Lyric discussion by parenthetical 

This song is indisputably about heroin and no, you do not have to be a drug user to "get" it. You just need to be well-read enough to get the references (which is NOT the same thing as saying you need to be "smart" enough). Here's my line-by-line interpretation:

Your hand on his arm The haystack charm Around your neck

==> The You and Him are ambiguous at this point. The haystack charm evokes the image of a common charm necklace with a charm in the shape of a haystack on it. That said, there's some symbolism/foreshadowing at work here. "Your hand on his arm" could reference basic familiarity/intimacy between friends or lovers, but it also conjures up images of "your hand" directing or leading "his arm", influencing him. Combine that image with the haystack "around your neck", not unlike a burden that drags you down like the archetypal "albatross" (see Coleridge's classic poem the "Rime of the Ancient Mariner" for the reference, or the Iron Maiden song if you must...). Peeling back the onion further, one could note that "your hand" is on his arm, the very place where the needle hidden in the haystack goes in the heroin interpretation of the song. Granted, we're only one stanza into the song, so much of this interpretation depends on what we learn later in the song, but Elliott chooses his words carefully so these things are not likely to be coincidental.

Strung out and thin Calling some friend Trying to cash some check

He's acting dumb That's what you've come To expect

==> Basic enough. Strung out on heroin, trying to cash a bad check to get money to score. The addict exhibits poor judgment and a pattern of bad behavior that alienates friends and loved ones who are continually let down by the addict's behavior. (Compare this to the lyrics of "Crumbling Down" by Polvo, which is an excellent song about drug addiction from the point of view of the addict's friend as seen from across that proverbial last burning bridge [artists.letssingit.com/polvo-lyrics-crumbling-down-xbwf76n].) But who is "you"?? We shall see, we shall see.

Needle in the hay Needle in the hay Needle in the hay Needle in the hay

==> An obvious drug reference but also a thematic reference to the soul-searching futility and desperation that haunt the addict's life.

He's wearing your clothes Head down to toes A reaction to you

==> This is where the He/You references get difficult and where we need to take an interpretive leap. It makes no sense to say "he's wearing your clothes" unless we look at the he/you division as a dichotomy within the narrator's self. Let's try this on for size: "You" is the the troubled past of the 'Elliott'/narrator character. (We all know Elliott was abused as a child.) This character's demons are what push him ("your hand on his arm") to drugs. "He's wearing your clothes" is not to be taken literally, but more to be a shorthand for saying that "you" (the demons) inhabit "him" the addict, completely and who "he" is, the strung-out dumb acting suggestible junkie, is literally a reaction to "you", the demons of his troubled past. It really seems to work as an interpretive frame, and would be a sadly common backstory for a drug addict.

You say you know what he did But you idiot kid You don't have a clue

==> I think there are layers of meaning here, or a couple of competing possible interpretations. First, keeping with the you/him dichotomy within the narrator, the "you" is the abused child part of the narrator's persona, fully able to feel the pain, but nowhere near mature enough to understand the world of hurt that "he" has opened himself up to by "dancing with Mr. Brownstone" (forgive me for the G'n'R reference...). Second, the "he" here could also refer to the abusive stepfather of Elliott's actual past, and while the adolescent or emotionally stunted part of the narrator knows what he "did" literally, he has no capacity to appreciate how much it screwed him up and drove him to destroy his life with drugs.

Sometimes they just Get caught in the eye You're pulling him through

==> "You" is trying to pull "him" through the eye of the needle. Symbolically, threading a needle is a common image for doing something painstakingly difficult. The damaged adolescent "you" is trying to pull the adult "him" through the difficulties of his life and out the other side, but, as the song says, sometimes you just get caught.

Needle in the hay Needle in the hay Needle in the hay Needle in the hay

Now on the bus Nearly touching This dirty retreat

Falling out 6th and Powell A dead sweat in my teeth

==> You and Him are gone. The dichotomy of the internal struggle gives way to mememememe, the internal drumbeat of the junk-sick addict. The narrator is admitting defeat. He's on his way to score and he can nearly feel it in his blood (literally). The "dirty retreat" is falling off the wagon, or simply the decision to give in to the siren call of the junky nurse. The need for a fix is so intense he can feel it in his teeth.

Going to walk, walk, walk Four more blocks Plus the one in my brain

Down downstairs To the man He's going to make it all ok

==> Multiple Velvet Underground references here, and as well there should be since VU were the original junky band. The "walk, walk, walk" repetition is, I believe, a winking homage to the classic Velvet underground song of drug use and self-destruction "Run, Run, Run". The "man" (as in the Velvet's "I'm Waiting for the Man") is the dealer who is going to "make it all ok" ironically by making it all much, much worse.

I can't beat myself I can't beat myself And I don't want to talk

I'm taking the cure So I can be quiet Whenever I want

==> The ultimate admission of defeat, which succumbing to drug addiction truly is. This is "him" admitting that he can't beat his own demons. Rather than contemplate that failure, that personal tragedy, he shoots up so he can "be quiet" (ie. not have to listen to the demons in his head). He ironically refers to it as "taking the cure", which is a Victorian-era reference to visiting a health spa or sanatorium, or, more specifically, to visiting such a place for an extended period to cure tuberculosis. For Elliott, taking the cure does not mean ridding the body of the cancer within, but of giving the self over totally to that self-destruction. Moving and sad.

So leave me alone You ought to be proud That I'm getting good marks

==> The "good marks", which he positively hisses out in the song, is a sly reference to track marks from shooting up. I believe he is telling his inner "you" to leave him alone since he drove him to the drug use in the first place. Don't judge me, he's saying, it was your hand on my arm, I'm this way in "reaction to you". This is the only way I can escape....

Almost too sad for words. What a great, great song.

I think this is an excellent interpretation :)

This interpretation literally is the best i think anyone could hope for! So well written that it really affected me and helped me to understand more of what the song already did to bring me here :P Someone in 2010 sat inside Elliott Smiths head......

i think when hes saying He's wearing your clothes, Head down to toes, A reaction to you that it has more to do with junkies always staying by other peoples couch's and stealing there clothes and stuff like with the checks as an ex user I try and help my Friends but all that happen's is they right themselves checks with my checks and steal my clothe's or any thing they could to score a hit Just my 2 cents

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