New York falls for gambling boondoggle

The rise of the gambling industry comes at a time of rapidly liberalizing attitudes about individual behavior, as seen in the legalization of marijuana for medical or recreational use in some Western states and the very rapid collapse of opposition to same-sex marriage.

Together these trends have made moral reservations about gambling disappear faster than a roulette player’s chips.

Governors across the political spectrum — from Republicans Rick Perry of Texas and Sam Brownback of Kansas to Democrats Andrew Cuomo of New York and Steve Beshear of Kentucky — urge more casino gambling to improve state government finances.

I. Nelson Rose, a Whittier College law professor who is a leading authority on the industry, says the New York vote shows that the notion of gambling as a vice that breeds crime, corrupts politicians, creates addiction and destroys neighborhood property values is history.

"Talk about morality and gambling today and you come off as a nut," Rose told me. "Even churches that oppose gambling do not talk about morality. They talk about disruptions to the family. And when morality drops out, everything becomes a cost-benefit analysis."

The way the gambling industry has persuaded government to measure costs and benefits means the casinos always win. That is on par with the states' authorizing only games whose odds favor the casinos.

The cost-benefit measures found in innumerable studies I have read narrowly focus on the taxes collected by casinos and the number of people the facilities employ. They minimize or ignore, on the other hand, the loss of taxable profits and jobs from other recreation when people shift spending from roller-skating, going to movies and dining out to shooting craps and playing video slot machines. They also pay little attention to gambling addiction.

These studies also minimize the costs of peripheral activities such as loan sharking, prostitution and embezzlement, the last of which is sometimes mitigated by insurance.

The industry smartly urges that tax revenue be earmarked for a specific noble purpose, typically education. California's 1984 lottery initiative earmarked more than a third of lottery revenue for education. Chicago Mayor Rahm Emanuel says any casino taxes will go only to schools.

Money, however, remains fungible. Casino tax revenue does not add to education funding; it just masks reductions in revenue from other sources. California offers an excellent example of this, as scholars have thoroughly documented.

Government studies of casino industry costs and benefits also routinely adopt the industry's preferred term for itself, the innocuous-sounding "gaming" rather than "gambling."

With the moral argument having lost force and governments desperate for money, all that stands in the way of complete victory for the industry is the extractive power of politicians. They can play contending forces against one another to raise campaign funds. Owners of existing casinos on the edges of big cities will donate because they want to avoid competition. Those seeking to open casinos in urban cores need permits.

Owning a casino is virtually a license to print money, provided management is competent and the casino attracts enough players for its size. Feeding politicians is but a minor business expense, causing no more concern than the rounding on profit statements.

High-volume casinos in urban centers will benefit from deep-pocketed convenience players who can drop by before or after work. This reduces or even eliminates the need to offer lavish and costly entertainment to draw people to remote locations such as Las Vegas and Atlantic City, where visits are longer but infrequent.

Manhattan casinos present a threat to Genting Group, the Malaysian gambling company that has built a huge casino at Aqueduct Racetrack near John F. Kennedy International Airport in Queens. That became clear when Cuomo proposed closing the Jacob K. Javits Convention Center in Manhattan almost two years ago in favor of a much larger but privately owned center that Genting proposed building next to its Queens gambling hall.

Alarmed by the prospect of losing conventioneers, Manhattan hotel and restaurant owners rushed to demonstrate their concerns to — and support for — politicians who would look out for their interests. That saved Javits, and it saved Genting from a big expense.

Now politicians will begin telling the same Manhattan business owners that a casino in the heart of New York City is in everyone's best interest. After all, would they rather see gamblers leave the city to play in the Indian casinos in Connecticut, the fading gambling halls in Atlantic City or the widely anticipated New Jersey Meadowlands casino that is on Gov. Chris Christie's agenda?

In short, the politicians' argument is that casino gambling will attract money that would otherwise go elsewhere, thereby reducing pressure to raise sales, income and other taxes.

The problem with that argument? Casino revenue is itself a tax — a levy on the money that players lose at the craps table that could have been spent in other ways.