Warning: Legal Gambling Is a Costly Game

In the past decade dozens of American communities have experienced severe economic stress. Some of these communities are flirting with economic-development strategies that might never have been considered a few years ago.

With 35 states now using lotteries as a means of bolstering state coffers, and with legalized gambling casinos managed by dozens of Indian tribes popping up around the country, communities are now thinking the previously unthinkable. Some are considering casinos as a means of economic development.

The proposition is tantalizing for politicians and citizens alike, especially in communities experiencing serious economic distress. The issue for local leaders is this: Is legalized gambling the right way for communities to stimulate economic development?

Setting aside deep-seated moral and ethical arguments that also may arise, it is helpful to view the debate on the basis of the pros and cons of gambling as an economic-development strategy. What do we know about the developmental spinoffs and costs accompanying this controversial strategy? Is gambling a panacea for unemployment ills? Or is there a downside that may be too costly?

Unfortunately, much of the research examining the effects of casino gambling has been sponsored by the gambling industry. It supports the value of gambling as an economic-development tactic and seriously slights short- and long-term costs.

In his study of legalized gambling as a viable community-development strategy, Robert Goodman of the University of Massachusetts in Amherst has given an excellent overview on the subject. One of the objectives of his research, supported by a Ford Foundation grant, was to assess the degree of balance in 14 other major studies sponsored by government, universities, and the hospitality and gambling industries. Of these 14 studies, Professor Goodman found only four to be balanced. Ten reports exaggerated the economic benefits of legalized gambling, while ignoring or understating the economic and social costs.

Goodman faults politicians and decisionmakers for failing to prepare objective economic-impact studies before approving casinos and other forms of gambling. In New Jersey, a study by the Governor's Advisory Commission on Gambling says, ``Unlike most policy areas, there is essentially no national research community focusing on most gambling issues.'' Its report stresses the need to know more about costs associated with gambling.

The claimed benefits from legalized gambling are more jobs, less unemployment, economic diversification, and an improved quality of life for more people. The Goodman report goes into detail regarding the significant costs of legalized gambling.

Consider the answers to the following questions about the known costs of legal gambling:

How will casinos affect other local businesses?

Richard Syron, president of the Federal Reserve Bank of Boston, describes gambling as money people spend that would otherwise be spent on commodities or other services. The implication is that only ``new'' spending by visitors will bring new money into the local economy. This new money will be spent in the casino and for lodging, gas, etc. However, when local people spend their money on gambling, there will be no generation of new wealth. What is spent in the casino will not be spent elsewhere locally, in essence cannibalizing other businesses in the area.

In Atlantic City, N.J., the shift toward gambling casinos from the restaurant industry has been catastrophic. In the first 10 years of legalized casinos, the number of restaurants dropped by 40 percent. In 1977, there were 243 eating places. In 1987, there were only 146 remaining.

Since casino gambling began in Atlantic City, retail business in general has dropped by one-third. In Minnesota, restaurant business dropped 20 to 50 percent within a 30-mile radius of casinos.

Does legalized gambling encourage crime?

In Atlantic City, community planners and politicians believed that casino gambling would cause an economic renaissance along the Boardwalk, restoring past glories. Instead, within three years after the introduction of casinos, there was a tripling of total crimes. Per capita crime in Atlantic City jumped from 50th in the nation to first.

The mecca of casino gambling, Las Vegas, Nev., has had its troubles with high crime rates, too. Between 1960 and 1984, the rate of crime per capita there consistently ranked between first and fourth among America's metropolitan areas.

State and federal authorities have been trying to keep casino gambling free of organized crime in Nevada and New Jersey. However, recent evidence suggests that organized crime has infiltrated dozens of casinos and bingo operations owned by various Indian tribes. Stewart Siegal, a dealer and manager at many casinos from Las Vegas to sites in the Caribbean, testifying before the Senate Select Committee on Indian Affairs, claimed that at least 12 casinos were under the influence of the Cosa Nostra. He also testified that nearly all Indian casinos were influenced, either directly through management and investment, or indirectly through suppliers.

Is compulsive gambling a significant problem?

The American Insurance Institute estimates that 40 percent of all white-collar crime is caused by those who have serious gambling problems. Henry Lesieur, editor of the ``Journal of Gambling Studies,'' reports that, ``Available evidence suggests that where more forms of gambling are legal, there is a higher incidence of problems and pathological [compulsive] gambling.'' Mr. Lesieur cites evidence that ``the mean gambling-related debt [excluding auto loans, mortgages, and other legitimate debt] of people in compulsive-gambling therapy ranged from about $53,000 to $92,000.'' This does not include debt already paid off.

In New Jersey alone, compulsive gamblers are accumulating more than $500 million in debt yearly. Other studies have showed that compulsive gamblers have a suicide rate five to 10 times higher than other Americans.

Current estimates, adjusting for inflation, place the national price tag of compulsive gambling at about $56 billion per year. According to Rachel Volberg, a medical sociologist, the cost to the state of Connecticut alone in 1991 was $554 million. In that same year, the state's revenue from legalized gambling was only $362 million.

Does legal gambling encourage illegal gambling?

Researchers at Duke University found that state-sponsored lotteries are a powerful recruiting device, encouraging people to practice other forms of legal and illegal gambling.

In testimony before the Chicago Gaming Commission, William Johoda, a former operator of gambling ventures for organized crime in the Chicago area, said, ``There always existed one solid constant - any new form or expansion of legal gambling always increased our client base. Simply put, the stooges who approved Las Vegas nights, off-track betting, lotteries, etc., became our unwitting front men and silent partners.'' Bob Walsh, assistant director of the FBI's Chicago office, told the Chicago Metro Ethics Coalition, ``Gambling generates new gambling. The more accepted it becomes, the more all forms of gambling benefit.''

What is making gambling ``more accepted?'' In 1991, nearly $300 million was spent by state governments to convince citizens that gambling is legitimate. In the 35 states with lotteries, the advertising budget for the lottery is usually the largest ad budget for any product or service sold within the state.

Researchers now say that addiction to gambling is growing fastest among high school and college-age youths. Howard Shaffer, director of the Harvard Medical School Center for Addiction Studies, says, ``We will face in the next decade or so more problems with youth gambling than we'll face with drug use.''

Dr. Shaffer points out that ``these young people are the only constituency who has experienced gambling that is both state-sponsored and culturally approved for their entire lifetime.''

To serve the best interests of our communities, we should ask tough questions about both the benefits and less-obvious costs of legalized gambling. The Opinion/Essay Page welcomes manuscripts. Authors of articles we accept will be notified by telephone. Authors of articles not accepted will be notified by postcard. Send manuscripts by mail to Opinions/Essays, One Norway Street, Boston, MA 02115, by fax to 617 -450-2317, or by Internet E-mail to OPED@RACHEL.CSPS.COM.

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