GRASS IS GREENER WHEN IT'S FILLING THE COFFERS

Before he was Governor of America's most populous and wealthy state,
before he was the Terminator, Arnold Schwarzenegger was a
refreshingly candid, self-promoting bodybuilder, with a will of iron
and a taste for hedonism.

Thus, when he suggested this week that it was time for Californians
to have "an open debate" on "whether to legalise and tax marijuana
for recreational use," it was hard not to think of a more youthful
governor, taking a big hit on a joint in the 1977 bodybuilding
documentary Pumping Iron.

He later told GQ: "That is not a drug. It's a leaf."

The Governor wants to put everything on the table. Polls suggest
Americans are interested in having this conversation. An ABC News
Washington Post poll in April said 46 per cent favoured legalising
small amounts of marijuana, more than double the number in favour 12 years ago.

A Zogby Poll in May said 52 per cent supported legalising marijuana
as a taxed, regulated substance. And a Field Poll in April said 56
per cent of registered voters in California also favoured legalisation.

But the word that jumps out from Schwarzenegger's comment - and one
that may be reshaping the decades-old debate on the pros and cons of
a drug still categorised by federal statutes as a Schedule 1
substance - is tax. Could it be that after endless talk about the
drug's health, social and public safety impacts, the question of
whether or not to legitimise marijuana will come down to the
pragmatic question: how much money can we make?

This is not a happy time in California. The state is broke, US$60
billion ($101 billion) in the hole and counting. Yet partisan
politics make the prospect of raising money via taxes close to zero.

When the going gets tough, the tough get creative. In March, Nevada
considered whether to tax prostitutes, but baulked 3-4 at a US$5 tax
on sex acts. California is now pondering whether the illicit leaf
might green empty state coffers.

The drug is routinely described in media reports as California's
biggest cash crop, a claim the Los Angeles Times queried in April
with the headline: "Is pot the biggest cash crop? Only if you're on drugs."

And with good reason: no one knows for sure how much the state's
illicit marijuana market is worth. The usual guesstimate is US$14
billion. The national figure is cited as US$100 billion. Given
marijuana is illegal it is reasonable to assume sellers inflate the price.

The US$14 billion figure comes from Jon Gettman, the former president
of the National Organisation for the Reform of Marijuana Laws. Oddly,
it is based on a tonnage estimate from the Bush White House of 10,000
metric tonnes, about triple the figure routinely used by federal authorities.

Gettman suggests the tax, plus savings on policing, could amount to
almost US$42 billion a year. Jeffrey Miron, a Harvard economics
professor, estimated in 2005 that US tax revenue from marijuana would
run to US$10 billion-US$14 billion a year.

"I think the financial crisis in California and across the country
has definitely focused people on the need to regulate marijuana,"
says Dan Bernath, spokesman for the Marijuana Policy Project, which
favours legalisation. "But that's one of several factors. People are
increasingly aware that marijuana prohibition doesn't work as far as
lowering marijuana use rates."

He also cites fears of the violence associated with the illegal
marijuana trade.

While Schwarzenegger suggests debate, Assemblyman Tom Ammiano
introduced a bill, AB390, into the California State Legislature in
February with the intent of legalising the purchase of marijuana by
adults over 21. The bill will reach committee hearings late this year
or early next year.

"California has the opportunity to be the first state in the nation
to enact a smart, responsible public policy for the control and
regulation of marijuana," Ammiano said. Regulating and taxing pot,
says Ammiano, is "simply common sense" and a levy of US$50 per ounce
could generate annual tax revenue of US$1.3 billion. However revenue
can only be collected if - a big if - federal law changes.

"It's a natural evolution of policy towards marijuana, now 13 states
have medicinal marijuana," says Quintin Mecke, Ammiano's press
secretary. "It's not simply economic. It's time to have a rational
public policy regarding marijuana. Clearly the war on drugs has
failed. As for health risks, marijuana is nowhere near as addictive
or fatal as alcohol or cigarettes which are both regulated substances."

He also suggests that, given much higher THC levels in contemporary
strains of marijuana, legalisation of the drug, as with alcohol, will
make it easier to manage sales.

California's debate is taking place as the ground shifts within the
US. During the Bush administration the Justice Department took a hard
line against medicinal marijuana. An advocacy group, Americans for
Safe Access, says 200 dispensaries were raided in the last two years
of the Bush era, with scores of people arrested and awaiting trial.
In March, Attorney General Eric Holder announced that his department
would no longer bust pot clinics that operate legally in 13 states.
But federal agents would raid dispensaries operating as shop fronts
for drug dealers.

To supporters, legalisation is grassroots democracy in action.
"States make a stand, and that drives the conversation," suggests
Mecke. But Beau Kilmer, co-director of the Rand Corporation's Drug
Policy Research Centre, cautions, "It's a false dichotomy to just
think about legalisation versus prohibition." He thinks the Governor
has opened up national discussion on a "huge middle ground" of
change, from decriminalisation to medical marijuana.

The issue has been amped up by epic drug violence in Mexico, and
fears it may spill across the border. This week, in a chilling
disclosure, Arizona police warned that the fugitive head of the
Sinoloa drug cartel, Joaquin "El Chapo" Guzman, had threatened in
March to take a more aggressive stance towards police north of the
border, raising the prospect of fire fights on US territory.

According to the White House Office of National Drug Control Policy
60 per cent of drugs smuggled from Mexico into the US is marijuana,
although this figure is an estimate.

It isn't a stretch to see legalising marijuana might dent cartel profits.

As Secretary of State Hillary Clinton admitted in a mea culpa in
March, the murderous drug trade is driven, in part, by America's
insatiable appetite.

The cartels are a dark mirror of the gangster bloodletting that
accompanied Prohibition in the 1920s, when the US banned alcohol.
That didn't work and proponents of marijuana legalisation contend
Mexico offers a sobering parallel of failure in America's
decades-long war on drugs.

"We're finally starting to realise that demand for illegal drugs is
what's driving the violence in Mexico," says Bernath. "And it is
spilling into this country. The way to mitigate the violence is to
remove marijuana from the illegal market."

But though the American public is shifting towards legalisation, only
14 per cent of Mexicans favour doing so. Nonetheless, the US appears
to be taking a softly, softly approach to marijuana legalisation.

Twelve states have voided jail time for possession of small amounts
of marijuana. In January Massachusetts made possession of an ounce or
less a civil citation, punishable by US$100 fine.

"A lot of old arguments used [against legalisation], such as
marijuana is a 'gateway' drug, have simply proven not true," says
Mecke. "A majority of Americans acknowledge using marijuana at some
time. It's seen as mainstream and relatively not harmful."

This still provokes dissention; a peer-reviewed US scientific review
might clear the air.

Will Ammiano's bill offer Washington a political roadmap if it
becomes law? Bernath believes legalisation is "inevitable." Maybe,
but as Kilmer points out the bill didn't have any co-sponsors.

And if push comes to shove the Obama administration may not want to
upset international anti-drug agreements by legalising marijuana at
home. Meanwhile, as long as federal authorities watch California from
the sidelines, tax collectors might refrain from salivating.

Ultimately, there's a sense that most politicians are waiting to see
which way the smoke blows.