Eight Reasons Why Elizabeth Warren's Wealth Tax Is a Poor Idea

Since the Democrats regained power in Congress, they have been pushing for their wholly unoriginal idea of increasing taxes on the wealthy. Democrats are eyeing a corporate tax increase, which would be a reverse trend of the Republican's tax reform bill: the Tax Cuts and Jobs Act. Earlier this month, freshman Congresswoman Alexia Ocasio-Cortez (D-NY) proposed a misguided marginal tax rate of 70 percent that got a lot of people talking. Now it's Senator Elizabeth Warren's (D-MA) turn. Last week, Warren proposed to levy a 2 percent wealth tax on assets over $50 million, and a 3 percent wealth tax for assets over $1 billion.

Since it is a progressive tax, the first $50 million would be taxed at 0 percent, and anything between the $50 million and $1 billion mark would be taxed at 2 percent. Anything above $1 billion would be taxed at three percent. Since both income and wealth inequality have reached new highs, Warren hopes that a wealth tax could redistribute the wealth and mitigate the inequality. Economists Emmanuel Saez and Gabriel Zucman estimate that Warren's wealth tax could generate $2.75 trillion over the next ten years. Most Americans don't make over $50 million, which means it has populist appeal, and it is calculated to generate a fair amount of income. The Left-leaning Institute for Tax and Economic Policy (ITEP) released a report just last week making the case for a wealth tax, which means the idea is catching some traction. What could possibly go wrong? I covered the topic of a wealth tax in 2014. I will use that 2014 analysis as a starting point for this 2019 analysis, as well as the OECD's April 2018 report on wealth taxes, but the short answer is "plenty could go wrong." Here are a few issues with Warren's plan to implement a wealth tax:

1. The wealth tax is difficult to valuate. One of the advantages of an income tax is that it is easy to determine one's income: just use the W-2 or 1099 Form. Not so with wealth. Wealth includes land, stocks, bonds, cash, cars, retirement savings...you get the idea. What is more is that determining the value of these various assets is more subjective than determining one's income (OECD, p. 69). 
2. The wealth tax can be evaded. Especially with increased capital mobility over time, which won't go away anytime soon, tax avoidance and evasion have increased (OECD, p. 67). To provide a U.S.-based example, the closest thing the United States has to a federal wealth tax is the federal estate tax. As the Left-leaning Center on Budget and Policy Priorities points out, wealthy people have been able to evade an amount equivalent to a third of the estate tax revenue raised since 2000. Granted, this was primarily caused by the GRAT loophole. Saez and  Zucman expressed confidence in Warren's plan lacking such loopholes. 
• In spite of Saez and Zucman's confidence, there are multiple ways to get around the wealth tax, including hiring tax attorneys to exploit IRS loopholes, dividing assets among family members, divorcing for tax purposes (if there are different asset thresholds), moving it overseas, and hiding it in trust funds (e.g., OECD, p. 67-68). Warren might be able to address some of these shortcomings, but it's also true that people will find new ways to get around the wealth tax.
• According to a Swiss case study co-authored by the co-architect of Obamacare, a 0.1 percent increase in the wealth tax resulted in the wealth reported to the government to drop by 3 percent (Gruber et al., 2016). 
• As former Republican tax policy advisor Alan Cole points out, since it is difficult to enforce the wealth tax, it is easier to go the route of the capital gains tax than it is the wealth tax. 
3. Other countries have abandoned the wealth tax. In 1990, 20 countries from the OECD (Organization for Economic Cooperation and Development) had a wealth tax. Now, only four countries have a wealth tax: France, Norway, Spain, and Switzerland. The Executive Summary in the OECD's April 2018 report on wealth taxes points out that the wealth tax repeals were "justified by efficiency and administrative concerns and by the observation that that net wealth taxes have frequently failed to meet their redistributive goals." If they frequently failed to meet their redistributive goals, that will end up being a problem for Warren since that is the primary reason she is advocating for the wealth tax in the first place. 
• Since 2000, France had 60,000 millionaires leave France because of a high wealth tax. French President Emmanuel Macron limited and lowered the wealth tax to mitigate the capital flight. 
4. The wealth tax in other countries have not collected a lot of revenue. Saez and Zucman believe that the wealth tax would contribute $2.75T over ten years, or an annual average of $275B. As the OECD report shows (p. 19-20), most countries kept their wealth tax revenue collection below 0.5 percent of GDP. Switzerland's 3.7 percent is explicitly stated by the OECD as an exception to the norm (p. 18). If we use the BEA's 3Q 2018 GDP estimate of $20.66T as a basis for the GDP, that would be 1.33 percent of the GDP. Adjusting the GDP for inflation would still not get the desirable figure: Saez and Zucman's estimate is rosier than historical data. The past, especially that of other countries, is not indicative of the future. At the same time, what the historical data show is that other countries have found it challenging to have rich people pay the wealth tax. The burden of proof would have to be on Warren to prove how her plan would be different from the other countries that tried and ultimately abandoned the wealth tax.  
5. The wealth tax poorly targets capital income. As the Tax Foundation explains, the wealth tax poorly targets capital income (or simply capital) because the wealth tax goes after normal returns. What it should be going after instead are the super-normal returns, which are the returns that go above the amount needed to compensate someone for saving and subsequently delaying their consumption. Since super-normal returns are unexpected, they do not have as much potential to distort investment decisions. 
6. The wealth tax lowers economic growth. In its 2014 analysis of Thomas Pikkety's global wealth tax, the Tax Foundation calculated that it would reduce GDP by 0.49 percent per annum. On the other hand, a 2010 World Tax Journal analysis calculated it at just 0.02-0.04 (Hansson, 2010). In either case, no one is arguing that the wealth tax is going to boost the GDP.
7. The wealth tax affects more than the super-wealthy. Savings finance business investment. This drives more than wealth for the rich or the economy. The capital acquired by these super-wealthy individuals is used to employ others, create products that are consumed by other individuals, or generates wealth for pensions and retirement accounts. 
8. The wealth tax is arguably unconstitutional. The Constitution prohibits federal direct taxes that are not apportioned by the states (Article I, Section 9, Clause 4). The exception to this rule is the income tax since the Sixteenth Amendment creates a separate constitutional provision. Given the nature of the wealth tax, it could be classified as a direct tax. It might not be clear whether a wealth tax would constitute a direct tax, but one thing that is clear is that it would be challenged in court shortly after Warren attempted to implement it.

As the OECD points out (p, 59), the wealth tax does not work in isolation. Its effects depend on the overall composition of the tax code. At the same time, there are considerable and observable drawbacks to the wealth tax that Warren would rather not mention. Given that we are approaching an election cycle, this will not be the last the American people hear of income inequality or higher taxes for the rich. 

The Gillette Commercial: Having a More Nuanced Discussion on Masculinity

Last week, one of the largest razor manufacturing companies, Gillette, decided to air a commercial called "We Believe: The Best Men Can Be." The commercial came with a whirlwind of criticism. James Woods and Piers Morgan thought is was an overgeneralization of the male species. Michelle Malkin called it "sacrificing a massive consumer base at the altar of progressivism." Conservative political activist Candace Owens called the commercial "a product of radicalized feminism and cultural Marxism." On the other hand, the commercial received praise, including from conservative commentator Mona Charen. Before formally forming your own opinion on the matter, I ask that you view the commercial yourself (see below).

I viewed the commercial multiple times myself to see if there was anything problematic. One of the bigger criticisms is that the commercial presents an overgeneralized stereotype of men as brutish, that "masculinity has got to go." The commercial starts with depicting instances of bullying, lewdness towards women, and sexual harassment. It explicitly harps on the cliché of "boys will be boys." The commercial says that "we believe in the best of men," and cuts away to former NFL player Terry Crews saying that "men need to hold other men accountable."

The commercial then shifts direction. One young male chides his friend by calling a woman "sweetie." The commercial cuts over to another young man asking his male friend to not ogle a female walking down the street. A father then holds his daughter in front of a mirror and tells her "to be strong." Another father breaks up a fight between boys saying "that's not how we treat each other." After showing these examples, the commercial ends by saying that "the boys of today will be the men of tomorrow."

In terms of its social message, the commercial was pretty tame. Yes, the commercial uses the phrase "toxic masculinity," cites the #MeToo movement (see my 2017 analysis on #MeToo here), and uses the cliché "boys will be boys." Yes, the commercial doesn't mention that there are women who bully and harass, although it's equally true that "men commit a lot more violence than women, sexual harassment is undeniably a problem in many workplaces, and boys should be raised not to attack each other." However, there was no call to bring down the patriarchy or to reassess traditional gender roles. There was no message that "all men are bad." As a matter of fact, the people who were correcting the undesirable behavior in the commercial were other males. There were men in the commercial exhibiting bad behavior, but there were also men in the commercial exhibiting positive behavior. The commercial is not condemning masculinity, but rather certain forms of behavior conducted under the guise of masculinity. The solution is not the feminization of masculinity or men, but men taking initiative towards better behavior. In the Gillette commercial, more masculinity is the solution to the problem.

In 2014, I wrote a detailed piece differentiating hypermasculinity from a healthier form of masculinity. Masculinity is more complex than a simplistic form of machismo. It allows room for men to care, express emotions, show emotions, and yes, even cry once in a while. Going more to the heart of the commercial, the commercial shows that masculinity is not about forcing yourself onto others or causing others harm. In the late 19th century to early 20th century, masculinity was not only about exuding personal strength and resilience, but being strong enough to hold up others and to hold others to a higher standard. As Ernest Hemingway said, "there is nothing noble in being superior to your fellow man; true nobility is being superior to your former self." When examining this definition of masculinity in context of the Gillette commercial, it actually portrays a more traditional definition of masculinity. The commercial is a portrayal of honesty, self-reliance, and virtue, one in which men can be their best and in which male toughness is the solution to the problem, which makes the Right's criticism of the commercial even more perplexing.

Ben Shapiro is right in that boys need strong male role models so they could become strong men. Interestingly enough, that is exactly what the end of the Gillette commercial was getting at: the need for men to be strong role models for boys and other men. As Mona Charen stated, the commercial should not be viewed "as reproof of masculinity per se, but rather as a critique of bullying, boorishness, and sexual misconduct." Values of honesty, moral rectitude, or respect for one's fellow are not "leftist or socialist priorities." Men treating others with respect instead of harming them is part of civil society, regardless of gender or political identity. It's called being a mensch, and it's something we should encourage.

Is this an attempt for Gillette to make more money? Perhaps. Is it possible that it is an attempt to start a dialogue on healthy masculinity? I would say so. What I would say is that while the commercial did not capture every last nuance in the debate, it did get us talking about the issue.

Is Sweden's Path Towards a Cashless Society the Right One?

When we think of waves of the future, driverless cars and artificial intelligence (AI) come to mind. There was something that I recently came across that I did not think could become a relic of the past, and that was cash. For some, the idea of a cashless society might seem like something in the distant future. However, a cashless society might not be so distant. Sweden is well on its way to having a cashless society. In November 2018, the New York Times reported that a fifth of Swedes do not use ATMs, and that cash only represents one percent of the Swedish economy (compared to eight percent of the U.S. economy or ten percent of the European economy). It has reached the point where half of Sweden's 1,400 commercial bank branches do not accept cash deposits. While the Swedish financial market is trending more towards the e-krona and more away from traditional cash, it makes me wonder if the benefits of a cashless society outweigh the costs. I'm not going to be able to cover every single point in great detail here, but I hope to provide an overview in attempts to answer the question.

Advantages of a Cashless Society

• Reduced business risk. Cash comes with a certain amount of risk, including robbery of cash, theft of cash from employees, and counterfeit money. If cash gets stolen, it is gone. If a credit card or some form of e-payment gets stolen, it has a better chance of getting recovered.
• Reduced crimes. A cashless society would make it more efficient for governments to collect money. This would not only reduce the size of the underground market, but it would also reduce rates of tax evasion and money laundering.
• More efficient method of paying. With the removal of cash, it would mean not wasting time at the checkout line for customers, improved customer experience for businesses.
• Simplification of international transactions. When you travel abroad, you don't have to worry about exchange rates: the mobile device can calculate it for you. 

Disadvantages of a Cashless Society

• Identity theft and data breaches. The 2018 Cambridge Analytica scandal made us realize just how vulnerable our data can be to hackers. If successful, hackers could potentially wipe out savings with a few keystrokes. This vulnerability is especially problematic with the retail industry, which is more dependent on electronic payment transactions. Cash payments have the advantage of being able to work with minimal infrastructure when there are breaches or outages. Speaking of outages.....
• What happens if the Internet or electricity is down? As Sweden's central bank (Riksbank) explains, ATMs need electricity. The Riksbank also acknowledges that alternative forms of payment would need to exist in order to deal with times of crisis. 
• Financial crisis. Some would view cash as more reliable during a financial turndown. On the other hand, the odds of there being adequate cash reserves are slim to none (Bank of Canada).
• Smartphone Issues. This disadvantage assumes that transactions are conducted with smartphones. If so, this would make losing your smartphone or having it stolen all the more damaging.
• Could lead to more overspending. A premier research paper showed how people react to certain types of payments (Raghubir and Srivastava, 2008). The more transparent the payment outflow, the more aversion towards spending. In short, it means that people feel "the pain of paying" more when using cash than when using electronic funds. This would be troublesome for a country with a low savings rate, such as the United States.
• A study from the Journal of Consumer Research (Thomas et al., 2011) showed that those who use electronic payments are more likely to purchase unhealthy foods, whereas another study from the JCR shows a better attachment to the products purchased with cash (Shah et al., 2016). 
• Increased inequality. It can lead to the vulnerability of the elderly because they are not used to digital media (see U.K.-based "Access to Cash" report). Immigrants are also less technologically savvy. Beggars typically receive their alms in cash. The Riksbank is confident that it can market to the elderly and get them more capable of managing day-to-day transactions digitally. That's for Sweden. On a global level, there are currently 1.7 billion people without a bank account. In the United States, 8.4 million households were unbanked, with an additional 24.2 million that are underbanked (FDIC 2017 Household Survey). This would mean that a quarter of U.S. households are inadequately banked, which could spell trouble for transitioning over to a cashless society.
• For more detailed skepticism on a cashless society, read the Cato Institute's 2018 policy analysis here. 
• Also read the argument as to how the "war on cash" is an assault on freedom.

Postscript
It is difficult to predict the effects of a cashless society at least in part because there has yet to be a cashless society. The overall trend line towards a cashless society also depends on the dynamics of each country. Swedish demand for cash has declined over the years. A country like Canada, on the other hand, has its demand for cash growing at a similar rate to its nominal GDP (Bank of Canada). The Bank of Canada also notes that the declining demand in Sweden is an outlier. Sweden also has developed a cultural shift away from cash in a way that other countries have yet to develop.

Given technological advancement, I would say that as time passes, there will be less cash in the world. I would surmise that at least for a while, it would not be a straight-up cashless society, but I can certainly see less cash. This trend could be comparable to printed books versus e-books in that in spite of the technological gains, there is still a preference for doing things "the old-fashioned way." In the meantime, we'll see how quickly the change happens.

Raising the Top Marginal Income Tax Rate to 70 Percent Is Misguided, To Say the Least

Freshman congressional representative Alexandria Ocasio-Cortez (D-NY) has been making headlines over the past week by advocating for a 70 percent marginal tax rate to fund her Green New Deal. The idea is that the richest of citizens pay a higher tax rate in order to fund Ocasio-Cortez's plan to fight climate change. The argument goes beyond the "rich should pay their fair share" narrative that is so common on the Left.

Those who are supportive of Ocasio-Cortez's plan, such as Matthew Yglesias and Paul Krugman, that go as far as arguing that a) this was done in the 1950s, and it was fine, and b) that 70 percent is economically a reasonable amount. Presenting it this way makes it look uncontroversial and unprecedented. As I will point out, neither one of these is true. I am not going to touch on the finer policy points of the Green New Deal (e.g., we probably won't reach 100 percent renewable energy by 2059 [Clack et al., 2017], much less than Ocasio-Cortez's proposed 2030) because that it is a separate conversation. What I would like to do is walk through and scrutinize the arguments used for such a tax increase.

What Is a Marginal Tax Rate?
I feel like providing an overview of what a marginal tax rate because I felt like that got lost in some of the news coverage. As the American Enterprise Institute covered, certain prominent figures on the Right botched up. House Minority Whip Steve Scalise (R-LA) said that Ocasio-Cortez's plan was to "take away 70 percent of your income and give it to leftist fantasy programs." Grover Norquist, a longtime advocate for lower taxes, made a similar faux pas. A marginal tax rate is the tax rate incurred on an additional dollar of income.  The current top marginal tax rate is 37 percent. Using the current tax rates (see below), what that means is that any dollar above $510,300 for an unmarried individual is taxed at the 37 percent rate. The rest of the dollars are taxed based on the brackets (e.g., any income made below $9,700 is taxed at 10 percent, any income between $9,700 and $39,475 is taxed at 12 percent).

Source: Tax Foundation

If an unmarried individual were to make a million dollars under the current tax code, here is how it would work:

• $970 (10 percent of $9,700)
• $3,573 (12 percent of the next $29,775 [=$39,475-$9,700])
• $9,840 (22 percent of the next $44,725 [=$84,200-$39,475])
• $18,366 (24 of the next $76,275 [=$160,725-$84,200])
• $13,880 (32 percent of the next $43,375 [=$204,100-$160,725])
• $107,170 (35 percent of the next $306,200 [=$510,300-$204,100])
• $181,189 (37 percent of the remaining $489,700 [$1,000,000-$510,300])
• Grand Total in Taxes: $334,988

Because of the progressive nature of the marginal tax brackets, this hypothetical millionaire is taxed at a rate of 33.5 percent, not 37 percent. In this example, that's a difference of $35,012 (or 3.5 percent). The math is going to vary based on the brackets, but that is how marginal tax rates work. Now that we walked through the arithmetic, let's get into some economic history.

Economic History Concerning the Top Marginal Tax Rate
For proponents of a higher top marginal tax rate, they like to point to the 1950s as a heyday for when the top marginal tax rate was at its highest (see below). The argument continues to go that in spite of these high top marginal tax rates, the economy grew just fine.

Much like Scalise was disingenuous with his portrayal of what a marginal tax rate is, Krugman et al. are being disingenuous by presenting this as evidence. Why? They fail to distinguish between the statutory and effective tax rate. The statutory tax rate is the amount imposed by the laws, the one on the books. The effective tax rate is what individuals actually pay. Either through deductions, loopholes, or tax evasion, the effective tax rate was lower than the statutory rate. An economic paper written by those who are proponents of higher tax rates concede this point (Piketty et al., 2017), as is illustrated below. This goes to show that the "1 percent" are not facing a significantly lower income tax rate than they did at the peak in the 1950s.

Another stubborn fact is that regardless of what the top marginal tax rate has been, federal taxes as a percent of the GDP generally oscillated between 15 and 20 percent. Despite different tax brackets and general tax policy, a constant within American tax history post-WWII is that taxes do not remain above 18 percent of GDP for very long. History provides a worrisome precedent for Ocasio-Cortez because it shows that it is easier to raise the top marginal tax rate than it is to raise the amount of tax revenue the government receives.

Source: St. Louis Federal Reserve

On an international level, the top marginal income tax rate for the 26 OECD countries has dropped from 64 percent in 1980 to 47 percent in 2017 (Cato Institute; OECD). As will be explained shortly, the effects of globalization have made it less practical to have higher top marginal income tax rates.

Why a 70 Percent Top Marginal Tax Rate Would Not Work 
A deeper look at the historic data has shown that the United States did not live some fantasy in which tax rates led to a boost in tax revenue that allowed for wonderful economic growth. However, there is even more to the argument that Ocasio-Cortez, Krugman, and the rest of proponents of government largesse forget when considering this topic. Here is a list of a few of those considerations:

• We cannot duplicate the unique macroeconomic circumstances under which the 1950s economic prosperity occurred. The United States came out of a decade-plus economic downturn. Something tells me that we don't want to have a repeat of the Great Depression. The infrastructure of European nations was demolished in WWII, which gave the United States the upper hand post-WWII. The economy was more labor-intensive than it is now. Speaking of capital.....
• As the Cato Institute points out, there were major capital controls prior to the 1980s that kept money better contained in the United States. With more countries adopting flexible exchange rate systems (including the United States), industries are much more mobile, which means industries can more easily move their tax base away from the United States if tax rates become that onerous. 
• According to an economic paper from proponents of higher taxation, the optimal tax rate is 73 percent (Diamond and Saez, 2011). The issue with this optimal tax rate is that it is the combined rate, not simply the marginal tax rate. Assuming this is an optimal rate (more on that below), we would need to remove all loopholes and exemptions, which are cornerstones of the U.S. tax code. 
• The Diamond and Saez paper comes with some flaws, including not accounting for long-term impacts on the taxpayer (Mathur et al., 2012).
• Bernie Sanders and his colleagues like to use Denmark as an example of a socialist utopia, but what they don't realize is that the Nordic countries do not just tax the "1 percent" at those high rates. They tax everyone at those high rates, including the poor. 
• If you look at Gallup polling, 93 percent of Americans consider the amount they pay for income tax to be "too high" or "just right." If the Far Left were honest about what it would take to pay not just for the Green New Deal, but also Medicare for All and its other pet projects, they would come out and say that everyone (not just the "one percent") needs to pay significantly higher tax rates. Something tells me that their ideas would not have the same level of popularity if the working class American knew that the higher tax rates would also apply to him or her. 
• An optimal tax rate is as much about political philosophy as it is efficiency, as a study from economists Jon Gruber and Emanuel Saez shows (see Table 9 of Gruber and Saez, 2000). 73 percent is optimal....if you want a utilitarian, progressive policy in the vein of Rawlsian thought. If you want something more conservative, lower the amount to 30 percent. If you want no wealth redistribution, the optimal tax rate is 3 percent. 
• Stanford economist Chad Jones argues that when you factor in entrepreneurs' contributions to society (e.g., Uber, Amazon), the social welfare gains reduce the optimal tax rate to 28 percent. 

Quick Side Note on Economic Effects of Taxes

Getting into how lower taxes could be part of the solution is too much for this blog entry since we have already covered so much ground already. What I would like to point out today is that onerously high marginal tax rates have adverse effects, such as stifling innovation (Akcigit et al., 2018), reducing income mobility (Alloza, 2018), and reducing economic growth (see literature review from Tax Foundation). 

Postscript: There was not a time during the United States' history in which high marginal tax rates translated into greater economic productivity. In the 1950s, the Top One Percent did not actually pay anywhere near the 90 percent amount. Even if they had, there would be no way to replicate the extraordinary conditions in which the economic productivity of the 1950s was created. There already is an admission from Matthew Yglesias that the Green New Deal would not rely on marginal tax rate revenue, but rather from deficit spending, which makes a marginal tax increase less useful given its failure to substantially increase tax revenue in the past. 

The burden of proof is on Ocasio-Cortez and the economists who support such a high top marginal tax rate that this would be a good policy idea. Proponents need to illustrate how this tax increase would substantially increase tax revenue, even though it has not done so in the past. Proponents would need to show how these tax increases wouldn't hamper economic growth or hurt both rich Americans and everyday working Americans alike. While Ocasio-Cortez's proposal has made for an interesting academic debate, I don't think such a proposal could meet such a burden of proof, nor do I see it becoming a reality in the United States anytime soon.


1-15-2019 Addendum: The Tax Foundation put out a preliminary estimate of Ocasio-Cortez's suggestion. It would do anything from generating $189 billion to losing $63.5 billion in tax revenue over the next decade. Even if we went with Washington Post's rosier estimate of $700 billion, it is a safe bet it would not cover the costs of Ocasio-Cortez's Green New Deal.

1-16-2019 Addendum: The University of Chicago forum of expert economists found that 49 percent of economists do not agree that a 70 percent marginal tax rate could raise revenue significantly without harming the economy. With weighted responses, that increases to 63 percent. 

Colorado's Marijuana Legalization at Five Years

Last week was the five-year anniversary of when Colorado's legalization of recreational marijuana was enacted. This is significant because Colorado is the first state in the United States to have legalized marijuana. Other states have since legalized recreational marijuana, but the Colorado case study can provide us with further insight on legalizing recreational marijuana. While there are a few studies that I came across (e.g., the Rocky Mountain High Intensity Drug Testing Area), much of the findings for today's analysis come from the thorough October 2018 impact study from the Colorado Department of Public Safety (CDPS).


Consumption and usage patterns. For adults, past 30-day usage increased from 13.4 percent in 2014 to 15.5 percent in 2017 (CDPS, p. 65). This is what one would expect because "when you legalize something, you get more of it." I was curious to see the impact that marijuana legalization had on teenagers. The CDPS used two main surveys. The first was the Health Kids Colorado Survey (HKCS). According to the HKCS, which is conducted biannually, shows that it slightly increased, followed by a decrease in 2017 (CPDS, p. 102).

The results of the National Survey on Drug Use and Health (NSDUH) from SAMHSA show an even greater decline in youth marijuana usage since legalization (CPDS, p. 120).

Marijuana-Related Crime. In Denver, marijuana-related crimes dropped from its peak of 276 crimes in 2014 to 183 crimes in 2017. Contrast that with overall crime in Denver increasing from 61,276 crimes in 2014 to 66,000 crimes in 2017 (CDPS, p. 32).

School Discipline and Achievement. Marijuana legalization does not seem to have affected this category. Marijuana offenses steadily dropped, from 1,655 offenses in 2014 to 1,144 offenses in 2017 (CDPS, p. 125). As for the number of drug suspensions, the number went up in 2009-10, and stayed steady since (CDPS, p. 129). Looking at drug suspensions in terms of rates, the figure is slightly lower than it was before legalization (CDPS, p. 130). What is even better is that the graduation rate has increased and the dropout rate slightly decreased since legalization (CDPS, p. 135).

Traffic Fatalities and Crashes. One of the major concerns aside from "think of the children" was that people would get high, drive their car, and increase the rate at which traffic fatalities took place. On the one hand, traffic fatalities involving drivers testing positive for cannabinoids increased since 2013 (see below; CDPS, p. 51). On the other hand, it comes with a very important caveat: THC, which is the key ingredient in marijuana, can stay in the bloodstream for weeks. Until there are better methods for testing for marijuana intoxication, it is difficult to say how much of this increase is caused by marijuana. This is further suggested by the fact that the number of drivers in fatal crashes that tested above the legal limit of 5ng/ml of THC decreased from 2016 to 2017 (CDPS, p. 49), it provides more plausibility that marijuana is not the sole factor in the increase of traffic fatalities. Conversely, an October 2018 report from the Insurance Institute for Highway Safety (IIHS) found that marijuana legalization led to a 7.4 percent increase in car crashes in Colorado (IIHS, p. 9).

Hospitalization. Preliminarily looking at the data, it looks like the rate of hospitalizations due to marijuana increased quite a bit. Two things to consider. One is that the rate was already increasing before legalization. Two, and more importantly, is that the discharge diagnosis codes changed in 2015, which makes it more difficult to change the trend. It is why the CDPS was explicit in not reading too much into these preliminary findings (CDPS, p. 78-79).

Treatment Admissions. The good news here is that the number of treatments and the rate of treatment admissions have declines since the legalization of marijuana (CDPS, p. 83-84).

Economic Effects. The Federal Reserve Bank of Kansas City released an interesting April 2018 report on the topic of the economic effects. In 2014, recreational marijuana sales were $308M. In 2017, that number went up to $1.1B, which represents a 42.5 percent compound annual growth rate! Colorado State University-Pueblo's Institute of Cannabis Research released a groundbreaking report on net economic cost and benefits for Pueblo County. Its findings? While it cost $23M, it created $58M in benefit, thereby creating a net benefit of $35M.

Marijuana also contributed to 5.4 percent of Colorado's job growth since 2014. The government is also happy because of the tax revenue. In 2014, marijuana tax revenue was $67.8M. By 2017, it climbed to $247.4M.

Postscript: There are a few caveats to note with this analysis The first is this: the CDPS is careful to note that one should not ascribe all the changes in social indicators to marijuana legalization, especially given the societal stigma and legal ramifications attached to marijuana prior to legalization. Colorado Christian University's Centennial Institute made this mistake in its report stating that for every dollar in tax revenue, the State spends $4.50 to deal with the costs. The CCU also fails to isolate the impact of legalization (e.g., stoners existed before the legalization), it compares current tax revenue with calculated costs of all marijuana use over a lifetime (thereby creating a false, non-analogous comparison), and does not include the benefits in public investment (e.g., cops are no longer spending money on chasing non-violent pot users), which is why I did not include the CCU report in my analysis today (see further criticism of CCU report here, here, and here).

There are other caveats to include in this analysis. One is that marijuana research is increasing more in light of legalization. Two is that this only the course over a five-year period. The other caveat is that it is a case study covering one state. While I would not use the Colorado case study by itself as definitive proof, I can say that marijuana legalization looks promising so far. Legalization did not increase youth usage or high school expulsions and dropouts. Treatment admissions have dropped. Marijuana legalization has created more jobs and economic growth. I would not have expected all benefit without any cost, but at the same time, it is nice to see that the benefits seem to be outweighing the costs, and that the fears of the naysayers are by and large unfounded.

Trump Pulling Out of Syria: I Am Glad He Avoided Mission Creep

The Syrian Civil War has been a thorn in U.S. foreign policy since it started in 2011. Since then, the U.S. has been involved in Syrian affairs in one way or another. Last month, President Trump did something that shook the Washington establishment: withdraw American troops from Syria. It is no surprise that many thought it was a mistake that will adversely contribute to regional instability. Did Trump make the right decision or not?

Not backed with congressional authorization. Article I, Section 8, Clause 11 gives Congress the power to declare war. Both the Obama and Trump administrations have ignored this constitutional provision. Unless Congress can make a declaration of war, the U.S. has no business stationing troops in Syria.

What about ISIS? Trying to stop ISIS was the only remotely justifiable argument for the U.S. to be in Syria. Even then, ISIS was threatening the U.S.' Middle Eastern allies, not the U.S itself. While Syria is a humanitarian tragedy, Syria had not been a critical threat to U.S. national security. Fast-forward to the present: ISIS is greatly incapacitated. With the U.S. withdrawal, the Syrian government and other parties involved (e.g., Russia, Iran) have a major incentive to make sure ISIS doesn't reemerge. At the end of the day, it is not practical to try to stall every conceivable calamity that could befall the region. The United States has many allies in the region: Turkey, Israel, Egypt, Jordan, Saudi Arabia. Perhaps they could do some more of the lifting (especially since they are closer and have greater cultural understanding) instead of having the U.S. try to fix everything.

We can't counter Iran or Russia. As the Carnegie Endowment for International Peace detailed, the U.S. already lost in Syria because Russia and Iran have much more influence than the U.S. was able to acquire. As the Brookings Institute brought up, it was never clear as to how the U.S. troop presence was going to shift the region's military balance.

As a matter of fact, the 2,000-plus troops were not capable of engendering the political reform necessary to stabilize the region. The situation in Syria favors Russia and Iran, so why should we spend millions more on a lost cause? Russia is now the broker of the conflict. Putin gets the joy of trying to manage Turkey, Syria, and Iran at the same time while making sure Russian interests are secure in Syria. Not saying it's impossible, but Putin can have fun trying.

Plus, there are two other things to consider. One, Syria not an appropriate place to contain Iran. Two, further attempts to sway things in a country where the U.S. is not wanted (whereas Iran and Russia were invited) would risk a proxy war with Russia.

Postscript: It is true that the withdrawal was not coherent because Trump did not coordinate with other countries or even his advisors. At the same time, our presence is not currently merited, which is noteworthy since the U.S. has already spent $54 billion in Syria (Brown University). Our presence would have been mission creep that would have perpetuated the U.S.' presence in the region for decades to come.  In spite of me criticizing Trump on such topics as international trade and immigration, I will give him credit where credit is due. I'll let the Foreign Policy Director at the Cato Institute sum it up: "Absent achievable goals and a strong national security imperative backed up by congressional authorization, the U.S. presence in Syria is illegitimate and better off wound down."


1-6-2019 Addendum: A senior fellow at the Carnegie Endowment for International Peace summarized five reasons why Trump was right to pull out of Syria.