Throughout history, state-supported gambling has long been an alluring financial cure-all, a quick fix approach to raising money. Despite steady opposition, legal gambling has become widely accepted.
Both public and private betting have been popular in America since colonial years. The first horse racing track opened in the mid-seventeenth century. Lotteries raised money for everything from public works to Ivy League universities, and have been supported by such luminaries as George Washington and Thomas Jefferson.
Growth in the gaming industry always has been met by strong protests. Charges of immorality, criminality, and corruption always accompany games of chance.1 Many nations have outlawed lotteries at one time or another. An American ban occurred in the face of rampant fraud in the late 1800s. Other forums of gambling have mostly been associated with organized crime interests (numbers games, roulette, dice, bookmaking, and so on).
Despite its checkered career, gambling is enjoying a renewed growth unprecedented in American history. Casino gambling is expanding; floating gaming parlors are back on the Mississippi; sports betting is increasingly accepted; and lotto fever has seized the entire nation in its grip.
It's hard to believe that New Hampshire re-introduced us to the lottery in 1964, a mere thirty years ago. Wagering tripled between 1982 and 1989.2 As each state jumps on the age-old bandwagon promising instant answers to fiscal problems, we need to ask ourselves if legal gambling is a good bet.
Some Betting Numbers:
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Legal gambling poses some important questions. What are the odds of winning? What is the impact on the poor? Does the government make good money on the investment? Is gambling an efficient, reliable, and beneficial revenue source? Do casinos, race tracks, and gaming parlors create new jobs? How can we decide if gambling is a reasonable approach to raising public funds?
Fact number 1: Though the news media play up the mega-dollar jackpots, only a small percentage of players can be winners. The chances of a substantial kill, whether at the track or at the lottery counter or dice table, are never very impressive. You are more likely to be struck by lightening8 than you are to hit a "big one." To paraphrase a lotto ditty, "Somebody's going to lose--why not your?" Simple arithmetic proves this: the greater the potential payoff, the smaller the odds of winning. And even big winners can't take it all with them. The state makes sure to get its share of the pay-out, and long-lost "friends" and relatives will have their hands out. In additions, jackpots are paid out in increments, and inflation makes each year's payment worth less than that of the year before.
Fact number 2: Though both rich and poor people gamble, gambling takes a higher toll on lower-income people. Having less money to begin with, poor people can't afford to lose their money in a quest for quick riches. Yet studies show the poor are particularly susceptible to gambling, and bet a higher percentage of their income than do those of higher socioeconomic status.9 Then, too, poor people are often the target of massive special advertising campaigns designed to part them from their money--as demonstrated by the billboards on Chicago's South Side.
Fact number 3: For the average state, gambling proceeds supply only a tiny fraction of the money needed for operating expenses. For example, lottery revenue in Michigan and California pays for just three to five percent of education budgets. The same is true for taxes generated by games such as casinos or horse racing. The main reason for these small returns is the high cost of bringing in the cash: huge sums must be earmarked for administration, promotion and, of course, prizes. Gambling income in highly variable, could dry up at any time, and tends to build a false sense of security, with the public wrongly believing that other forms of taxation become less necessary. In short, legalized gaming is one of the least efficient ways available for gaining revenue.10
Some Economic Statistics:
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Fact number 4: Any form of legal gambling levels off over time. Players lose enthusiasm for the same old thing. States try to drum up more business by promoting new games or by glamorizing existing ones. More money goes into attracting players rather than to the treasury. Horse-racing is a prime example of how a gamin industry falls on hard times. On-track betting peaked in the mid-1970s, but has declined for years at most sites. Minnesota introduced the "King of Sports" in 1985, with a first year handle of over $84 million. In 1986, the figure grew to $133 million; but, since the, the take has fallen to less than that of the opening year.18 As usual, the "answer" has been to encourage off-track betting offices (begun in New York) and wagering by telephone.
The revenue statistics for Illinois lottery resemble a carnival roller-coaster. When a new game is brought on board, interest climbs for a year or so. Then people become jaded, and income takes a dive. Illinois will try its luck with riverboat gambling, something tried with initial success in neighboring Iowa. Since there is but one river between the two, competition is bound to be fierce. Illinois may gain the upper hand with unrestricted wagering (Iowa restricts betting to $200 per person per day). Again, the predictable escalation has no end in sight.
Fact number 5 Gambling does not generate new wealth or high-end employment. Most people who gamble don't take cash out of savings to do so. They use money designated either for other discretionary expenses or--if they are poor--for necessities. The jobs that are created tend to be low-earning positions at tracks, casinos, and lotto outlets, and don't always benefit the locals.19 New Jersey has banked heavily on the success of casinos to help address unemployment, but the jobless rate and number of people on public assistance have remained about the same.20 In short, gambling is hardly a painless tax.
Many people, seeing that illegal gambling is a bad influence in society, believe gaming should be controlled by the state rather than left to crooks. They say legalization takes away business that otherwise enriches mobsters and racketeers, thus reducing criminal activity. Some claim that gambling is inevitable, fulfilling a human "need." Still others contend that lawful games are relatively harmless diversions which provide numerous social opportunities while financing worthy causes.21 At the same time, a large (but shrinking) segment of the population rejects any justification as being wrong-headed. for them, gambling is a vice which promotes a wide variety of evils, including sloth, irresponsibility, predatory activities, and so on. In addition, there are specific objections that one might make to the arguments of legalization's proponents:
Argument #1--Crime Control: Does legalizing gambling cut into the turf and "take" of criminals? Apparently not. First of all, legalization opens up new opportunities for public corruption. There have always been government officials who traffic in crime. Now we have expanded the possibilities to include a greater range of temptations. The predictable outcome: more shady dealings among public servants trying to grab a share of easy money.22 Examples range from the mayor of Atlantic City being indicted for bribery and extortion connected with casino development to the fixing of lottery drawings by state workers in Pennsylvania.
Second, legal gambling attracts the same kind of criminal element as unauthorized games. The history of horse racing, for example, has been a long tale of bookies, fixers and loan sharks. Gaming sites also often attract thieves, extortionists, prostitutes, and swindlers. Again, legalization provides ready-made occasions for such predators to operate.23 As a consequence, the moral environment suffers, and police staffs are stretched to the breaking point by the need to respond to the increased crime.
Thirdly, legal gambling probably does not diminish illegal activities. State-sanctioned gambling does not welcome the participation of criminals. This means there are persons who will still ply their trade in the local precincts, and they will continue to find a clientele. Why is this? For one thing, illicit gambling can be more congenial than the legal forms (at least as long as you can pay up). Operators often give breaks, players have several betting options, with more favorable odds, and winnings are not taxed. An even more intriguing point could be made: legal gambling provides another forum for criminals to exploit. For example, they are now able to play off state lotteries, taking illegal wagers on daily and weekly drawing, just as they have been able to provide bookmaking services for those interested in horse racing.24
Some Crime Statistics
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Argument #2--Inevitability: What about the argument that gambling is inevitable, and that society, rather than organized crime, should benefit? The question has already been partly answered: legalization doesn't hurt criminal activity. But even if it did, would it be a good idea? Consider two probabilities:
Argument #3--Harmlessness: Gambling is most likely inevitable. Most Americans support its legalization. Yet the only way that we can accept the idea that we may as well legalize the inevitable is if gambling is essentially harmless. But gambling is not a simple friendly social pastime. It tempts people to fruitless fantasies of instant riches; it means exploiting or being exploited by others; it is an attempt to make money without working for it; certain forms (most notably casinos) prey on the elderly;28 and it is a public health menace.
The average American gambler probably doesn't risk his financial health through wagering. Still, at least two categories of people suffer far more than average because of gambling. The first--the poor--has already been noted; for them, every dollar bet steals from basic provisions. The second category includes those who cannot contain their urge to join the excitement of the chase--the compulsive gambler.
The Problem Gambler--A Picture: the compulsive gambler follows the downward curve familiar to that experienced by other addicts. What begins as the exciting fulfilling prospect of beating the odds,29 has its tragic end in bankruptcy, ruined marriages, and shattered reputations. for the compulsive gambler, the play becomes the focus of life. As long as the winning phase continues and the better is "on a roll" everything is rosy. As soon as losing sets in, so does the descent. Each loss becomes a reason for another wager. Losses mount. Bets become larger and more frequent in an attempt to break even. Any winnings are re-invested in the process and used as an incentive to further gambling. Moral considerations become secondary; denial, lying and worse become habitual. Such people come from every segment of society, and it is now acknowledged that, with the growth of lotto, big-time bingo, and pull tabs, both men and women are being affected.
The Cost of Addiction: It is estimated that between 2.5 and 4 percent of all Americans are potential compulsive gamblers. Many of these individuals will realize that potential only through the legalization of gambling. Studies show what common sense would teach us: There are more problem gamblers in states which permit various forms of wagering.30 In fact, all it takes for gambling and its difficulties to increase is the publication of betting lines in newspapers, even in states where such betting is illegal. The cost to the nation is staggering and, to this point, unknown as to its full extent. From individual stories, we can draw a frightening picture of desperate people losing homes, spending entire paychecks on games, squandering huge inheritances, defaulting on loans, neglecting spouses and children, and otherwise contributing to the list of American social ills.
Gambling addiction is a serious threat to the family and to society at large. There is, however, another compulsive gambler who is rarely mentioned: the state itself. In trying to fight declining public interest, governments often begin to act like an addict, looking for that "big kill." New games, jazzier promotions, and greater moral compromise are part of this downward spiral.
Already there is a sense that gaming fever is out of control. But it may not be too late to slow--and perhaps even reverse--this trend. there are encouraging signs. The Minnesota Legislature defeated every pro-gaming bill introduced in 1992, and many leaders want a moratorium on new forms of gambling. Unfortunately, lobbyists are sure to return each year to press for more gambling. Unless there is a concerted efforts to oppose the growth of games of chance, they will continue to take a toll on the poor, the elderly, the addicted and, indeed, on all Americans, as we are each forced to pay the price for gambling run wild.
Compulsive Gamblers: Who are they, and what do they cost us?
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Notes:
1 For an excellent overview of gambling's history, see J.P. Jones, Gambling Yesterday and Today, (David Charles: Newton Abbot, 1973).
2 Anthony Bouza, Gambling in Minnesota, (St. Paul: Department of Gaming, 1990), p. 131.
3 "Gambling Rage: Out of Control?" U.S. News and World Report, May 30, 1983.
4 U.S. Bureau of Census, Statistical Abstract of the United States, (Washington, DC, 1991), p. 658.
5 Figures for 1989, Gambling in Minnesota, Ibid; for 1983, Ovid Demaris, The Boardwalk Jungle (Toronto: Bantam Books, 1986), pp. 226-233.
6 John M. Findlay, People of Chance (New York: Oxford U. Press, 1986), p. 202.
7 Demaris, op. cit., pp. 131-134 cites average annual losses of $237 for Atlantic City slot players, $60 for lottery, and $183 for horse betting.
8 The typical odds for winning a lottery jackpot are about 1 in five million; the odds of being hit by lightening, about 1 in 600,000.
9 See, for example, Gambling in America: Final Report of the Commission on the Review of the National Policy Toward Gambling, (Washington: Government Printing Office, 1976), p. 156.
10 Amy Bayer, "Are Lotteries a Ripoff?", Consumer's Research, January 1990.
11 State Legislative Magazine, April 1986, p. 29.
12 See Gambling in Minnesota, pp. 40, 95; also Insight, March 17, 1986.
13 Russ Bellico, "On Lotteries," The Progressive, April 1977, p. 24.
14 Gambling in Minnesota, p. 132.
15 St. Paul Dispatch, Dec. 9, 1981.
16 Sternlieb and Hughes, op. cit., p. 184.
18 Minnesota Racing Commission Reports, (St. Paul: 1989 and 1990).
20 George Sternlieb and James W. Hughes, The Atlantic City Gamble (Cambridge: Harvard U. Press, 1983), pp. 11-12.
21 For this kind of argument, see gaming industry publications such as Public Gaming Magazine.
22 Gambling in America, p. 158.
23 See Easy Money: Report of the Task Force on Legalized Gambling, (New York: Fund for the City of New York, 1974).
24 For some good discussion of crime issues, see Governor's Advisory Commission on Gambling, Trenton, New Jersey, 1988.
25 Sternlieb and Hughes, p. 134.
26 See Gaming and Wagering Business, July, 1989.
27 "Nevada's Gambling, Divorce Laws Tied to Top Suicide Rate," Chicago Tribune, Sept. 30, 1980.
28 Larry Braidfoot, Gambling: A Deadly Game (Nashville: The Broadman Press, 1985), pp. 107-110.
29 Heavy gamblers generally begin their addiction with long (up to five years) win streaks. For excellent discussion of compulsive gambling, see Robert L. Custer, "Profile of the Compulsive Gambler," The Journal of Clinical Psychiatry, December 1984; also James M. Schaefer and Mikal J. Aasved, Minnesota Slots: An Observational Study of Pull Tab Gambling (Duluth, MN: Center for Addiction Studies, 1990).
30 Gambling in Minnesota, p. 16; Braidfoot, Gambling, p. 153.
31 Gerald T. Fulcher, "Gambling, Who Are Its Victims?" State Legislatures, October, 1985.
32 Figures are provided by Arnie Wexler, Vice President of the national Council on Compulsive Gambling, Parlin, New Jersey.
33 Robert M. Politzer, James S. Morrow and Sandra B. Leavey, "Report on the Cost-Benefit and Effectiveness of Treatment at the John Hopkins Center for Pathological Gambling," Journal of Gambling Behavior, Fall/Winter, 1985.
Published by The Minnesota Family Council, 2855 Anthony Lane South, Suite 150, Minneapolis, MN 55418-3265, (612) 789-8811. No restriction on reproduction if not taken out of context. Call, write, or use our contact us link for information on additional copies. Originally published August, 1992. Posted November, 1996.
Minnesota Family Council / Minnesota Family Institute
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