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In casinos from coast to coast, in slot parlors from the Great Lakes to the Gulf Shore, at racetracks and in lotteries across the country, Americans will legally gamble away”that is, lose”nearly $90 billion this year.
How times change. A hundred years ago, gambling was a national vice almost universally outlawed. A mere 30 years ago, Americans could only gamble legally in Nevada and Atlantic City. Yet, since the early 1990s, state-sanctioned gambling has exploded. Rural Connecticut and a once-backwater patch of Mississippi are gambling oases, Iowa has a small fleet of riverboat casinos, and a gambling parlor has been proposed for Buffalo, N.Y. There are casinos in 32 states, and every state except Hawaii and Utah offers some form of legal betting. The public seems eager to play: The take for commercial casinos alone has more than doubled since 1995, from $16 billion to nearly $33 billion last year.
Is this really a good idea?
The gambling industry, of course, says yes, arguing that casinos, especially those that become destinations for gamblers, produce both private jobs”for dealers, tellers, waiters and the like”and public cash from taxes on revenues, agreements with American Indian tribes and the spillover from tourists. Depending on what type of gaming it is, says Frank J. Fahrenkopf Jr., president and CEO of the American Gaming Association (AGA), in most cases there s been capital investment and economic development. There have been jobs produced and tax revenues created.
Revenues For Everybody
Exhibit A is Tunica, Miss., 30 miles downriver from Memphis”a place so wretchedly poor that the Rev. Jesse Jackson in the 1980s called it America s Ethiopia. Since its first casinos opened in 1991, however, the county budget has ballooned from $3 million to $51 million, and schools have been enriched by $50 million. There are new roads, water mains, sewers, a $26 million riverfront park and $10 million in recreational facilities”almost all paid for by tourists from places like Memphis, Little Rock, Chicago and St. Louis, who drop $1.2 billion a year in Tunica s nine casinos.
The gaming industry really created revenues for everybody, says Clifton Johnson, a native who left Tunica in the 1980s for better fortunes in Dallas, came home after the casinos opened and is now the county administrator. If you look at how the community has grown and provided job opportunities where there were none, it s pretty much been on the upside. And the downside of being America s Southern gambling mecca? Not much, he says.
Officials in smaller markets also claim benefits from legal gambling. According to an AGA-funded survey of elected officials and local leaders in areas with relatively new casinos, 79% believed the casinos had been positive for their communities.
The biggest appeal for state and local governments? Easy money”and lots of it. Pennsylvania, for example, is allowing 61,000 slot machines in 14 parlors. The commonwealth will collect 55% of the gross, which”along with the $50 million up-front fee”comes to an estimated $1.7 billion a year, almost two-thirds of which will be used to lower property taxes.
Doug Harbach, now the director of media relations for the Pennsylvania Gaming Control Board, was opposed to the looming slots at first. Then he ran for the House of Representatives in 2004. (He lost.) I went door-to-door, and people kept saying, Doug, what can you do about our taxes? he recalls. I got off my moral high horse. If people go into that casino and pull that lever, and some of the money goes to help taxpayers, then I m for it.
Put another way, some Pennsylvanians, and perhaps a few tourists, will lose $3 billion a year so other Pennsylvanians can get a break on their tax bills and a handful of corporations can reap big profits. (One hint of the private-profit potential: Even with the usurious cut for the state and the up-front fee, companies are fighting for the licenses.)
So, ask the question again from that perspective: Is all this gambling really a good idea?
The Toll Gambling Takes
No, say critics. The costs, they insist, are enormous”more than three times any perceived benefit, argues Earl L. Grinols, the distinguished professor of economics at Baylor University. Gambling leads to increased crime, to suicides and to people ruining their lives when they get caught up in it, he says. If the damage were spread evenly among all of us, there d be no gambling.
Several studies in the last decade have documented a connection between the proliferation of casinos and people going broke. SMR Research, for example, found that the bankruptcy rate was 11.2% higher in gambling counties”and 29% higher if there were five or more gambling halls. Researchers at Creighton University in Omaha, Neb., found that personal bankruptcy rates in counties with casinos grew by more than 63% above comparable counties without casinos. Tom Coates, who founded Consumer Credit of Des Moines, a counseling agency, estimates that almost 15% of the people who come to his office for help each month gambled themselves broke. In most cases, repayment isn t an option, he says. They ve dug the debt hole too deep. For them, bankruptcy is the only choice.
There also are rafts of studies cataloging rises in crime, domestic violence and other social ills, as well as suicide rates. (The AGA disputes the various studies and points to others that reach opposite conclusions.) With an increase in gambling, you get an increase in problem gambling”they just go together, says Marvin Steinberg, a psychologist and executive director of the Connecticut Council on Problem Gambling, which is largely funded by the state s mega-casinos. When problem gambling takes over a person s life, it s as dangerous as any drug. It impacts the individual, the family, the workplace, the community”often before anyone is even aware of it.
One difficulty gambling opponents have is that the costs they cite are largely hidden, appearing as no more than statistical hiccups. Because only a tiny number of individuals bear the most acute consequences, it s easy to overlook the broader ripples, say gambling opponents. When a single addict gambles himself into bankruptcy, for example, there will be a line of stiffed creditors and court proceedings paid for from the public treasury. Likewise, a pathological gambler who embezzles his stake from the boss has to be investigated, tried and supervised in prison or on probation”all of which costs money. Factor in newly impoverished spouses and children, and the costs multiply. Considering that a bit more than 1% of the population is prone to pathological gambling and 5% to problem gambling, that adds up to more than 18 million potential disasters.
Critics fear that the downside of gambling will become more acute as it becomes more of a hometown pastime. Casinos in Atlantic City saw revenues fall in the first two months of the year, drained off by new gambling halls elsewhere in the Northeast. What worked for gambling destinations”an influx of tourists who drop their dollars and then slink home”might not be as attractive if the money is being lost mostly by the city s locals.
Some communities have concluded that the promised benefits are not worth the trade-offs. Voters in Ohio last fall crushed a proposal to allow slot parlors, and Rhode Islanders killed a plan for a casino near Providence.
Robert Kresse, a lawyer who is trying to block a proposed casino by the Seneca tribe in downtown Buffalo, agrees. A casino in Buffalo is not going to be the same as a casino in [nearby] Niagara Falls, he says. Instead, he suspects that local residents will be the main customer base. The promised economic benefits? They ll be using our dollars to pay us a small percentage of the dollars they take in.
The quality of life in Buffalo is superb, Kresse adds, pointing to the college campuses and research facilities. And this casino is a dark cloud on the horizon.
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