As war continues in the aftermath of Russia’s invasion of Ukraine, interest by policymakers and the media has spiked in the America COMPETES Act, legislation that would purportedly help the U.S. better compete with powers such as Russia and China. My Competitive Enterprise Institute (CEI) colleagues and I have mostly panned that bill, which passed the Democrat-controlled House on a largely party-line vote about two weeks before the Russian invasion. Iain Murray, Wayne Crews and others at CEI have pointed out that many of the bill’s provisions will not achieve its stated goal of increasing American competitiveness but would instead undermine that goal.
However, during the House floor debate before the bill’s passage, one provision added to the bill actually would increase U.S. competitiveness by cutting red tape that hobbles exports from a growing American industry. Ironically, even though this provision has widespread bipartisan support, it became the punchline for Senate Minority Leader Mitch McConnell (R-KY) in describing all that was supposedly bad in the bill.
“China has been steadily building up its military and economic might, and the Democrats’ answer is to help Americans get high,” McConnell exclaimed on the Senate floor. But the provision did nothing of the kind. It simply clarifies federal law to allow banks and credit unions to provide financial services to marijuana businesses following the laws of the states in which they operate.
The provision stems from the Secure and Fair Enforcement (SAFE) Banking Act, which passed the House in 2021 as a stand-alone bill 321 to 101, gaining the support of nearly all Democrats and 106 House Republicans. And as my colleague Matthew Adams points out here, bipartisan support for the bill’s approach is further demonstrated by the fact that former President Donald Trump, former Attorney General Bill Barr, and former Treasury Secretary Steven Mnuchin all expressed support for liberalizing marijuana banking.
Yet the Senate leadership of both parties seems to be the problem – from Minority Leader McConnell pooh-poohing the act to Senate Majority Leader Chuck Schumer (D-NY) holding it hostage to a more comprehensive approach which would package banking liberalization with efforts to address the injustices of the Drug War. The criminal justice issues stemming from the Drug War, including lengthy prison sentences for nonviolent offenses, are real. But unnecessarily prolonging the debanking of legal marijuana firms simply perpetuates the Drug War’s injustices further.
Passing the SAFE Banking Act would have multiple benefits. Today, banks and credit unions are reluctant to offer basic financial services to legal marijuana firms – from holding deposits to issuing credit and debit cards – because marijuana production is still illegal under federal law, even if it is allowed under state law. Thus, the financial institutions fear that they could be charged with money laundering or otherwise violating federal law if they serve firms engaged in any type of commerce involving marijuana.
Because pot firms often cannot put their money in banks nor utilize credit and debit cards, they are forced do business in cash and hold large volumes of cash. This in turn attracts crime. As described by Politico, “Lacking bank accounts, growers and retailers are forced to hold large stashes of cash on premises, a magnet for thieves and robbers.” The resulting crime has had tragic results, such as the shooting of a citizen last year who tried to stop an attempted break-in at a marijuana dispensary in Colorado Springs, CO.
The SAFE Banking Act has attracted widespread grassroots support and received plaudits from longtime marijuana legalization advocates such as NORML, free-market groups such as CEI and Americans for Prosperity, and financial trade groups like the Independent Community Bankers of America and the Credit Union National Association. The groups all tout the obvious benefits of reducing violent crime as well as giving banks and credit unions legal certainty when dealing with legitimate businesses.
But the legislation has benefits beyond even those. Namely, it would actually increase U.S. competitiveness, the stated goal of the COMPETES Act to which it is now attached. In McConnell’s Senate floor tirade, he scoffed at the notion that providing legal clarity for marijuana banking could in any way help U.S. firms become more competitive. “Needless to say, this is not a winning strategy for global competition between great powers,” he declared.
Read the full article at Forbes.