What America's Users Spend On Illegal Drugs, 1988 - 1993

Executive Office of the President Office of National Drug Control Policy

Lee P. Brown, Director

Spring 1995

Notes & Research by: Debby Moore, Founder Kansas Environmentalists for Commerce in Hemp State Education Center Kansas Political Action Headquarters 2742 E. 2nd Wichita, KS, 67214 (316) 681-1743 hemplady@wichita.fn.net

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Executive Summary 3 2-In 1993, Americans spent $49 billion on these drugs: $31 billion on cocaine, $7 billion on heroin, $9 billion on marijuana, and $2 billion on other illegal drugs and legal drugs used illicitly. 4-Between 1988 and 1993, the amount spent on marijuana has remained constant. 9-Money is not the only form of payment for illicit drugs. Dealers often keep drugs for personal use, users help dealers in exchange for drugs, and users perform sex for drugs (especially crack cocaine). When such "income in kind" is valued at current retail prices, an additional $3 billion to $5 billion must be added to the total for cocaine and an additional $2 billion to $3 billion to the total for heroin. In this report, all expenditures are in 1994 dollar equivalents. These expenditure estimates do not include income in kind.

4 1-It should be noted that the range for cocaine expenditures derived from the supply model is larger than the consumption-based expenditure estimates. There are two reasons for this. First, the supply model does not take into account most losses and consumption within the producer countries or State and local seizures in this country. Second, the United States may transship more drugs to Europe than our model assumes. Had we been able to account for these factors, the $33 billion to $90 billion supply-based estimate would have been lower. Still, the estimates based on drug consumption are remarkably close to those based on drug supply. *Consider this statement as a disclaimer.* 2-Although the estimates provided in this paper are somewhat imprecise, they are sufficiently reliable to conclude that, according to consumption-based estimates, the trade in illicit substances ranged from $49 billion to $66 billion between 1988 and 1993. However, the costs to society from drug consumption far exceed this amount. Drug use fosters crime; facilitates the spread of catastrophic health problems, such as hepatitis, endocarditis, and AIDS; and disrupts personal, familial, and legitimate economic relationships. The public bears much of the burden of these indirect costs because it finances the criminal justice response to drug-related crime, a public drug-treatment system, and anti-drug prevention programs. *Cannabis does none of these things. The government manufactures the problem.* 3-The importance of these estimates is not that they provide an accurate accounting of the retail sales from illicit drugs and from legal drugs used illegally. The estimates have an appreciable margin of error, and it seems unnecessary to have a study that says that the illicit drug trade is immense. Public officials already know that. *Consider this as another disclaimer.* 5-Perhaps it has, but other indicators suggest otherwise. According to the National Household Survey on Drug Abuse (NHSDA), the number of people who use cocaine on a weekly basis fell from 884,000 in 1988 to 642,000 in 1993. Best estimates based on the Drug Use Forecasting (DUF) data suggest that there were about 2.1 million hardcore cocaine users in 1988 (another 200,000 were incarcerated) and about 1.9 million in 1993 (*another 400,000 were incarcerated). In contrast to DAWN, these estimates suggest that the number of hardcore cocaine users has remained fairly constant over the last six years.

5 1-Indeed, cocaine prices have fallen from roughly $290 per pure gram in 1988 to $240 per pure gram in 1993. This decrease might be attributed to the small decrease in the number of hardcore users and to a large decrease in the number of occasional users. (According to the National Household Survey on Drug Abuse, the number of occasional users fell from about 7.3 million in 1988 to about 4.0 million in 1993.) Total U. S. Expenditures on Illicit Drugs, 1988-1993 (Dollars are stated in billions)


Cocaine .......................$41.1 .......$42.5 .......$38.9 ......$35.2 ......$33.1 .......$30.8

Heroin .........................$11.2........$11.5........$10.3.........$8.2.........$7.0..........$7.1


Other Drugs....................$3.2..........$2.8.........$2.3..........$2.4........$2.2..........$1.8

Expenditures on Dangerous Legal Drugs

Tobacco $43.0 Alcohol $71.9

Should be noted that totals on Tobacco & Alcohol expenditures are most difficult to obtain.

6 2-Bureau of International Narcotics Matters, International Narcotics Control Strategy Report (Washington, D.C.: Department of State Publication, April 1994 and previous years); Royal Canadian Mounted Police (RCMP), National Drug Intelligence Estimate, 1994 (and previous years) and International Narcotics Control Board, Narcotic Drugs Statistic for 1991 (and previous years).

7 2-To estimate the retail sales value of illicit drugs consumed in the United States, we examined both the demand for and the supply of drugs. The demand or consumption approach estimates the number of drug users, how much they spend on drugs, and the amount of drugs they consume. The supply approach estimates the volume of drugs available for consumption. To determine the amount of drugs available in this country and the retail value of these drugs, we estimated the amount of base crop raised in producer countries, and reduced it by the amounts lost, seized, or consumed in other countries and by the amount seized in or shipped through the United States to other countries. We then multiplied the result by retail prices. *Formula* 3-For a number of reasons, neither of these approaches yields precise estimates of the yearly retail value of the illegal drug tread. First, the secretive nature of drug crop production and manufacturing prevents accurate assessments of drug production. Second, with some exceptions, drug dealers and their customers transact business away from public view. Finally, drug users often misrepresent their drug use when interviewed. Thus, estimates of retail expenditures must be based on incomplete, inaccurate, and often inconsistent data, as well as assumptions that occasionally lack strong justification. *Disclaimer*

9 5-7) Evidence that a large segment of the drug-using population is excluded from the NHSDA comes from a number of sources. According to the 1991 NHSDA, drug use is twice as high among respondents who lived in households considered unstable than it is among those who lived in more stable environments, indicating that the NHSDA's bias toward reporting on stable households is like to miss many heavy drug users. Available evidence indicates that NHSDA's numbers understate heavy drug use. A. Harrell, K. Kapsak, I. Cisin, and P. Wirtz, "The Validity of Self-Reported Drug Use Data: The Accuracy of Responses on Confidential Self-Administered Answer Sheets", paper prepared for the National Institute on Drug Abuse, Contract Number 271-85-8305, December 1986. *These people would lie!* 7-Additional evidence also comes from interviews with nearly 35,000 intravenous drug users who were contacted by National Institute on Drug Abuse-sponsored researchers as part of an AIDS outreach project. Abt Associates' tabulations show that an estimated 40 percent of these drug users lived in unstable households and about 10 percent could be considered homeless. 8-Finally, a comparison of the demographic characteristics of the heavy cocaine users in the NHSDA with those of heave cocaine users based on other sources (the Drug Use Forecasting program, the Drug Abuse Warning Network, and the National AIDS Demonstration Research project) shows a marked difference in populations. Incomes are greater, unemployment is lower, and there are fewer respondents using more than one drug in the NHSDA population. D.Hunt and W. Rhodes, "Characteristics of Heavy Cocaine Users Including Polydrug Use, Criminal Behavior, and Health Ricks," paper prepared for Office of National Drug Control Policy (ONDCP), December 14, 1992. *Acknowledges that some of these are just regular folk.*

10 4-9) Hardcore users consume illicit drugs at least on a weekly basis and exhibit behavioral problems stemming from their drug use. Hardcore users cannot be identified precisely from available data. using DUF data, a hardcore users is one who used illicit drugs on ten or more days per month. Behavioral problems are implied by the fact that such users have all been arrested at least once. *Bad laws!* 5-10) Because urinalysis will detect cocaine and heroin use within two to three days of its consumption, it is unlikely that urinalysis will fail to identify an individual who uses cocaine on at least a weekly basis. 6-11)...A Bureau of Justice Statistics study reports "In State correctional facilities, 3.6 percent of the tests for cocaine, 1.3 percent for heroin, 2.0 percent for methamphetamine, and 6.3 percent for marijuana found evidence of drug use. In Federal prisons, 0.4 percent of the tests for cocaine, 0.4 percent for heroin, and 0.1 percent for methamphetamine, and 1.1 percent for marijuana were positive."

11 2-12)DUF data are used to produce estimates of the number of adult heavy users who are at risk of arrest during a given year. However, some hardcore drug users manage to avoid criminal justice involvement, perhaps because their drug purchases are discreet and their consumption is private.

13 1-Hardcore cocaine users spent more than $220 a week on cocaine and hardcore heroin users spent just over $250 a week on heroin in 1993.

16 3-At the opposite extreme, hardcore users who report their use in the NHSDA appear to consume less than half as much cocaine as hardcore users represented in the DUF data. Their expenditures might be considered a low estimate of typical cocaine spending by hardcore users. Giving more weight to be NHSDA expenditure figures would reduce the amount reported in Table 3 by half. However, it is difficult to reconcile estimates that are half as large with the amount of heroin and cocaine that enters the country.

17 25)-Reuter and Kleiman estimated that the market for cocaine was about $8 billion in 1982. Because of the accelerating use of cocaine from that time until the mid 1980s and after accounting for inflation, it is not surprising that their estimate is less than the figure reported here. Their $8 billion estimate for heroin expenditures is more difficult to reconcile with what is reported here for two reasons. First, the number of heroin users has not fallen much over the last decade. Second, the price of heroin has dropped dramatically. We would expect their estimates to be greater than those reported here, but that is not the case. P. Reuter and M. Kleiman, "Risks and Prices: An Economic Analysis of Drug Enforcement," in Crime and Justice: An Annual Review of Research, volume 7, ed. M. Tonry and N. Morris (Chicago: University of Chicago Press, 1986), 194. Carlson, who conducted a study of the underground economy for the Internal revenue Service, reported that an estimated $11 billion was spent on cocaine in 1982. K. Carlson et al., "Unreported Taxable Income for Selected Illegal Activities: Volume I: Consensual Crimes," paper prepared for the Internal Revenue Service under contract number TIR-81.57, September 1984. In an update of his study, Carlson estimated that cocaine expenditures increased from $5.8 to $6.6 billion between 1988 and 1991. K. Carlson, "Unreported Illegal Source Income 1983-1995," paper prepared for the Internal Revenue Service under order number 89-11565, May 15, 1990. Since he relied heavily on the NHSDA, and because his estimates are not adjusted for inflation, it is not surprising that his estimate is much lower than the one reported here. Carlson's estimate of heroin expenditures, based on the National Narcotics Intelligence Consumers Committee estimates for 1982, was in keeping with Reuter and Kleiman's $8 billion figure. His updated study, based on NHSDA data, put that figure roughly $7 billion a year between 1988 and 1991. Thus, his estimates are consistent with those reported here.

20 1-More Americans use marijuana than either cocaine or heroin. During 1993, for example, about 9 million Americans used marijuana or hashish at least once in the month before the survey. This number has decreased 23 percent since 1988, when it was almost 12 million. 2-We calculated an individual's total number of joints used each month by multiplying the number of days of marijuana use in the past month by the number of joints used per occasion. For those without valid answers for these questions, we imputed the total monthly use. The average number of marijuana joints used in the past month has remained about the same (16.9 to 17.8 joints) 3-The average amount of marijuana used in the past month was calculated from several questions in the survey. This number has changed little over time - about 0.014 ounces per joint. 4-However, the average number and weight of joints used by those who smoke marijuana cannot tell the entire story about trends in marijuana use, because marijuana's THC content has changed over time. Delta-9 tetrahydrocannabinol (THC) is marijuana's primary psychoactive chemical. According to a study conducted at the University of Mississippi the average THC content of sinsemilla was at a peak in 1990 and 1991. That average fell from 10.5 percent in 1991 to 8.6 percent in 1992, and to 6.0 percent in 1993. The THC content of commercial-grade marijuana remained fairly constant at less that 4.0 percent from 1985 to 1992, but jumped to about 5.4 percent in 1993. Because we do not know the mix of sinsemilla and commercial-grade marijuana used by the typical user, we cannot know, for certain, whether users are smoking more or less marijuana as measured by THC content. 21-1-price is the final factor in calculating the total value of marijuana consumption. Marijuana prices increased throughout most of this period, but fell in 1993. These prices are for a one-third ounce purchase. 2-The factors required to calculate total marijuana consumption are shown in Table 6. In 1993, average users consumed 17.8 joints a month. The average amount of marijuana used per joint equaled 0.0136 ounces. At a retail price of $342 an ounce, these users spent an average of $83 each month ($998 a year) on marijuana. This number, multiplied by the 9.0 million monthly users, yields a consumption estimate of $9.0 billion. These estimates of total spending are in line with estimates by others. 22 1-Nevertheless, these estimates are probably low. Users are likely to under report socially disapproved behaviors even when those behaviors are legal. They would seem to have even more incentive to under report illegal behaviors. Some readers might find it reasonable to inflate these estimates for marijuana consumption by about one-third.

38 1-Marijuana It is difficult to develop an estimate of the size of the U.S. retail market for marijuana from estimates of available supply. First, the amount of marijuana that Americans cultivate for personal use is impossible to estimate. Second, even though a large amount of the domestic marijuana market is grown in the United States, countries in South and Central America, the Caribbean, Asia, North Africa, and the Middle East also supply cannabis to the domestic market. Unfortunately, the data needed to develop better estimates are not available, and without the independent ability to assess the reliability of the marijuana cultivation estimates, we cannot develop a plausible supply-based estimate of the retail value of the marijuana market in the United States.

A-14 5-The number of days that a respondent consumed each of four categories of drugs were the independent variables. We collapsed drugs into four general categories: COCAINE (powdered and crack), HEROIN (Black tar and other), MARIJ (marijuana and hashish - combined in the DUF interview), and OTHER. Cocaine, heroin, and marijuana were the only drugs consumed by a large percentage of the arrestee population. OTHER comprised a large number of infrequently consumed substances. Except for MARIJ, each variable comprised at least two drugs.

*Pages A-31 to A-37 APPENDIX 4 Imputations for missing data on marijuana use. Consists of formulas they invented to determine how much cannabis is consumed in the United States, and what persons paid for it.