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Time is called on Oregon’s decriminalisation experiment

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Florists are usually cheerful places. But Gifford’s Flowers, in downtown Portland, has been going through it of late. It’s been broken into three times and employees have been attacked and even bitten, says Jim Gifford, who has been running the store for half a century. Mr Gifford blames Oregon’s decriminalisation of the possession of drugs, which, he says, has led to more “people in drug episodes” coming to his shop. “A blue city in a blue state should be leading,” the lifelong progressive Democrat says. “But also not forgetting about the people that work hard and play by the rules.”

In 2020 Oregonians voted to decriminalise the possession of small amounts of hard drugs, including fentanyl, methamphetamine and heroin. It was the first (and so far only) state in the country to do so. The change was a massive experiment in treating addiction as a public-health problem. But the state has now concluded that the experiment failed. This month, in the face of ever-increasing overdose rates and public complaints such as Mr Gifford’s, the Democratic-controlled legislature overwhelmingly passed a measure recriminalising the possession of drugs. The governor, Tina Kotek, has said she will sign it.

Overdose deaths have spiked in Oregon, increasing by 42% in the year to September 2023 (compared with a national increase of 2%). Researchers disagree on how much decriminalisation versus the spread in fentanyl is to blame, but none thinks that the state’s experiment managed to decrease deaths. Oregonians are frustrated. Open-air drug use has become particularly blatant.

The replacement law makes the possession of a small amount of drugs a misdemeanour crime punishable by up to 180 days in jail. It does provide paths to addiction care, by offering drug offenders the chance to go directly to detox facilities instead of jail (and to try it again if the first time doesn’t work). “It’s time to reset our guardrails,” Andy Mendenhall, the head of Central City Concern, an addiction-services provider in Portland, told lawmakers. He pointed to people who found choosing between prison and treatment to be a “powerful part of their pathway of recovery”.

Praising the bill, Paige Clarkson, the district attorney in Marion County, believes that the new provisions will allow prosecutors to focus on drug dealers while prioritising treatment for addicts. “Police, sheriff’s deputies, district attorneys, we don’t want to criminalise addiction,” she says. “We want to use the criminal laws to motivate those individuals to get healthy.” Oregon’s new regime would still be quite enlightened.

But its drug experiment is likely to become a cautionary tale anyway, says Floyd Prozanski, the state senator who led the charge in enacting it. Although he still believes in the mission, Mr Prozanski recognises that advocates are going to “have to rebuild the confidence of people not only in Oregon, but around the country. And realise that when we implemented it, we did it wrong.”

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Economics

Germany’s election will usher in new leadership — but might not change its economy

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Production at the VW plant in Emden.

Sina Schuldt | Picture Alliance | Getty Images

The struggling German economy has been a major talking point among critics of Chancellor Olaf Scholz’ government during the latest election campaign — but analysts warn a new leadership might not turn these tides.

As voters prepare to head to the polls, it is now all but certain that Germany will soon have a new chancellor. The Christian Democratic Union’s Friedrich Merz is the firm favorite.

Merz has not shied away from blasting Scholz’s economic policies and from linking them to the lackluster state of Europe’s largest economy. He argues that a government under his leadership would give the economy the boost it needs.

Experts speaking to CNBC were less sure.

“There is a high risk that Germany will get a refurbished economic model after the elections, but not a brand new model that makes the competition jealous,” Carsten Brzeski, global head of macro at ING, told CNBC.

The CDU/CSU economic agenda

The CDU, which on a federal level ties up with regional sister party the Christian Social Union, is running on a “typical economic conservative program,” Brzeski said.

It includes income and corporate tax cuts, fewer subsidies and less bureaucracy, changes to social benefits, deregulation, support for innovation, start-ups and artificial intelligence and boosting investment among other policies, according to CDU/CSU campaigners.

“The weak parts of the positions are that the CDU/CSU is not very precise on how it wants to increase investments in infrastructure, digitalization and education. The intention is there, but the details are not,” Brzeski said, noting that the union appears to be aiming to revive Germany’s economic model without fully overhauling it.

“It is still a reform program which pretends that change can happen without pain,” he said.

Geraldine Dany-Knedlik, head of forecasting at research institute DIW Berlin, noted that the CDU is also looking to reach gross domestic product growth of around 2% again through its fiscal and economic program called “Agenda 2030.”

But reaching such levels of economic expansion in Germany “seems unrealistic,” not just temporarily, but also in the long run, she told CNBC.

Germany’s GDP declined in both 2023 and 2024. Recent quarterly growth readings have also been teetering on the verge of a technical recession, which has so far been narrowly avoided. The German economy shrank by 0.2% in the fourth quarter, compared with the previous three-month stretch, according to the latest reading.

Europe’s largest economy faces pressure in key industries like the auto sector, issues with infrastructure like the country’s rail network and a housebuilding crisis.

Dany-Knedlik also flagged the so-called debt brake, a long-standing fiscal rule that is enshrined in Germany’s constitution, which limits the size of the structural budget deficit and how much debt the government can take on.

Whether or not the clause should be overhauled has been a big part of the fiscal debate ahead of the election. While the CDU ideally does not want to change the debt brake, Merz has said that he may be open to some reform.

“To increase growth prospects substantially without increasing debt also seems rather unlikely,” DIW’s Dany-Knedlik said, adding that, if public investments were to rise within the limits of the debt brake, significant tax increases would be unavoidable.

“Taking into account that a 2 Percent growth target is to be reached within a 4 year legislation period, the Agenda 2030 in combination with conservatives attitude towards the debt break to me reads more of a wish list than a straight forward economic growth program,” she said.

Change in German government will deliver economic success, says CEO of German employers association

Franziska Palmas, senior Europe economist at Capital Economics, sees some benefits to the plans of the CDU-CSU union, saying they would likely “be positive” for the economy, but warning that the resulting boost would be small.

“Tax cuts would support consumer spending and private investment, but weak sentiment means consumers may save a significant share of their additional after-tax income and firms may be reluctant to invest,” she told CNBC.  

Palmas nevertheless pointed out that not everyone would come away a winner from the new policies. Income tax cuts would benefit middle- and higher-income households more than those with a lower income, who would also be affected by potential reductions of social benefits.

Coalition talks ahead

Following the Sunday election, the CDU/CSU will almost certainly be left to find a coalition partner to form a majority government, with the Social Democratic Party or the Green party emerging as the likeliest candidates.

The parties will need to broker a coalition agreement outlining their joint goals, including on the economy — which could prove to be a difficult undertaking, Capital Economics’ Palmas said.

“The CDU and the SPD and Greens have significantly different economic policy positions,” she said, pointing to discrepancies over taxes and regulation. While the CDU/CSU want to reduce both items, the SPD and Greens seek to raise taxes and oppose deregulation in at least some areas, Palmas explained.

The group is nevertheless likely to hold the power in any potential negotiations as it will likely have their choice between partnering with the SPD or Greens.

“Accordingly, we suspect that the coalition agreement will include most of the CDU’s main economic proposals,” she said.

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