Colorado’s Marijuana Tax Revenue likely to fall over time like New York’s Cigarette Tax Revenue

Posted by PITHOCRATES - March 22nd, 2014

Week in Review

States with huge budget deficits are watching Colorado and their marijuana sales tax.  As they consider following Colorado.  The proponents of marijuana decriminalization point to Colorado and say, “See?  Make it legal and tax it.  And everybody wins.  People can smoke until they get lung cancer.  And the state can rack up tax revenue to pay for, of course, schools.  It’s always schools, you see, because if you oppose tax revenue for schools you hate children.  And taxing sin is good, too.  Because we shouldn’t be doing those nasty things anyway.  So sin taxes work.  Just look at how well those cigarette taxes are working (see As taxes on cigarettes go up, so does smuggling, study finds posted 3/22/2014 on FoxNews Politics).

More than half of the cigarettes for sale in New York are smuggled into the state illegally – the highest percentage in the country, according to a recent report from the Tax Foundation.

According to the non-partisan research group, increased excise taxes on cigarettes to discourage smoking have, in fact, created lucrative incentives for black market trafficking between states…

According to the U.S. Department of Justice’s Bureau of Alcohol, Tobacco, Firearms, and Explosives, even though authorities have taken steps to reduce cigarette smuggling, nearly $5 billion in revenue in 2010 was lost because of smuggling.

Well, as it turns out, sin taxes don’t work as well as they thought they would.  They increase crime.  Because smuggling cigarettes is less risky than smuggling class one narcotics.  For cigarettes aren’t illegal.  So criminals can turn from something more risky, like smuggling class one narcotics, to something less risky.  Smuggling legal cigarettes.  Tax revenue from Colorado’s marijuana tax will probably decline over time.  As a black market comes to Colorado to sell tax-free marijuana.  Just like a black market sells lower-taxed cigarettes in higher taxed cities.

So you have additional crime on the one hand.  A black market drug-dealer network much like what exists today.  But one that can operate in less fear as the penalty for getting caught is a lot less than what it used to be.  Making it easier for our kids to smoke marijuana.  Either by buying it from a better supplied illegal drug dealer.  Or stealing some from their parent’s stash.  Or someone else’s stash.  For there will be a lot of stashes to steal from.

So the crime element is bad.  But as the black market takes off tax revenue will fall from legal sales.  Just like it has for cigarettes.  Leaving an over-spending state still short of tax revenue.  But now with a marijuana black market that they must police.  And a state full of potheads that will likely NOT help the state produce the best and brightest for the high-tech jobs in their economy.  The higher-paying kind of jobs that pay more income taxes.  Because once you have your weed and some cool tunes what do you need a high-stressed job for?  Which will probably make the experiment in Colorado not go as they thought it would.  Something other states should consider before following Colorado down this road.


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Basement Medical Marijuana Growers are Depressing the Street Value of Illegal Marijuana

Posted by PITHOCRATES - June 15th, 2013

Week in Review

A common perception is that Canada cares more for her people than America cares for her people.  The Americans put profits before people.  While the Canadians put people before profits.  Which is why Canada has legalized medical marijuana while only a few states in America have.  Because it was something sick Canadians needed.  So because Canada cares for her people (unlike the United States) they made the enlightened decision to legalize medical marijuana.  And it’s worked out swimmingly (see Medical marijuana lets B.C. growers earn thousands on streets posted 6/14/2013 on CBC News).

A B.C. pot grower [Jack] says he and many others are making thousands of dollars every month growing licensed medical marijuana and selling it for illegal distribution on the streets, and there is little police can do to stop it…

Jack says he used to grow his pot illegally and sell it on the Prairies, but that was too risky, so he applied to Health Canada for a Personal Use Production licence.

He filled out a few forms and got a doctor to sign off on a medical condition. The whole process took a half hour he recalls…

But while he’s growing the pot legally, Jack still sells his marijuana to the same middle men he always has and that’s how large amounts of medicinal marijuana end up being sold illegally on the streets, police say…

“Serious organized crime has found a venue that buffers them from law enforcement. They are actively recruiting people to make applications for marijuana licences…

Meanwhile back in his basement, Jack says he actually misses the days when operations like his were illegal because lately so much so-called “legal weed” has spilled onto the street it’s driven down prices.

He used to get almost $3,000 a pound for his bud when he was growing illegally. Now it’s $1,700 pound and falling. Sometimes there’s so much medical marijuana out there he says some growers can’t unload their product.

“It’s going down the tubes because of all these licences. Three years ago you couldn’t have enough of this. Now I know people who have ten pounds from their last crop because they couldn’t sell it. ”

And so Jack pines for the good old days – when what he did was illegal but he made a lot more money doing it.

Imagine that.  Drug dealers lied to their government.  So they could grow marijuana legally in their basement.  So they could sell it illegally on the street.  Even organized crime has taken to recruiting people to become home-growers to feed their criminal networks.  Bet the Canadians didn’t see that coming.

Note the economic lesson here.  Illegal substances are typically low in supply.  Because people can get arrested for supplying them.  Because few people want to risk getting arrested this low supply creates a high demand.  As there are more drug users than the current growers and traffickers of marijuana can supply.  Which would normally bring more suppliers into the marijuana economy.  But not when it’s illegal.  But make it legal and look what happens.  There is an explosion in supply.  Great for the drug user as prices fall.  But bad for the drug dealer as their drugs are worth less and bring in les revenue.

This is what happened during the Roaring Twenties in the United States.  As European farmers left the farm to fight in World War I American farmers stepped in to meet that unfilled demand.  And mechanized their farms to increase their output.  To cash in on that high demand.  But after the war soldiers became farmers again.  And those export markets for American farmers disappeared.  Just as their farms were never producing more with less thanks to their costly mechanization.  As crop prices fell it was good for hungry people as it prevented famine.  But it was bad for farmers.  Who couldn’t service their debt for all of that mechanization they financed.  And began to default en masse.  Causing bank failures in farming communities.  That spread to city banks.  Leading to the great bank runs of the Great Depression.

Interesting what growing pot can teach you.


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Methadone Overdoses kill more Teens and Young Adults than Guns Do

Posted by PITHOCRATES - February 10th, 2013

Week in Review

Colorado and Washington have recently decriminalized marijuana.  Pot shops can now legally sell marijuana without violating state law.  They are still violating federal law but the Obama administration has stated that they won’t prosecute recreational users in those states.  Even the United Food and Commercial Workers union (UFCW) is looking to organize these pot shops.  It seems everyone wants to cash in on greater drug use.  And why not?  What could possibly go wrong with that (see Drug Users Turn Death Dealers as Methadone From Bain Hits Street by Sydney P. Freedberg posted 2/8/2013 on Bloomberg)?

While the number of U.S. overdose deaths involving methadone peaked in 2007, it was still almost six times higher in 2010, the most recent year for which data are available, than in 1999.  The data don’t reflect the source of the methadone—whether it’s addiction clinics or pain prescriptions.  More than one drug might be involved in each death.

So how many overdose deaths where there in 2010?  About 4,500.  More than the 3,889 dead from firearms in 2010 for ages 15-24.  Common ages for drug addiction.  So to stop these needless deaths we should do everything we can to prevent drug addiction.  From keeping addictive opiates illegal.  And any drugs that may serve as a gateway to these harder and more dangerous addictive drugs.  Such as marijuana.   Often the first drug many addicts start with.  We should do everything we can to get these drugs away from our kids.  Even if it only saves one life.  The rational President Obama uses for sweeping changes in gun control laws that many on the Left even concede will not prevent the kinds of tragedies like that in Newtown, Connecticut.  Yet President Obama has stated that he won’t prosecute recreational marijuana users in Colorado and Washington.  Even though more teens and young adults die from drug overdoses than from guns.

In the small towns where CRC has clinics, its methadone has surfaced in criminal cases, police and prosecutors say. Dearborn County, Indiana, officials are planning a $10 million expansion to the local jail, needed partly because of crimes tied to CRC’s clinic in Lawrenceburg, said prosecutor F. Aaron Negangard.

“We’ve had people come down to the methadone clinic and rob a bank because they need money to pay for methadone,” he said. “We’ve had people at the McDonald’s shooting up. Whether it’s dealing or someone giving take-homes to a friend, it’s been a huge problem…”

In Virginia, 3-year-old Trevor Hylton died on Sept. 30, 2009, after drinking methadone that his mother, Lisa Michelle Hylton, said she left on a kitchen counter in a cough-syrup cup.

Not only does drug addiction destroy the lives of the drug addicts but of the people around them.  Those people robbing banks to pay for their legal methadone.  And once they get it they go and shoot up at the local McDonald’s.  Where young and impressionable kids can be found.  It’s a “huge problem.”  Also, a 2-year old died from this legal substance when it was brought into the house.  Clearly something should be done to stop drug use.  Even if it only saves one life.  Because it is  destroying the lives of addicts.  And those around them.

In methadone maintenance treatment, an almost 50-year-old field, drug addicts get daily doses of the synthetic narcotic. In appropriate amounts, it alleviates the symptoms of withdrawal from heroin or other opiates without getting users high. In combination with counseling, methadone can help addicts stay off illegal drugs and live with more stability, research shows.

Counseling is “the backbone of addiction treatment,” said Elinore F. McCance-Katz, a physician who has advised California state officials on treating opiate dependency. Without it, there’s a “good possibility” that patients won’t reduce or stop their drug use, she said.

Once addicted it’s a bitch to kick.  A lot of people fail trying.  Some don’t even try.  As getting high is more fun than trying to get clean.  Further proof that we need to do something to stop drug use.  Even if it saves only one life.

With the Obama administration looking the other way to flagrant violations of federal drug laws in Colorado and Washington and the UFCW helping to decriminalize marijuana to profit off of drug use one has to wonder why anyone cares about a story about methadone addiction.  This is not the kind of story you want to run when you’re trying to ease drug laws to lock in the youth and drug addict vote.  So why is this even in the news?

Bain Capital, the private equity firm co-founded by former Republican presidential candidate Mitt Romney, paid $723 million for CRC in 2006, corporate filings show. Romney, who left Bain in 1999, had no input in its investments or management of companies after that, he has said…

“With a nonprofit, the incentive is to get people to treatment and wean them off,” Bragg said. “When you have a for-profit and cash-only business, there is no incentive to detox them. In fact, there’s an incentive not to detox them because of the continual cash flow.”

Oh, that’s why.  It’s Mitt Romney’s fault.  Of course.  And that contemptible profit incentive.  It’s never the drug addict’s fault.  Or the societal decay that condones drug use.  Because kids are going to be kids.  They’re going to experiment with drugs as much as they will experiment with sex.  No point telling them not to.  Because kids have to be kids.  Besides, who are they hurting?

Virdie Channing Compton, 30, of Council, Virginia, was on methadone maintenance for more than four years at a CRC clinic in Cedar Bluff after opiate abuse that began in his teens, he said in an interview. After a year or two, he was shooting up his take-homes, he said, and abusing other drugs.

“I was strung out” worse than before, Compton said. He beat the clinic’s drug tests, he said, by sneaking in clean urine in a bottle tucked in his underwear.

On June 3, 2011, Compton had gotten his dose at the clinic and was driving through Council in an unlicensed farm truck when he veered into some oncoming motorcycles. He hit William Van Nortwick, a retired teacher from Safety Harbor, Florida, who was traveling with two sons and a friend on vacation.

Van Nortwick died. Tests showed Compton was under the influence of methadone and Alprazolam, an anti-anxiety drug. He pleaded guilty to involuntary manslaughter. He’s serving a nine- year prison sentence.

Kids can hurt a great deal of people when they grow up into drug addicts.  Would that have happened if Bain Capital didn’t take over these methadone clinics?  Probably not.  As these clinics would have been shut down by the state due to budget problems.  Which is why they were privatized in the first place.  So these people may have survived.  But this guy would have still been a drug addict.  An untreated drug addict.  Who may have continued to work his way up to harder drug use.  And turned to crime to support his habit.  Perhaps even becoming a drug dealer.  Possible taking even more lives in the long run with his untreated addiction.  Maybe sharing needles in a heroin addiction.  Catching and spreading AIDS.  Or simply dying earlier from a drug overdose.

Some states are more stringent than others. Ohio has banned for-profit methadone clinics for decades, after state mental- health advocates and leaders decided addiction care was “more in line with the mission of not-for-profit organizations,” said Stacey Frohnapfel-Hasson, a spokeswoman for the state Department of Alcohol and Drug Addiction Services.

That doesn’t keep CRC from treating Ohio addicts. The company’s East Indiana Treatment Center in Lawrenceburg, Indiana, saw 2,479 patients in 2011, state records show; only 380 of them were Indiana residents. Almost 45 percent, or 1,111 were from Ohio. Most of the others, 987, were from Kentucky.

Part of the reason for the inflow: Indiana’s rules on take- home doses are more lenient than those in Kentucky or Ohio, said Vidya Kora, a past president of the Indiana State Medical Association. Kora, a LaPorte County commissioner and former coroner, has called for turning all methadone clinic operations over to non-profit agencies.

While Indiana adopted legislation in 2008 aimed at mandating marijuana testing for methadone patients, creating a central registry of patients and decreasing the maximum number of take-home doses to 14 from 30, the rules are still less stringent than others, said state Senator Ron Grooms, a Republican whose southern Indiana district includes a CRC clinic in Jeffersonville.

Apparently using marijuana is a problem for methadone patients.  Do they test for beer and bourbon?  For according to marijuana proponents smoking marijuana is no different from drinking beer or bourbon.

When the Netherlands decriminalized marijuana one of the unintended consequences was the drug tourism that it attracted.  And the crime.  Causing them to later demand proof of residency before buying marijuana in their coffee shops.  The more potent marijuana with higher levels of THC has caused further unintended consequences.  Which they want to prevent the sale of.  Complicating their drug policies.  Something Colorado and Washington will have to deal with.  And the states that are in close proximity to them.

If they kept all drugs illegal there would probably be at least one child less that experiments with marijuana.  And moves on to a heroin addiction and a methadone detoxification.  Shouldn’t we do this?  Even if it only saves one child?


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The UFCW wants to unionize Workers at Medical Marijuana Pot Shops

Posted by PITHOCRATES - February 9th, 2013

Week in Review

The unions have always advertised that union made was better made.  Because it was safer.  And of higher quality.  For unions look out for the people.  They protect our kids in school.  And demand high safety standards in industry.  They even have a zero tolerance policy on drug use in the workplace.  Large union contracts on big construction projects have mandatory drug testing to hire in.  And have random-random drug tests monthly.  Once a month on some random day at some random time they call workers in to pee in a cup for testing.  That’s how committed the unions are in combating drug use.  So you never would have expected to see something like this (see Insight: Shrinking U.S. labor unions see relief in marijuana industry by Samuel P. Jacobs and Alex Dobuzinskis posted 2/6/2013 on Reuters).

During the last few years, unions, led by the UFCW [United Food and Commercial Workers union], have played an increasingly significant role in campaigns to allow medical marijuana, now legal in California, 17 other states and Washington, D.C…

Union officials acknowledge that their support stems partly from the idea that the marijuana industry could create hundreds of thousands of members at a time when overall union membership is shrinking…

Industry advocates acknowledge that the legal marijuana industry’s potential to produce jobs is difficult to project. One reason: uncertainty over how the U.S. government will deal with an industry whose product is illegal under federal law but increasingly accepted by state laws.

Since Colorado and Washington state voted to legalize marijuana on November 6, President Barack Obama has said his administration will not pursue recreational pot users in those states.

This is interesting.  If the states don’t like a federal law they just ignore it.  If Colorado and Washington can simply ignore a federal law they don’t like then every state that doesn’t like Obamacare should be able to ignore it, too.  If the unions protest states that ignore Obamacare (the unions endorsed Obamacare) and insist that they follow federal law then so should Colorado and Washington.  Who should immediately re-criminalize marijuana under state law.  To match federal law.

By joining a union, marijuana workers could have more sway in pressing for higher pay and benefits such as healthcare…

The retailers there say they are conflicted – grateful for the legitimacy that labor’s involvement could bring their businesses, but worried that the support could undermine the already shaky financial footing of their small operations.

One marijuana business owner in Denver said he considered aligning with the UFCW but eventually backed away. He said he was worried that having a union shop would hurt the value of his business by driving up employment costs…

Eventually, [UFCW’s Rush] helped to persuade enough labor leaders that the same union that organized Hostess bakery workers could represent people who made pot brownies.

High union labor costs just bankrupted Hostess and put them out of business.  So, yeah, marijuana retailers are worried about higher labor costs if their shops unionize.  There’s a reason why there is so little union membership today.  It is very difficult for a business to stay in business with those high union costs.  The very costs that bankrupted General Motors and Chrysler requiring the government bailout.  If they unionize their costs will go up.  As will their prices.  Giving the non-unionized shops a price advantage.  As well as the drug dealer on the street.

In Los Angeles, UFCW Local 770 is pushing a ballot measure that would set zoning and safety standards for medical pot dispensaries. For years, police and residents have complained about the impact that less-than-reputable medical marijuana dispensaries have on some neighborhoods.

Dispensary workers and owners who have aligned themselves with the union say that some competitors undermine prices and security by flouting labor laws and avoiding taxes.

Decriminalizing marijuana is not the panacea they think it is.  First of all no one wants what drugs attract.  Addicts.  And crime.  Shutting down the nonunion shops won’t take care of that problem.  Because the higher prices at the ‘reputable’ drug retailers will only broaden the market for the drug dealers on the street.  Who are also nonunion.  And can sell their marijuana for less than a pot shop with high union labor costs.

Medical marijuana retailers have provided more than medical marijuana.  People wanting marijuana for recreational use had no problem getting a doctor’s prescription.  Including people who bought marijuana and resold it to kids.  Higher retailer prices at ‘reputable’ pot shops are not going to change that.  It will only raise the street value of marijuana.  Making for a prosperous black market.

The UFCW is obviously backing and lobbying for full decriminalization.  So their members can prosper from a rise in drug use.  And addiction.  It is interesting how the Left attacks cigarette smoking.  Even suing Big Tobacco for the harm their addictive product has done to those who smoke.  Yet as evil as cigarette smoking is there is no such outrage over marijuana smoking.  Which they say is not only harmless but medicinal.  Talk about your double standards.


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LESSONS LEARNED #84: “The bigger and more complex government gets the more unintended the consequences.” -Old Pithy

Posted by PITHOCRATES - September 22nd, 2011

Prohibition had Popular Support from Wives, Progressives and Organized Crime

The Progressive movement began changing our lives in the beginning of the 20th century.  Thanks in large part to the American Civil War.  After a generation of American fathers were killed by the ravishes of war a lot of sons grew up without a manly role model in their lives.  They had no father to learn manly chores from.  To go hunting with.  To beat the crap out of them when they misbehaved.  To toughen them up for the real world.  Instead all they got was the loving and nurturing stuff from their mothers.  And when they grew up they wanted to be mothers, too.  And nurture the American people.  For mother knows best.

When these children grew up they changed government.  Instead of it being the limited government of their fathers they wanted an activist one.  To make our lives better.  More fair.  And safer.  Which is why they supported the temperance movement.  And took it to Prohibition.  To save the American family.  To stop drunken husbands from beating their wives.  To prevent poverty by keeping the money in the family.  And out of the saloons.   To stop the epidemic of venereal disease.  Spread by prostitutes who frequented saloons.  Trying to get some of that family paycheck.  Before the saloon owner got it all.  So Prohibition had popular support.  From wives.  Progressives.  And organized crime.

This was an unintended consequence of Prohibition.  For the law prohibited “the manufacture, sale, or transportation” of booze.  But not the drinking of it.  And when there’s a will there’s a way.  There were people who still wanted to drink.  And could without facing any consequences for it if caught by the law.  So they kept drinking.  And there was a booming demand.  And a willing albeit illegal supply network to meet that demand.  So life was good.  For those who liked to indulge in inebriating beverages.  And for those who provided those inebriating beverages.  Especially the providers.  Because when you make anything illegal that is in high demand means only one thing.  High profits.

There’s a Profit Incentive for Criminals because Illegal Stuff Costs More than Legal Stuff

At first everyone laughed as they flaunted the law.  It was, after all, a victimless crime.  People wanted to buy.  And the underworld wanted to sell.  No harm.  No foul.  For awhile.  Until the gang violence spilled over into the public streets.  When innocents saw this violence up close and personal.  Some even dying in the crossfire.  Like in Chicago.  Owned for a time by Al Capone.  King of the bootleggers.  Who killed off the competition.  The Valentine’s Day Massacre being the tipping point.  When the cops started fighting back.

The FBI eventually got Capone.  On tax evasion.  But it didn’t end the violence.  You know what did?  The repeal of the 18th Amendment.  And letting the people drink again.  Which they really needed during the depressing New Deal programs of FDR.

By decriminalizing alcohol they removed the profit incentive for criminals.  Because illegal stuff costs more than legal stuff.  So there’s no market for bootlegged liquor anymore.  So the gangs turned to another illegal substance.  Drugs.  Whose criminalization has far worse unintended consequences than Prohibition ever had.  We can trace most violent crime in the U.S. to drugs.  From theft to support a drug habit.  To Capone style gang warfare to protect turf.  To the unspeakable horrors on and south of the US-Mexican border.

The Decriminalization of Drugs:  Damned if We Do.  And Damned if We Don’t.

So what is one to do?  Decriminalize drugs?  Not quite the same thing as ending prohibition.  Drugs are a little more potent than alcohol.  Especially methamphetamine.  Crystal meth addiction destroys lives.  Which is why it’s such a lucrative drug.  You can manufacture it anywhere from chemicals.  And it’s addictive.  Addiction provides a steady demand.  And its chemistry provides a readily available supply.  That you can hide.  Unlike Coca fieldsPoppy fields.  Or marijuana fields.

Meth has a strong foothold in the drug-taking community.  Despite it being illegal.  One shudders what would happen if we decriminalized drugs.  Like meth.  It’s potent.  Addictive.  And popular with the kids.  It takes a fake ID to buy alcohol when underage.  Because there are few pushers selling cases of beer and wine coolers on the street.  But if an adult can buy it legally it could be hard for a drug dealer to pass up the underage market.  I mean, there are no empty bottles or cans to trace back to a store.  And if you’re caught carrying, hey, it isn’t illegal.

So we’re damned if we do.  And damned if we don’t.  The war on drugs has a devastating cost on society.  But the drugs are so harmful.  And helping users break their addiction also costs society.  Broken families.  Lost jobs and careers.  Children addicts can no longer provide for.  Infectious disease.  Overdose.  Violence.  Criminal activity.  And decriminalizing drugs won’t make any of that better.

The Poorer You are and the More Children You Have the More Money You Get on Your EBT

America has been fighting another war.  A war on poverty.  Which probably has been more destructive than the war on drugs.  Economist Thomas Sowell blames the welfare state for the destruction of the black family.  By subsidizing failure.  Providing incentives not to succeed.  A disincentive to be responsible.  The very programs to help the poor have destroyed the poor.  With unintended consequences that have destroyed generations.

This video was from 1980.  Fast forward to today and you can see this put in another way.  Perhaps a little less elegantly.  But it reinforces Dr. Sowell’s argument.  There’s a video on YouTube that praises the EBT card in California.  A program to help poor single people with children.  Depending on the number of children and your circumstances, the government loads a dollar amount on the EBT card.  You then use it like a debit card.  At any store that accepts EBT.  The government then reimburses the store owners.

So the poorer you are and the more children you have the more money you get on your EBT card.  As Dr. Sowell pointed out, this may be a disincentive to be responsible.  And the YouTube video shows this.  We should note, though, that the rapper who made this video said that “it was meant to be satirical and poke fun at a real issue.”  Some have called it inappropriate.  You can judge for yourself after you watch the video.  (NOTE:  If you’re at work or are in a public place you probably should wait until you get home to watch this video.  It contains very graphic language (as in the ‘f’ word).  And may be racially insensitive.  Please exercise due discretion when viewing It’s Free, Swipe Yo EBT.)

Government may have Meant Well but the Road to Hell is Paved with Good Intentions

Prohibition made it harder to manufacture and distribute alcohol.  But people still drank.  Because it wasn’t illegal to drink.  At first it was just a game.  Imbibing at the speakeasy.  Then buildings exploded.  And bodies littered the street.  Much like they are in Mexico today.  And along the US-Mexican border.  Because well organized enterprises are trying to meet a lucrative demand north of the border.  That our drug policies made lucrative.  Just like Prohibition made bootlegging a lucrative business.

Unintended consequences are a bitch.  And whenever government tries to fix something we often get something worse.  Prohibition and our war on drugs have given us organized crime to deal with.  And our war on poverty has destroyed poor families.  By incentivizing irresponsible behavior.   And making generations dependent on government.

At every time, though, government meant well.  They always say that they had nothing but good intentions.  But we should remember what they say about good intentions.  That the road to hell is paved with good intentions.


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