Make Drug Use Pay Its Own Way: Laurence Kotlikoff, Glenn Loury

In a far-off land called I’m Right, You’re Wrong, a fierce drug-legalization debate is raging. Half the people, libertarians, say drug use should be legal. The other half, moral purists, insist it shouldn’t.

They disagree even on what to call it when those who buy or sell drugs are led off to jail. The libertarians call this a form of taxation -- specifically, a tax on the time of the buyer and seller. The moral purists prefer the term criminal penalties.

On this much everybody can agree: non-violent buyers and sellers are wasting a lot of time in jail.

Let’s say everyone agrees to drop the unwinnable legalization argument and to do something useful: switch to levying penalties in dollars rather than in time.

The penalties should equal the difference between the gross price paid by buyers, including the dollar value of their lost time, and the net price received by sellers, after subtracting the dollar value of their lost time. The amount of drugs bought and sold doesn’t change. What does change is that no one is sitting in jail on drug charges, and the government has real revenue from taxes or penalties (call it what you will).

Why pay to house and feed drug buyers and sellers in prison when you can convert the implied tax-penalty into money that can be spent on something useful -- like a public campaign showing the terrible dangers of drug use?

Filled Jails

This question applies in spades to the U.S. Our home of the free has the highest incarceration rate of any country in the world, and enforcement of drug laws has a lot to do with that. Among developed countries, nobody else comes close. Our imprisonment rate is six times that of Britain, seven times that of Germany and nine times that of France.

America’s lockup rate is not only miles out of line with that of other countries. It’s completely out of line with our own past practice. Today’s rate is five times what it was in 1970. Over the same period, our violent crime rate has fallen by half. The increase in non-violent criminal incarceration is concentrated among drug offenders, whose numbers have increased 12-fold since 1980.

Among groups disproportionately involved in trafficking drugs, incarceration rates are staggering. Fifteen percent of white male high school dropouts and 69 percent of black male high school dropouts will spend time in jail by age 35. These figures are four and five times higher, respectively, than they were in 1979.

Huge Cost

As of 2008, more than 2.3 million Americans -- roughly the population of our fourth-largest city, Houston -- were locked up. China, with about four times the U.S. population, has 1.5 million people behind bars. Tally the number of Americans in jail, on parole, or on probation and you’re talking close to the populations of Los Angeles and Chicago combined.

The cost of putting so many people away is huge. Half of these expenditures are made by state governments, many of which are in terrible fiscal shape. Connecticut, Delaware, Michigan, Oregon and Vermont now spend more on prisons than on higher education. For those released from jail, legitimate jobs, let alone well-paying ones, are very hard to find.

More than half of prison inmates have minor children. Consequently, millions of our kids are now growing up with at least one parent incarcerated, which helps explain why our country leads the developed world in child poverty.

In our view, using and selling drugs should be seen as socially offensive and loudly condemned to discourage use. Those selling drugs to minors, a form of child abuse, should be locked away for a long time.

Time Is Money

But for the vast majority of those engaged in the drug trade, we should switch from taking some of their time to taking some of their money. The dollar-denominated penalties (taxes, if you prefer) should be high enough to limit drug use without encouraging widespread evasion. Drug addicts would be offered rehabilitation programs as an alternative to paying the full price of their habit.

In the world we envision, the adult drug stores would be considered by some as legal and taxed, by others as illegal and fined. Regardless, they would operate like other commercial enterprises and receive the same police protection. As with the ending of Prohibition, this would dramatically reduce the horrendous violent crime rates in many of our major cities. The proceeds from taxing the drug trade should be used in two ways only -- to publicly condemn and discourage drug use, and to help those dependent on drugs to get clean.

Like our war on smoking, we can start to win our war on drugs. To do so, we need, at long last, to adopt a winning strategy.

(Laurence Kotlikoff, professor of economics at Boston University and president of Economic Security Planning Inc., is a Bloomberg News columnist. Glenn Loury, professor of social sciences at Brown University, is co-author of “Ethnicity, Social Mobility, and Public Policy.”)

To contact the writers of this column: Laurence Kotlikoff at kotlikoff@bu.edu

To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net

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