Obamacare's Youth Enrollment Problem

While Obamacare seems to be avoiding a death spiral (at least for now), it still is not succeeding in attracting enough young adults, also referred to as "young invincibles," to enroll into Obamacare. In spite of making concerted efforts to attract 18-34 year olds to sign up for Obamacare, according to the most recent numbers from the Human and Health Services, only 28 percent of the the eight million that have reportedly enrolled are young adults. This is a far cry from the 40 percent that the Obama administration wanted to enroll. Proponents of Obamacare have made Obamacare sound like such a good deal for young adults, so what gives?

First, we have to ask ourselves why youth enrollment is desirable. The reason why young people are the cause of attention is because young people tend to be healthier, which helps diversify the risk pool. Aside from that, one of the features of Obamacare is the limit of age rating in health insurance from 5:1 to 3:1, which means that insurance companies are not given leeway to assess actuarial risk. Not charging more elderly individuals the premium amount based on their actual risk to the health care exchange means that young adults will carry a disproportionate burden of the risk pool, which is more than their costs would have been otherwise. If the cost of buying insurance through the health care exchanges created by Obamacare ends up being more expensive than foregoing health insurance for enough young adults, then the situation creates a death spiral. That is why the intuition about Obamacare ends up being that Obamacare is a raw deal for young adults because it will discourage young adults from buying insurance through Obamacare.

Although there is a correlation between age and healthiness, one can argue that being young does not automatically mean being healthy. There are middle-aged individuals and even a few elderly individuals who have no real health problems to speak of, which means the death spiral scenario can be overblown. The Kaiser Foundation seems to think along these lines. Rather than assume the "death spiral" scenario, they only predict that a premium increase would occur. For argument's sake, let's assume that the Kaiser Foudnation, which is by no means conservative or Right-leaning, is correct that there would not be a death spiral, but only a "slight increase" in overall premiums (keep in mind that this does not include what the price increase would be for young adults, but just Americans in general). The problem with that is that one of the promises made by the Obama administration to force Obamacare down America's throat is that health care premiums would actually decrease.

Projections of youth enrollment has been steady thus far, and as projections stand, there is currently no worry about an adverse selection death spiral happening. However, this does not mean that Obamacare is in the clear.  The Kaiser Foundation's "worst-case scenario" assumed that the youth enrollment rate only dropped to 25 percent. What would happen if it dropped below that point? There could be a major influx of elderly or ailing individuals. Young individuals could end up dropping coverage because premiums continually rise and they get sick and tired of propping up the insurance pool. While I don't think Obamacare is currently in danger of a death spiral at this time, I still think that Obamacare still needs to keep its focus on enrolling healthier individuals because it is still too soon to say what the net change in premiums for young adults will be and how it will affect the healthcare marketplace, particularly how it affects workplace health insurance. In the meantime, if Obamacare is going to remain the law of the land, the least we could do is create reforms to the law to it in order to make it less of a pain.

India's Top Six Challenges After the 2014 General Elections

While we wait for the officials to count the votes of the Indian general election, it's not a matter of simply determining whether Rahul Gandhi or Narendra Modi will win the election. It's about what lies ahead for the Prime Minister of the world's largest democracy. As I pointed out a couple of years ago, India has a lot it needs to reform if it hopes to become a regional superpower, never mind a global one. Rather than look at its long-term prospectives, what I would like to do is provide a list of India's more pressing matters that can lead to the medium-to-long term growth that India desires:

1. Consistently high levels of inflation. India's inflation has been double digits for quite some time, which makes it difficult for Indians to save money. It also makes the rupee a highly volatile currency, a characteristic that is not optimal if India is looking to attract foreign investment. Although I am not going to come up with a solution to India's inflation woes here, what is certain is that India can use a heavy dosage of monetary and financial reform. 
2. Education, demographics, and job skill matching. There are about 200 million Indians from the ages of 15 to 24. There is a major skills gap in India that needs to be closed, which the Carnegie Endowment for International Peace thinks can be best done by private training institutions. Considering that the literacy rate in India is 74 percent, some education and youth skill development reforms, not to mention removing labor market rigidity, are in order. 
3. A need for a 21st-century infrastructure. If India has a malfunctioning transit system and constant power outages, how can India expect to ascend to "world power" status? As the Council on Foreign Relations illustrates, India needs to break through the government-regulated power system and bureaucratic stalling of infrastructure projects if it wants to be taken seriously. 
4. Lack of property rights. India's poorest are not really able to own land, and their landlessness keeps these individuals entrapped in poverty. Looking at the World Bank's Ease of Doing Business Index (ranked 134 out of 189), maybe the government can stop its stranglehold on business and allow for economic growth to flourish in India.
5. Corruption. Much like any other developing country, India has its fair share of corruption. Transparency International (TI) ranks India 95 out of 175. TI did a report in 2011 about the extent of corruption in India. If India wants to improve upon its governance, the next Prime Minister needs to address corruption. 
6. China. In spite of its bilateral trade relations with China, there is still a fair amount of mistrust between China and India, not to mention that India has a sizable trade deficit with China. Between further diplomatic meetings and financial reform, China will understand the importance of investing more money in its Indian neighbor.

For more information, you can read this report from the International Monetary Fund or this analysis from the London School of Economics. 

Buying "Fair Trade" Is Not Fair: Why Freer Trade Is More Important

For those who did not know, today was World Fair Trade Day. In order to understand why we need to have a World Fair Trade Day, we need to understand the premise behind fair trade, which is to provide equity and sustainable justice to those in the supply chain, most notably poor farmers in developing countries, that do not receive proper treatment or wages. Those who buy products certified as "Fair Trade" believe that they are paying more for their product because the money from the price premium ends up helping the poor. I'm happy to see that the Fair Trade movement is based on voluntary transactions. It's certainly preferable to the government getting involved in labeling schemes or distorting the market. Seeing a more conscientious, ethical consumerism is also encouraging, and I hope that trend continues. However, what I have to ask is whether buying Fair Trade products is the most effective way to help those who it intends to or if it is merely feel-good consumerism.

One of the primary criticisms of the Fair Trade movement is that the money does not end up where consumers think it does. The theory behind Fair Trade is that the money goes to farmers on small farms who are disadvantaged by "the system." The problem with this in practice is that the individuals actually doing the farming, i.e. the grunt work, are migrant workers. Migrant workers, by definition, are too poor to own land and have to go from farm to farm to find work. This means that unless the farmer is lucky enough to be in a cooperative, the individual receiving the premium is not the farmer, but the landowner. Given socio-economic class stratification in places such as Latin America, it's safe to assume that the landowner, even if his property is not corporate size, is much better off than the farmers working the land. Even a large chunk of the premium does not go to the farmer, but rather other actors within the profit chain (Valkila et al., 2010; Kilian et al., 2006; Mendoza and Bastiaensen, 2003). One can go as far to argue that Fair Trade certification is actually harming the poor (Beuchelt and Zeller, 2011).

Since most of this premium does not even go to the intended party, in economic terms, buying fair trade is a subsidy to retailers of Fair Trade-certified products. One of the wrongs that Fair Trade certification is trying to mitigate is the market distortions that hurt farmers in developing countries. These developing countries have plenty of agricultural subsidies that distort the market, so why are we trying to fight one arbitrary price distortion with another? Wouldn't it be better to get rid of the initial price distortion to make sure that laborers are being paid fair market value?  

There are some other issues with Fair Trade certification, one of which being that access to the Fair Trade label is restricted due to the price of certification, which is tantamount to rent-seeking. Those in the poorest countries cannot afford paying the certification fees (Beuchelt and Zeller, 2011), which is especially true if the farm is too small-scale. However, those problems are minimal as long as the Fair Trade market stays small. For those farmers who do decide to join a Fair Trade cooperative, there is the issue of creating market inefficiencies with monopsony, which means the fact that there is only one buyer and many sellers [of labor] in cooperatives translates into depressed wages. There is also the incentivizing of even more corruption than already exists because Fair Trade provides more opportunities for corruption (e.g., passing non-Fair Trade products off as Fair Trade, keeping wages low, acquiring kickbacks from Fair Trade premium). Additionally, fair trade only addresses income disparities, and not the price volatility it was initially meant to subdue.

Buying Fair Trade is not the way to go about reducing poverty. Fair Trade products do nothing to help migrant workers escape the trap of poverty. Heck, even the proponents of Fair Trade cannot even agree on what makes trade fair! Fair trade only produces a market of $7B [in 2011 dollars] out of a global economy of $230T [in 2012 dollars]. In terms of impact, most of the Fair Trade certified farms are in middle-income countries (e.g., Mexico, India, Peru, South Africa). Unless fair traders can find a standardized way to define "fair" without distorting the market too badly, fair trade will remain a niche market for consumers who are under the misimpression that they are making a difference. Even if there were better oversight and record-keeping, at best, Fair Trade certification focuses on a limited amount of small producers while ignoring the larger issues of poverty in developing countries. I don't want to say that Fair Trade certification is as big of a scam as organic food, but the large gap between perceived and actual benefits is comparable.

Does this mean that farmers in developing countries are deterministically doomed to a life of poverty? I think not. Free trade has historically pulled more people out of poverty than any government program has, and I am confident that it can do so for those who are currently struggling. When critics of free trade say that "free trade harms these farmers," it's because developed countries have freer economies than developing countries. Rather than a modest subsidy that does not even reach the disadvantaged producers, we should find alternatives that directly impact those in need. There is the possibility of or structural reform to have more liberalized markets, which will mean that farmers will have more purchasing power and consumer sovereignty in the long-run. We can also end agricultural subsidies both in developing and developed nations that cause the initial distortions in the agricultural markets. Developing countries can be more collaborative and export some agricultural technologies so these countries can develop more quickly.

Even though a lot of the required changes need to take place on a more global, macroeconomic level, we should still look at what can be done from the individual consumer's standpoint. It might seem counter-intuitive, but it might be better to buy premium coffee than fair trade coffee because premium coffee means that better care to pick high-quality beans requires better-paid labor. Assuming that more and more individuals buy premium coffee, the demand will increase and more higher-paying jobs would be created than under the fair trade certification scheme. If we're going to be more socially-driven, conscientious consumers, then we have to make sure our dollars are going to good causes. We can't be swept away by the false promises of fair trade certification. We either need to demand better quality from the fair trade certification process so some or all of the criticisms can go away, or we need to find better ways to spend our charitable donations to help those in need.

11-17-2015 Addendum: If you're looking for a nice argument for free trade, here is one courtesy of the Cato Institute.

Parsha Behar: Deception In Business Is Unethical, But Wrongful Speech Is Even Worse

In this week's Torah portion, we deal with a lot of laws surrounding the land of Israel and transactions with property. While describing the jubilee year, the Torah describes how one is to return to his holding (Leviticus 25:13), most probably due to foreclosure. When selling or buying property, G-d makes a point of not wronging one another not once, but twice (Leviticus 25:14, 17). After the second admonishment, G-d says that one should not wrong another, but "fear your G-d; for I am the L-rd your G-d" (Leviticus 25:17). In the context of the passage, we are specifically looking at real estate sales. Given the time period and the demographics of the parties involved, it only includes fellow Israelites, hence the usage of the word עם (fellow Jew/countryman). Two questions come to mind: 1) Why is there the repetition of wronging one's fellow, and 2) Can we extrapolate any principles from this scenario?

First, why does it matter if you wrong your fellow in real estate transactions? Why not simply care about one's bottom line? From a practical standpoint, markets would either not last too long or they would be on shaky ground if there is no credibility. Being able to trust other actors in a given market is what makes an economy grow. 

Since G-d is not one to be superfluous in repeating the same admonishment twice, it would help to explain the difference between the admonishment in Leviticus 25:14 and Leviticus 25:17. In the first mentioning, it refers specifically to overcharging or underpaying in property transaction (Bava Metzia 50b). In the second mentioning, it refers to deceptive speech (Midrash, Leviticus Rabbah 33:1). In the specific context of business, one cannot verbally deceive the merchant with false hope of buying something when there is no intention to buy (Bava Metzia 58b). It is also forbidden for the merchant to deceive the customer with false advertising or misleading the customer into thinking they are purchasing something that they in fact are not (Choshen Mishpat 227-228). In the passage, there is also the phrase in Leviticus 25:17 of ויראת מאלהיך כי אני הי (fear your G-d because I am the L-rd your G-d). This phrase shows that business ethics are an intersection between humankind and G-d. Even though G-d was not directly involved in the financial transaction, He still gave this as a divine decree because people are created in His Image and should be respected for that reason, which is why the halacha behind business ethics applies to both Jew and non-Jew alike. In a general context, Rashi extends the admonishment in Leviticus 25:17 beyond the business realm and to harmful speech in general (Rashi's commentary to Leviticus 25:17).

Going back a few Torah portions, we see the phrase אני הי (I am G-d) repeated often enough in Leviticus 19 to make the point that we act in a holy manner because these laws come from G-d. However, I have to wonder why G-d felt He needed to mention אני הי only in Leviticus 25:17, and not in Leviticus 25:14. Why does G-d need to remind us of Him when it comes to verbal deception and not monetary deception? 

I would argue that G-d needs to give us the extra reminder because it's easier to commit verbal deception.  A court of law can prove fraud or embezzlement, but it cannot prove one's intent behind one's words. Only the individual and G-d can truly know one's intent, which is something that can be easier to hide than monetary deception. Monetary transactions tend to have transparency. Words, on the other hand, can be a tricky business. Words can be massaged to deceive another individual, even when they are technically true. Words can even be maliciously used when the target of said words does not even know about it, which is why the Jerusalem Talmud (Peah 1:1) likens foul words to an arrow because of the damage it can do from a distance. When you cheat an individual with words, you steal more than money. You steal their dignity because you make them look foolish. At least with money, the individual can be caught and the damage can be undone, but when you wrong someone with words, the damage is not so easily reversible (Choshen Mishpat 228:1). 

As Hillel mentions in Pirke Avot (1:14), "If I am only for myself, what am I?," and does so to remind us that in this specific context, business transactions are about more than making profit. We have a responsibility to others when conducting business. We also have a responsibility to use our words to treat others with dignity, regardless of whether they are spoken during business hours. By stating twice that it is wrong to aggrieve another, G-d was expanding that both to physical and verbal transactions. Although this Torah passage deals with property transactions, the moral here is that we should be constantly concerned about the wellbeing of others and that the measure of our conduct towards others is a solid metric of our own holiness and connection with G-d.

China Surpassing America's GDP in PPP Terms Doesn't Matter Much

Last week, the World Bank came out with its International Comparison Program (ICP) report, which provides comparative price data, measures the Gross Domestic Product (GDP), as well as purchasing power parities (PPP). The most controversial of these implied findings is that when GDPs are adjusted for PPP, which is a variant of the nominal GDP measurement, China's economy is predicted to surpass the United States by the end of this year. The nominal GDP is but one measurement of economic success, but it is still used as a primary yardstick of such success. Some individuals think it's cause for concern. Interestingly enough, the Chinese government has reservations about such claims. Is China's rise in the GDP [in PPP terms] a reason to worry or are people making a mountain out of a molehill?

First, we need to determine why adjusting the GDP in PPP terms is important. Comparing prices across borders can be tricky because the nominal GDP does not factor the value of the dollar in a cross-country fashion; it merely uses the current exchange rate to convert the GDP from one currency to another. The purchasing power parity is comparative measurement of what a certain amount of dollars [or other currency] in one country can buy in another country. A dollar can buy a lot more in China that it can in the United States, i.e., a greater bang for your buck. To adjust for comparison of living standards can help provide a clearer picture, which is why more and more economists are using GDP in PPP terms.

Much like with the nominal GDP, I also have my criticisms about using the GDP in PPP terms. When adjusted for PPP, the basket of goods examined is based on the price of the final good. The premise behind PPP is the Law of One Price, which states that identical goods should carry identical prices if the markets are efficient. The problem is that this economic theory does not play out well in practice. Let's first go with the assumption that goods or services are identical across borders. The Big Mac Index is an informal way of measuring the PPP. The Big Mac was used because it has cross-border similar inputs. Even under the Big Mac Index, we don't have identical goods. In Israel, the Big Mac is different because under Jewish dietary law, one cannot mix meat and dairy, which means that the Big Macs in Israel have to use both kosher meat (which is more expensive) and faux cheese. In India, cows are not considered sacred because they are considered sacred in Hinduism, which is why the Big Mac either contains chicken or mutton. Even going outside of the Big Mac Index example, it's not a stretch to believe that goods in one country are qualitatively different in another, which is why relative PPP might be a better metric.

Other factors go into defying the Law of One Price, such as transportation costs. The further a good has to travel to reach its final destination, the more it will typically cost. The transport costs are added into the price of the final good. Economic barriers, such as tariffs or taxes, alter the price from accurately following the Law of One Price. Demand for goods also do not hold constant across countries. Even if a good had the same supply per capita across countries, a lower demand in one country will mean that country has a lower price than another country. To assume that two families in differing countries have identical consumption baskets is untenable. These differentials make it more difficult to accurately calculate various countries' PPP, which is why it should be no surprise that the last time the World Bank published the ICP report for 2005, China's PPP-adjusted GDP was cut 40 percent in the last round of revisions per the World Bank methodology. It should also be no surprise that the World Bank factored in a margin of error up to 15 percent with their calculations (ICP, 2014, p. 23). Finally, this assumes that the numbers from China's National Bureau of Statistics are accurate, which is a tenuous assumption, to say the least.

Let's argue that in spite of the PPP's flaws, it still a good enough of a proxy to determine economic largesse. Should America worry? I don't think so. For one, in absolute GDP without PPP adjustments, the American economy still outpaces the Chinese economy by an approximate factor of two. Not to be too tautological, but the PPP measures purchasing power. Adjusting for PPP does not suddenly aggrandize the economy. One cannot purchase goods or services with PPP-adjusted dollars. One has to pay at the prevailing exchange rates, which is true in our global economy, and which is also why measuring the GDP as such is a better proxy for relative geopolitical power. There is also the issue that the GDP measures annual transactions and resets each year. Economies, however, do not reset. When looking at the wealth differentials between China and the United States, China lags behind the United States by at least $30T. Even if you want to argue that factoring in PPP brings us a more accurate picture, it doesn't matter nearly as much because none of these adjustments take in the population into account. When the GDP in PPP terms is adjusted per capita, you see a whole different picture (see below).

When adjusted for a per capita basis, the United States is 12th and China is 99th. Not only that, in per capita terms, China's economy is about a century behind America's economy. The GDP is an accounting device to measure domestic output, so none of this measures economic wellbeing in America in comparison to China, the composition of the economies, nor does it take innovation into account (see here and here). China also has a shrinking labor force and deteriorating economic health (also see here), not to mention China has larger issues regarding resource sustainability.

I imagine there will be a point when China's nominal GDP surpasses America's. There is a distinct possibility that China might pass the United States in per capita terms if it makes enough economic reforms. However, unless China creates structural reforms that allow for more liberalized markets or even focus on ways to improve upon the standard of living, I see this "milestone" as mere smoke and mirrors.

Yes, I Think a One-State Solution Is Really a Good Idea

As we approach יום העצמאות (Israeli Independence Day), I think of all of the progress that Israel has made since 1948. What started off as a discombobulated nation-state that was barely able to stand on its own metaphorical two feet is now a beacon of democracy and economic prosperity in an otherwise dark abyss of totalitarianism and economic stagnation. Even with Israel's successes, I can't but help think that Israel has not made as much progress with its neighbors as it should have by now. Sure, there's a cold peace with Egypt and the Jordanians are much more tolerant of an Israeli neighbor than during Israel's inception, Israel still has a while to go, particularly with the Palestinians. At least since the Oslo Accords, Israel has sincerely pushed for a two-state solution in which an Israeli state can live alongside a Palestinian state in "peace and harmony." If anything should have confirmed the unfeasibility of a two-state solution, it should have been Gaza attacking Israel as soon as Israeli forces were removed from Gaza back in 2000s. None of this even takes into account the geographic distance between Gaza and West Bank, or the plethora of other issues that come along with creating a single, unified Palestinian state. Since the two-state solution approach is not working, how about a one-state solution?

A lot of the success of the one-state solution would be contingent upon its implementation. First, this one-state solution would be under the authority of the Israeli government, not a Palestinian government. Without getting into detailed comparative politics, Israel is the only one to handle the implementation of a one-state solution. There is also the matter of what Israel would annex. As long as Gaza's democratic representation is based in Hamas, a terrorist organization hellbent on Israel's destruction, I would not integrate Gaza into the annexation of the disputed territories. Gaza has been and continues to be a mess. Upon annexing Gaza during the Six Day War, Israel actually tried giving Gaza to Egypt, but not even Egypt wanted to deal with the headache. There is also the issue of whether to grant Palestinians full or limited voting rights, which would, amongst other institutional protections, act as a buffer to maintain the Jewishness of the State of Israel. Tangentially, I would imagine that a loyalty oath would be a prerequisite of the integration of West Bank's citizens, much like it was back in 1948. Furthermore, there is the issue of whether to grant the Palestinians in the West Bank full citizenship, permanent residency, or something in between (or even the infeasible explosion of Palestinians from the West Bank, which I think is a bad idea for more reasons than one). There are also issues of how to deal with "right to return," which I think would be relatively less contentious under a one-state solution than under a two-state solution.

A major potential impediment is the oft-called demographic time bomb, which is the notion that the Arabic population would procreate at a faster rate than the Jewish population, thereby making the Jews a minority in the Jewish homeland. Before crying "Never again!", we should realize that the demographic time bomb is more of a dud than anything else. I have not read Caroline Glick's The Israeli Solution, but from what I can tell from reviews of her book, she covers the topic pretty well. Israel has precedented success for integrating over one millions Arabs into Israeli society. The State of Israel has been able to maintain the Jewish facet of its national identity while being able to have a fifth of its population be non-Jewish. Even if they absorb those from both the West Bank and Gaza, at best, Arabs would be a third of the population. And if the Arabic birth rate is 2.97 and the Jewish birth rate is 3.50, mathematically speaking, there is no basis to fear a demographic takeover of the Jewish state. To make the integration of Palestinian Territories easier, what the Israeli government can do is grant the territories provincial quasi-autonomy while being under Israeli sovereignty.

With the current stalemate in the Middle East, this is all theory. Miscegenation did not help in the United States, and I don't think the miscegenation inherent within a two-state solution would help with fostering amicable relations between the Israelis and Palestinians. A one-state solution would foster better understating and co-habitation in the long-run, and it would be less likely to alienate Palestinians in Israel than a two-state solution would. Even if you want to say "bi-nationalism works with Northern Ireland, South Africa, or Canada (well, sort of), but doesn't work with places like Iraq or Yugoslavia," the Israeli-Palestinian conflict is unique enough where precedent acts as a tenuous proxy. The right to nationalist self-determination, political feasibility, integrating the new Arabs into the Israeli welfare system, international criticism, and maintaining the legitimacy of Israel being a Jewish state would all be obstacles to the one-state solution. I still strongly believe that Palestinian recognition of a Jewish state is a pre-requisite before either a two-state or one-state solution, or even a three-state solution, takes place. However, if that were the case, I would make an educated guess that a one-state solution would work better than a two-state solution in the long-run.

Debunking Heritage Foundation's Debunking of Marijuana Myths

Even with the legalization of marijuana in Colorado and Washington, pot is still a contentious issue with both sides adamant about their positions. When the debate is this heated, there tends to be too much misinformation out there on the topic, which is how I felt when I read an article from the Right-leaning Heritage Foundation entitled Marijuana is Harmful: Debunking Seven Myths Arguing It's Fine. What I would like to do is go through their list of myths and see if they are indeed mythical or factual in nature.

1. "Marijuana is harmless and non-addictive." Framing the effects in such absolutist terms is a straw man argument that advocates of marijuana reform don't even use. If you're smoking something, there's a good chance that it's going to come with some risks (see this interactive chart from Healthline.com). The Heritage Foundation uses emergency room visits as a metric for just how unhealthy marijuana usage is. While 455,668 emergency room visits due to marijuana sounds like a lot, put that into context of the 129.8 million emergency room visits per annum, which would make marijuana-related emergency room visits a 0.35 percent of overall emergency room visits.  I'd be curious to see a breakdown of the diagnoses of these emergency room visits. Is this merely a reflection of individuals who abuse the emergency room? Is it that because the marijuana-based visits are due to individuals incapable handling the experience of tripping out? Inquiring minds would like to know. What I find distracting about bringing this myth up is that is we allow for other substances that can be harmful and addictive, such as alcohol (See Point #4 for further elaboration). 
2. "Smoked or eaten marijuana is medicine." I'm going to try to sidestep the debate on medical marijuana as much as possible here. First, it would be nice if marijuana were no longer classified as a Schedule 1 drug so more conclusive studies can be performed. Second, if marijuana is as effective as the Sativex spray that the individuals mention in their analysis, does it really matter which treatment a patient chooses as long as it doesn't harm anybody else? Third, even if one is able to extract the necessary, medicinal components of marijuana that avoid one from getting high, it is a red herring argument because marijuana is also used for recreational purposes. 
3. "Countless people are behind bars simply for smoking marijuana." Heritage Foundation brings up that 0.3 percent of state prison inmates are behind bars for smoking marijuana. Let's assume that the incarceration rate for mere pot possession is low. The number of arrests for marijuana possession is still the most common form of drug-related arrests. It still costs our justice system time and money to process these arrests, which is made all the more frustrating by low conviction and incarceration rates. Given the financial constraints that state and local budgets have experienced since the Great Recession, wouldn't it be better to focus on crimes that have actual victims?
4. "The legality of alcohol and tobacco strengthen the case for legal marijuana." The people of Heritage Foundation's argument is "alcohol and tobacco take so many lives. Why legalize another harmful drug to the list?" Because this is a country based on the idea of freedom. Even if it comes with risks, we should have the right to consume alcohol, tobacco, or marijuana. Look at the risks of marijuana compared to alcohol. For example, one can die from alcohol overdose, but the amount of THC one would have to ingest to overdose on marijuana makes it nigh impossible to die from overdose. It would explain why the CDC does not have a category for death caused by marijuana usage. Also, a study from British Columbia Mental Health and Addictions Journal shows that health-related costs for alcohol are eight times higher than that of marijuana (Davis and Thomas, 2009). Alcohol causes more damage to the brain than marijuana (Jacobus et al., 2009). Furthermore, legalizing marijuana is shown not to increase crime rates (Morris et al., 2014). Alcohol causes way more harm to others than marijuana (Nutt et al., 2010), yet we allow for alcohol's legalization. If we see a substitution effect between alcohol and marijuana with marijuana's legalization, it would mean a decreased likelihood of harm to others. In a free society, we make certain choices and live with the consequences, whether good or bad, of those actions. We legalize alcohol and tobacco not only because we know that Prohibition doesn't work, but also because in spite of the risks of these drugs, it is preferable that we allow individuals to free to make their own choices. If we allow individuals to consume more harmful substances like alcohol or tobacco, a fortiori, we should legalize marijuana. 
5. "Legal marijuana will solve the government's budgetary problems." No one reputable would argue that marijuana is the silver bullet of budgetary problems. I sure wouldn't. On the federal level, the leading drivers are Social Security, Medicare, and Medicaid. If you look at what the Congressional Budget Office publishes regarding budget reform, it's not that simplistic. Although marijuana is not meant to solve fiscal woes, it still creates a net positive for the budget. 500 economists signed off on the positive budgetary implications of legalizing marijuana. From an economic standpoint, legalizing marijuana is a no-brainer.
6. "Portugal and Holland provide successful models of legalization." I am not going to disagree with Heritage Foundation on this one. Portugal and Holland have only decriminalized marijuana, and Holland has become more strict about its drug laws in the past few years. We have no modern-day examples of whether marijuana legalization, which is why it will be nice to see how Colorado, Washington, and Uruguay handle marijuana legalization. 
7. "Prevention, intervention and treatment are doomed to fail, so why try?" This does not refute the argument for legalizing marijuana. Prevention, intervention, and treatment are not mutually exclusive options when it comes to marijuana legalization. The difference between legalization and prohibition is that in the former scenario, you don't pile on the additional issues that come along with prohibition.  
8. "Colorado and Washington are examples to follow." Heritage Foundation added this so-called myth at the end as an addendum. Calling this a myth is premature. After all, marijuana has been legalized in these states for a few short months. That is hardly enough time to determine anything of substance. Rather than take a pot shot at marijuana legalization, what should be done is that we wait and see what the effects of marijuana are before making conclusions.