Tracing consequences both seen and unseen.
Audrey SpaldingA Whole Lot of Craps
Posted at 9:01 pm on March 29, 2010, by Audrey Spalding

According to a report from The Lottery Post, 18 states are considering expanding state gambling laws and institutions in order to make up revenue shortfalls. Right now, New Hampshire is considering a bill that would allow video slot machines and table games at six casinos.

To use an over-used phrase, it looks like state lawmakers and local media outlets are “all in.” The Concord Monitor colored the state’s budget problems as unavoidable and unfixable.  Even though some New Hampshire lawmakers have put forward propsed budget cuts, reporter Shira Shoenburg wrote, the cuts just aren’t enough to cover the state’s deficit. So really, the reasoning goes, the only hope is to increase state revenues somehow. Sen. Lou D’Allessandro, a major proponent of expanding casino operations in the state, offers up this rosy forecast: “If the gaming proposal is passed, there will be a significant influx of jobs and revenue. Some people have seen the light.”

Let me be clear. I don’t have a problem with gambling per se. However, there are several reasons that make state legislators’ turn to gambling as a budget shortfall fix especially awful:

1. Cuts can be made.

The choice presented, that New Hampshire can either make up its budget shortfall with new gaming tax revenues, or cut extremely important programs to the detriment of state residents, is a false one. I guarantee that New Hampshire still has some programs and dubious spending that the state could cut. New Hampshire could eliminate some state tax credits, thereby leveling the field for businesses. The state could also take a long, sober look at its budget, and reconsider how much it pays its highest-paid employees, the usefulness of certain regulatory boards, and whether some of its agencies really need to spend as much as they do on “professional development,” “awards,” and travel.

2. Legislators cannot have it both ways.

I thought that the reason states imposed restrictions and regulations on gambling was because it was an unsavory activity, judged by many to be immoral, or was considered costly to the state. As reported in The Concord Monitor, New Hampshire Senate President Sylvia Larsen never supported expanding gambling — until her state needed the extra money. If Larsen truly believed in her publicly stated convictions, that gambling is in some way harmful, the recession should have changed none of that, and she has no excuse for supporting such unsavory activity.

Along those lines, because states have welfare programs designed to bail out those who, say, gamble away their paychecks, I doubt that expanding gambling would, in fact, help states’ bottom lines. A 1999 report from the National Gambling Impact Study Commission estimated the nationwide cost of gambling, which includes things like welfare payments and unemployment benefits for gamblers who bet the farm, as about $5 billion per year.

Either state-sanctioned gambling is morally bad for the state, or it is morally good; either gambling has a net positive economic impact or a net negative one — the verdict shouldn’t change based on the government’s budget.

3. This is not found money, it is a terrible wealth transfer.

Just like everything else, gambling tax revenues are not found money. The money came from someone. In this instance, the person (cash cow) at least chose what to do with his or her money, and was taxed and charged accordingly. However, expanding casino operations is not akin to creating money or jobs. It is simply transferring them from a different, possibly less taxed, part of the state’s economy. Furthermore, when politicians do try to justify wealth transfers, they explain the process as necessary to help the needy. Under that rationale, we have programs such as welfare, and we have student-equalized state payments to public school districts instead of leaving each district to raise all of its revenues within district boundaries. I see expanding gaming, if it does in fact increase state revenues, as a transfer of wealth from the less well off to the middle class.

As John W. Welte noted, people with more money tend to try gambling;  “…but higher socioeconomic status gamblers had lower rates of pathological gambling, and lower extent of gambling involvement, particularly for lottery.”

4. Who really thinks this will work?

Interestingly, one major reason states are considering gaming expansions is that gaming revenues have fallen, likely due to the fact that people have less money to play around with. From 2008 to 2009, according to The Lottery Post’s report, gambling revenues fell an average of 5.6 percent. Some states, like Illinois, are facing declines greater than 14 percent.

So, people have less money, and are prioritizing accordingly. Turns out, gambling is not a top priority for many. Why do states think that expanding gambling might change that fact?

Again, from The Lottery Post: “People don’t have as much to spend,” said Freda Lofthus, 71, as she was playing slot machines at Prairie Meadows Racetrack and Casino near Des Moines. “I spend about half of what I used to.”

5. Why is the state involved in the first place?

Lest I get too much gaffe from the libertarians for reasoning within the constraints of the current system, let me point out that the state really shouldn’t be involved in gambling in the first place. State-sponsored lotteries that claim to fund schools seem, to me, to be even more deceptive than a private casino claiming that I can strike it rich. The state stamp of approval adds a certain authoritative nod that this sort of activity is somehow safe, and a good idea. I submit that if the state were not involved in gaming regulation, then perhaps casino competition would increase, maybe even along the lines of increased return rates and a better overall experience — instead of casino owners working to curry favor with politicians.


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1 Comment »

  1. Good points all. I am also inclined to wonder if the benefits of expanded gambling in a state will become diluted as more and more states allow it. I figure back when Las Vegas and Atlantic City were the only places one could do serious gambling, everyone in the nation who wanted to gamble went there, so they benefitted from the cash transfer of every gambler in the nation to those two cities. Once every state has their own casinos, it seems reasonable that the state will really only benefit from local gamblers, since who would travel from the Carolinas say to come to Allentown, PA and play roulette?
    I don’t on principle oppose other people gambling, and agree it should be none of the State’s business, but this sort of thing still makes me shake my head at the sheer foolishness.

    Comment by Eric Hammer — April 1, 2010 @ 10:08 am

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Henry Hazlitt"[T]he whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."
Henry Hazlitt, Economics in One Lesson
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