Don't Bet on a Quick Fix for Economic Slumps
Gambling doesn't raise revenue, it saps communities. Politicians better start looking for creative alternatives.
ON a bright spring morning in 1991, Bettencourt, Iowa, an industrial city on the Mississippi that had been hit hard by recession, lavishly celebrated the opening of the Diamond Lady, the nation's first modern riverboat casino. As media people, politicians, and citizens looked on, the actor Howard Keel, who 40 years before had played a gambler in Showboat, rolled the ceremonial first dice. He won $5 and, in the process, ushered in a new age of legalized gambling in America.
Over the next 4-1/2 years, states across the country, faced with many of the same fiscal problems as Iowa, would look to gambling as the cure for their economic woes. From lotteries to slot machines, riverboats to full-blown casinos, state after state rushed to expand its gambling operations. Legal gambling in the United States currently generates about $40 billion in yearly revenue.
While this massive expansion has generated some controversy, most of it has centered on the moral questions raised by the transformation of a previously illegal activity into an officially sanctioned one. If we put aside these important considerations, however, and focus on hard, economic truths, new questions arise - questions that have less to do with gambling per se and more to do with the wisdom of placing the future of our communities in the hands of panicked lawmakers and a politically savvy gambling industry with massive lobbying resources at its command.
The simple fact is that there is not one example in America today of a popularly based movement for more gambling. In fact, in those few instances when voters have been given the chance, in statewide elections, they have usually rejected casino and riverboat plans. The drive to expand has instead come almost entirely from legislators in search of a quick economic fix that doesn't involve raising taxes. Lawmakers adopt an ''if we don't our neighbors will'' mentality: Within a year of Iowa's historic riverboat opening, both Illinois and Mississippi had legalized their own riverboats, with looser regulations, in an attempt to lure away the new Iowan bettors.
In their haste, politicians and other leaders have relied on incomplete and slanted research - often prepared by the gambling industry or its consultants - about how their new operations will impact their communities. The United States Gambling Study, which I directed, looked at 14 such reports and found that time and again benefits were exaggerated and costs greatly underestimated.
These hidden costs are all the more insidious because they occur over time and do not attract the same media fanfare that the ribbon-cutting at a new casino does. Chief among them is the effect new gambling operations have on existing businesses. As more opportunities to gamble appear, states and communities have to increasingly rely on their own citizens to keep revenues up. Rather than bringing dollars in, this localized form of ''convenience'' gambling simply drains local consumer spending from local movie theaters, bowling alleys, restaurants, and retail stores and cannibalizes the local economy. One example: The number of independently owned restaurants in Atlantic City, N.J., before casinos were legalized was 243; 10 years later it was 146.
Steve Wynn, CEO of Mirage casinos, told a Bridgeport, Conn., audience in 1992: ''There is no reason on earth for any of you to expect for more than one second that just because there are people here, they're going to run into your store, or restaurant, or bar.... It is illogical to expect that people who won't come to your restaurants or stores today will go to your restaurants or stores just because we happen to build this building here.''
Another major hidden cost results from the inevitable increase in compulsive gambling behavior, including an increased burden on the criminal-justice system, which suddenly must deal with a flood of bad-check writers and other white-collar criminals. In addition to the devastating personal tragedies that attend a gambling addiction, the state's private and public costs for each of its problem gamblers is estimated to be more than $13,000 yearly.
A report by the Wisconsin Policy Research Institute says its most conservative estimate of the social costs of casinos in that state is $160 million per year. In Iowa, where the chairman of the state's gambling commission once said the introduction of riverboats was as important as the Bill of Rights, problem gambling has also boomed. According to a recent Iowa Department of Human Service study, compulsive and pathological gambling have more than tripled in the four years since Mr. Keel rolled the dice.
The decision to legalize gambling, once made, is a very difficult one to unmake. New ventures create instant constituencies that are prepared to fight to keep them alive; governments also quickly grow addicted to the initial surge of revenues. Once the novelty wears off or a neighbor state introduces a competing gambling operation, lawmakers are forced to look to new and ''harder'' forms of gambling or to looser regulations in an effort to keep their budgets afloat. As government finds it increasingly necessary to hard-sell gambling to the public, it makes the transition from regulator of gambling to its biggest promoter. Legislators and community leaders are finding that their relationship with gambling goes far beyond anything they originally intended.
There is no denying that state and local governments face a real economic crisis as we move into the next century. But do we really want the keepers of the public trust to actively promote enterprises that take disproportionately from those who can afford it least, are potentially addictive, and do great damage to existing economies? We should insist that our elected officials show more creativity in choosing their approaches to economic development.