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Will Pot Be the Next Obama Stimulus Plan?

Rick Newman

President Obama has said he's open to new ideas during his second term. Here's one that at least two states are pushing: legalizing marijuana to help ease government finances.

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On Election Day, voters in Colorado and Washington approved measures that would make it legal for citizens to buy pot and smoke it recreationally. Among other things, legalizing pot would help each state raise some desperately needed revenue. But whether pot becomes commonly available, and taxed just like alcohol, depends on whether the federal government tacitly goes along with the new measures or cracks down on them, which it has the authority to do.

The federal government regards marijuana as a Schedule 1 controlled substance, in the same class with powerful narcotics such as heroin and LSD. Pro-pot groups have been pushing the feds for years to reclassify marijuana and adopt a more permissive stance, especially since some doctors believe the leafy drug has important medicinal properties. Washington has tolerated the legalization of medical marijuana, but it hasn't budged on recreational use, and last year the Obama administration reaffirmed its opposition to any changes in the status of marijuana.

The question now is whether the two statewide measures, along with others that might follow, might persuade a second Obama administration to mellow out and reconsider its tough stance against pot. The economic arguments in favor of legalizing pot are no hallucination. Forecasting firm IHS Global Insight reports that Washington state could pull down nearly $2 billion in additional revenue over five years, through fees on licenses granted to pot providers. Colorado, which would manage pot sales differently, could earn about $342 million from excise taxes over five year. In a tough economy, with voters staunchly opposed to most new taxes, that's a meaningful amount of revenue.

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The government has swiped away other taboos when an economic crunch created an urgent need for new funding sources. The most obvious example is the 1933 repeal of Prohibition. State and local governments now collect more than $6 billion per year in alcohol taxes. Many states have loosened laws that once prohibited gambling, which now generates nearly $8 billion in tax revenue for states, and also provides thousands of jobs. Marijuana backers insist that legalized pot would be no more likely to generate reckless behavior than booze or gambling.

But states can't really normalize pot sales, and earn revenue from it, without Washington's approval. The Justice Department, which enforces federal law, has a few choices: It could issue a clear statement indicating that it plans to either go along with the new statewide measures or oppose them. That would either encourage state officials to establish the regulatory structure for allowing pot sales, or dissuade them.

Washington could also take no stance at all, leaving state officials guessing about whether federal prosecutors would interfere with pot sales or look the other way. That might create uncertainty over the legalization issue, but allow Obama and his fellow Democrats to avoid a political fight over states' rights or moral decay while still giving some liberals what they want.

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Obama is a strong advocate of more funding for teachers, cops, firefighters, and other public service employees usually paid by states and localities. He's also a former pot smoker who scored plenty of illegal weed as a kid growing up in Hawaii. Legalizing pot could generate a bit more revenue for Obama priorities, in a way the president might have supported in his earlier days. If Congressional Republicans continue to reject Obama's other stimulus ideas, he could even say Republicans made him do it.

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

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