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Ask Auntie Pinko
March 18, 2004

Dear Auntie Pinko,

Is casino gambling the answer to states' economic woes?

Baltimore, MD

Dear Harry,

One would certainly think so, to hear the advocates make the case. Of course, the advocates mostly fall into two categories: Those who know they're going to get rich off the casinos (the owners/operators/contractors) and those who hope they're going to get rich. Or at least break even. Or maybe just not lose too much, while having all the "fun" of sitting in a space bigger than the average aircraft hanger, where the sun never shines, the air is stale and dead, and the noise level never goes down, endlessly pushing a button and watching little numbers and symbols spin, for hours and hours.

Auntie fails to see the appeal in that "recreational activity," but that doesn't mean I think all casino gambling everywhere should be outlawed. But do I think it's "the answer to states' economic woes?" Well, no. For one thing, twenty-six states already have Indian owned/operated casinos, and another eight or ten have other types of casinos. And from an economic standpoint, that means it's going to be very hard for any state to make a large enough net profit for the effort to be worthwhile.

Lots of analysis has gone into this, because in the last ten years or so at least seventeen states have seriously considered legalizing casinos or allowing machine gambling (slots/video poker) at other venues. And every state has gathered facts, commissioned studies, done analyses, and assessed the potential impact of gambling on their budgets.

Most of them have rejected the idea, because several things keep recurring over and over again in all the studies, analyses, etc.:

• Casinos generate a net inflow of new cash to a state only when they are positioned near the borders of an adjacent state where there are no casinos. If they are positioned elsewhere, they are simply a tax mechanism that disproportionately preys on the most economically vulnerable people in the state - whose subsequent economic woes are likely to increase the state's total expenditures for a variety of law enforcement, social services, and physical infrastructure programs.

• Restaurants, retail establishments, and entertainment businesses in the vicinity of new casinos or gaming facilities experience losses in business, which translates into state tax losses of sales tax revenues and business income tax revenues.

• Attempts to "keep gambling money inside" a state that has casinos on its border in a neighboring state (Illinois tried this) have suffered net economic losses in spite of the 'recapture' of gambling cash.

• Analyses of several states' ventures into gaming are revealing that short-term economic boosts do not transfer into long-term economic improvements. Towns that expected "spinoff" benefits from casinos - job growth, tourism, etc., have been disappointed, and many have experienced a net loss after factoring in law enforcement and infrastructure management costs.

Without ever getting into the "moral arguments" or even the "social service arguments," it's pretty clear that the only reliable financial winners from gaming are the owners and operators of the facilities. It's a frail reed, at best, for cash-strapped states to rely on for rescue - especially when the need is right now, and it may take several years to pass legislation, develop appropriate regulatory controls, fairly and transparently let contracts, construct and initiate facilities, and collect actual revenues.

Auntie Pinko thinks that the hopeful gleam in the eyes of many legislators who look to the supposed "cash cow" of gambling for rescue is not unlike the gleam I've seen in the eyes of people standing around in convenience stores, hopefully scratching off ticket after ticket, thrilled to pieces when their 23rd $1 ticket wins them $10.

Just as a disclaimer, so that you, Harry, and other readers know where Auntie stands on the "moral issues" of gambling, Auntie has been known on more than one occasion to engage in cutthroat penny poker at family reunions, run multiple cards at a local charity's bingo night, and won't necessarily turn down a who-gets-to-pick-the-rental-movie bet on the outcome of certain local political contests.

But I do get a little uncomfortable at the idea of my government being in the business of exploiting financially vulnerable citizens with the cruel chimera of hope for a multi-million dollar jackpot. I don't know whether my feelings are influenced in any substantial way by my political ideology - I suspect this issue is one of those that cross such lines - but I do know that I have many Democratic friends who have their own reasons for being dubious about expanding the gaming industry.

Thanks for asking Auntie Pinko, Harry, and good luck on your next lottery ticket (if you buy them!)

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