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Posted at 6:00 AM ET, 11/21/2007

Is There a 'Cocaine Shortage'?

By Michael Dobbs

Mexican Marines guard large cocaine haul in November

"It's unprecedented...This is not only the deepest shortage [in the retail cocaine market] but it's the longest we have seen."

--White House Drug Czar John Walters,`interview with Washington Post, November 9, 2007.

"We've never had disruptions of this magnitude before."

--Walters press conference in Bogota, Colombia, November 7, 2007.

A reality check in the "war on drugs." Drug Czar John Walters touted similar disruptions to the cocaine market in the United States back in 2005, but the progress turned out to be short-lived. Is there any reason we should believe him this time? Unfortunately, the statistical methodology used by his office and the Drug Enforcement Administration is extremely opaque.

The Facts

Success in the war on drugs is often measured by examining changes in the price of cocaine, particularly the street price paid by American consumers. If supplies are disrupted, the price will rise. It was therefore reasonable enough for Walters to point to a 44 percent spike in median cocaine prices between January and September as a significant development. The question is whether the price increase is "unprecedented," and how long it will last.

Despite repeated requests, the Office of National Drug Control Policy has declined to provide historical data to support the director's claim about the "unprecedented" nature of the price increase. The only data they will supply goes back to 2005, which is precisely the time when Walters last claimed a major decline in the availability of cocaine.

The chart used by Walters to trumpet his "unprecedented" claim is published below. The data has been drawn from the STRIDE database maintained by the Drug Enforcement Administration, which includes records of thousands of domestic drug purchases by undercover agents at both the wholesale and retail level. The Walters data represents the "mean", or average, price of all these purchases. It is impossible to tell from the way the data is presented how much cocaine has been bought at what level, a crucial distinction since the retail price is typically several times higher than the wholesale price. The prices are all current prices. (Had the prices been adjusted for inflation, the pre-2007 line would be downward, rather than flat.)

Neither Walters' office, nor the DEA, publishes cocaine price data on a regular basis, so historical comparisons are almost impossible. The best available data comes from a 2004 study by the RAND Corporation, which looked at cocaine prices between 1981 and 2003. The RAND analysts used DEA data, but they broke it down to examine different sections of the market, such as less than two grams (a typical consumer purchase), two to ten grams, above ten grams, and so on. They also adjusted prices for inflation, measuring everything in 2002 dollars. The RAND analysis, available here on the drug czar's website, showed a steady decline in the price of cocaine to the American consumer over more than two decades, interrupted by occasional spikes.

Here are the RAND/DEA figures for the price of pure powder cocaine, per gram, based on purchases of two grams or less, between 1981 and 2003:

The most striking point in this graph is the long-term downward trend in retail cocaine prices, despite all the efforts at interdiction undertaken by successive U.S. administrations. By eyeballing the chart, you can see that there were significant price spikes in 1982, 1990, 1994, and 2000, which are comparable to the recent increase. Each spike was followed by another sharp decline, as producers responded to the higher prices. Compared to historical levels, cocaine prices are still very low, particularly if you factor in inflation.

The RAND data is not strictly comparable to the latest DEA data as it measures the retail slice of the market, rather than average purchase prices. (RAND data for other slices of the market show similar peaks and troughs.) But it certainly suggests that policy-makers should be more cautious in using terms like "unprecedented."

"We have had three or four similar increases in the past 20 years," said John Carnevale, director of the drug czar's planning and budget office under George H.W. Bush and Bill Clinton. "Cocaine prices go up and go down, but the long-run trend is one of decline. The increases were temporary, and did not have any effect on the market in terms of reducing demand that we could discern."

One of the principal authors of the RAND study, Peter Reuter, a professor of public policy at the University of Maryland, said he was troubled by the way the DEA and ONDCP (the drug czar's office) kept changing its statistical methodology. "I don't understand why they don't run the series the same way (as RAND), just to remove any doubts that the data is solid. It would be much more convincing if they did that."

I called ONDCP to get its side of the story after the Washington Office on Latin America, which has long been critical of U.S. drug policy, debunked the Walters claim in an analysis, available here. Chief scientist David Murray said he would provide a full set of historical data to support the director's statements, but later withdrew the offer, saying that DEA would not authorize release of the information. He criticized the WOLA analysis, saying the group was comparing "oranges with hubcaps." The ONDCP critique is available here.

Other indicators cited by Murray include a drop in drug use in 2006 among some American workers and "law enforcement reports" suggesting a "cocaine shortage" in some American cities.

There is considerable skepticism about the drug czar's data in Congress, among both Democrats and Republicans. The co-chair of the Senate Caucus on International Narcotics Control, Sen. Charles Grassley (R-IA), noted that the Department of Justice recently reported that "cocaine availability could return to normal levels in late 2007 and early 2008," an assessment that appears to undermine the upbeat claims of the drug czar.

"I hope we are making progress, but I am not ready to crow yet," said Grassley.

The Pinocchio Test

Drug Czar John Walters has failed to provide historical data to back up his claim of an "unprecedented disruption" to the cocaine market. That would appear to end the argument, but I understand this is a complicated subject, so I would like to hear your views before issuing a verdict. It would be good if we could drag some more data out of DEA and ONDCP. If they think they have a valid case, they should put their data where their mouth is.


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By Michael Dobbs  | November 21, 2007; 6:00 AM ET
Categories:  Gov Watch, Health, Other Foreign Policy, Social Issues, Verdict Pending  
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