce drug laws in those two states to discourage officials there from setting up the infrastructure needed to allow the use and distribution of pot--and more importantly, to tax it.

But Obama has now indicated that Washington won't do that. When ABC's Barbara Walters asked Obama in an interview what he planned to do about the new legalization effort, he said, "We've got bigger fish to fry" than trying to track down thousands of individual pot users. While Obama said he still opposes the legalization of drugs, he also suggested there might be some new compromise between conflicting federal and state laws--especially since more states could legalize pot, following the moves in Washington and Colorado.

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Obama seems to be taking a pragmatic approach on the issue, avoiding a fight over states' rights and a national legalization effort some members of Obama's liberal base feel is long overdue. There could also be a fair bit of revenue at stake for states able to tax marijuana the same way as liquor or cigarettes. Forecasting firm HIS Global Insight estimates that Washington state could pull down about $2 billion in revenue over five years from the legalization of pot, through fees on licenses granted to pot providers. Colorado could raise about $342 billion over five years, through a different scheme to levy excise taxes on the sale of pot.

States could certainly use the revenue. The slow economy is still curtailing state tax receipts and causing large budget gaps, with 31 states this year coming up short by a total of $55 billion, according to the Center For Budget and Policy Priorities. State and local governments continue to shrink, including lower numbers of teachers, cops and firefighters. States and cities have often turned to "sin taxes" to raise more revenue during downturns, and if Washington looks the other way on pot, a marijuana tax could be an appealing new way for more states to balance their budgets.

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Obama, who acknowledges smoking pot regularly as a teenager, may not go as far as pushing for the full legalization of marijuana. His second-term priorities include fixing the national debt, getting his healthcare reforms up and running, and perhaps tackling climate change. A fight over the moral and legal status of pot would be a huge distraction.

But there's recent precedent for federal tolerance of rule-breaking. For more than a decade, the U.S. military followed a convoluted look-the-other-way policy toward homosexuality in the armed services, even as homosexual behavior remained forbidden. Over time, public opinion on the issue softened, until the Pentagon repealed the whole prohibition in 2011, with minimal controversy. We may be at a similar juncture with pot. A decade from now, Obama's insouciance on the issue may be seen as the pivot point that brought marijuana out of the closet.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.

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