Essay/Term paper: Is gambling a feasible source of funds for the government

Essay, term paper, research paper:  Marketing

Over the past twenty or so years, great wealth and improved economic and social conditions have been promised to the communities that have embraced legalized gambling. However, with twenty years of experience it is time to look back and analyze whether this is true or not.
It could easily be said that gambling is as American as apple pie. Gambling has shaped American history since its beginning. Lotteries were used by The First Continental Congress to help finance the Revolutionary war. Many of our founding fathers, such as Benjamin Franklin, Thomas Jefferson, and George Washington, have sponsored private lotteries. It has been said that "Our founding fathers were just numbers guys in wigs" At one time baseball would have seemed to be the American pastime. This is not so now. In recent years, the attendance at casinos has nearly doubled the attendance at all major league baseball games, with close to 130 million people visiting casinos every year.1
With so much money at stake, the average gambler does not stand a chance against this big business. The casinos go to every length to analyze what makes a gambler bet, stay longer, and loose as much money as possible.
Gamblers who come to casinos with the intention of winning money are habitually disappointed. As casino crime lord, Meyer Lansky"s universal gambling truth states; "Gamblers never win, the house never loses"2 Slot Machines and most table games allow players to make bets where the probability of winning is relatively high. Frequent wins are characterized by low payouts. These frequent wins encourage further gambles with low payouts.
Frequent winning, low paying games are not the only way casinos get people to keep playing. Nothing less that psychological warfare is going on at casinos across the country. "The days of shaved dice, missing face cards and rigged roulette wheels are long gone. But the pursuit of profitability in the corporate era of gambling has turned the average casino into a financially hazardous place for betters"3 The casino"s beliefs are all based on the fact that since the house has an advantage over the player, the longer the house can keep the player playing, the more money the house will make. The gambling industry spends millions each year to whether wider isles, fresher air, and back rests on the chairs at slot machines make a player stay longer.4 And why would the casino care if somebody is comfortable? Because if each better stays for just a few more minutes, it could mean millions for the casinos.
Casinos have false ceilings with rooms above them where some people watch for cheats and swindlers. From these same vantage points, are other people with alternate jobs. They are hired to observe and study what situations encourage gamblers to play longer. And as stated before, the longer people play, the more money casinos receive.
These tricks of the trade are not just directed at the comfort level of the players, but also at their subconscious. Adding a certain scent into the air can make slot players spend up to fifty percent more than average at times. When money is turned into chips, in the player"s mind, it decreases it"s value. When a gambler asks a dealer for change for a hundred dollar bill, the dealer is under orders to give the player the lowest denomination possible, in five dollar chips. The player would easily spend the twenty chips as pocket change. But a twenty-five dollar chip is much more likely to be saved or even cashed in.
Colors are a very important part of the subconcience mind. Betters are easily drawn to bright red machines, but tire of them quickly. Many casinos now put bright red machines on the outside of isles. Inside the isles are the more calm cool blue and greens that seem to encourage the player to stay longer.
Gamblers are at the mercy of the big business casinos. Most people do not fully realize how much they are controlled by institutions who have made a science of studying gamblers behavior at the gaming tables.
It is a fact that the economic status of a gambler, usually determines the psychological meaning of gaming for him or her. "The higher one"s income , the more one will tend to see gambling as entertainment or as a way to socialize with other people. Conversely, the lower one"s income, the more gambling tends to be seen as an investment"5 With the poor who cannot afford such investments as the stock market or real estate, gambling is meant to be less as play and more as a sincere chance to transform their lives for the better. While the poor do not spend much more than gambling than middle income families, they do spend a much higher percentage of their income.
Another disturbing situation in the gambling community is the changing percentage of women and young people who are becoming problem gamblers. At this time gambling is called "the fastest-growing teenage addiction, with the rate of pathological gambling among high-school and college-age youth about twice that of adults." In Atlantic City, the lure of gambling is so strong that over thirty thousand underage people are either thrown out, or stopped from entering the casino.6
Lobbyists for the gambling industry have made exorbitant claims about the benefits that states will receive from the legalization of gambling. Among the many claims made by lobbyists are the increase in jobs, millions in revenue from gambling taxes, and an overall better economy. On the surface these statements seem beneficial. But underneath lies a misconstrued group of half-truths that support the gambling industry. This is only because the studies that came up with these findings were funded entirely by companies that have interests in promoting gambling.7
There is a consistency in most of the stories the lobbyists for the gambling industry. They usually involve the myth that says that big spenders will spend money on local businesses and therefore boost the economy. This myth is false. In fact, most local economies are actually hurt by the existence of a casino. This is due to the actuality that the majority of the people to go to casinos are the people form the surrounding area. Instead of spending their expendable money in local stores on clothing or appliances, they gamble it away. So what the casino is really doing is recycling the money of the city and filtering out its profits. It is like running an engine to power a generator, to in turn power the engine; eventually it will run out.
The reason such gambling Meccas as Las Vegas and Atlantic City are so successful is because they are tourist attractions. "The casino explosion elsewhere has helped , by simply whetting the appetite of a whole new generation of gamblers to try Las Vegas"8
The gambling industry has also taken advantage of people"s indecision. They do this by stating that there is much potential demand for gambling, and without acting on it, casinos in neighboring communities and Indian reservations will open and take business away from them. They claim that casinos in nearby cities are presently reaping the benefits from a gambling based economy. Indecisive communities are told that by not acting, they are in fact losing money. Money that could be used to finance schools, police, and city services. So by forcing voters to make a quick decision, they are actually forcing them to open Pandora"s box.
There are two general ways in which the gambling industry encourages crime. The fact that gambling leads to crime has even been measured. In 1994 the national crime rate fell two percent, while in the thirty-one places that got new casinos the year before, saw a 7.7 percent increase in crime.9
The people that commit these crimes are not usually mobsters. "People who engage in crime to support their compulsive gambling behavior generally have no prior record of criminal behavior."10 Governments are creating environments where normal people, without criminal backgrounds, are being lured into activities that could lead them to commit serious crimes. The average compulsive gambler who resorts to crime to support his or her habit is someone with a good job, better than average intelligence, and had stable relationships.
With state governments sending the subtle message of "gambling is OK", the public lowers its defenses against it. According to a national survey conducted by Harrah, a large casino company, "51 percent of American adults believe "casino entertainment is acceptable for everyone." Another 35 percent say that it is "acceptable for others but not for me"11
Some five percent of gamblers are compulsive, and to support their habit, some of these gamblers turn to crime. According to a 1992 report by the Minnesota state planning agency, about sixty percent of all pathological gamblers engage in crime to support their habit. Another 10 percent, go to jail or are on probation.12 Different crimes are committed by different ages of gamblers. Adults tend toward white collar crimes like writing bad checks, while teenagers are more prone to steal from their parents.
The second way gambling effects crime is by attracting organized crime. Organized crime is probably not as prevalent on the surface of the gambling industry as it was in the forties, but it is still there. One of the claims made by gambling promoters, is that legal gambling shifts illegal gambling dollars into public fund. But, organized crime, by offering better odds and nontaxable payouts, has remained an active supplier of gambling products with its own niche in the market. The illegal gambling market is so enormous that its profits each year, surpass that of the top 100 American corporations combined.13 This includes IBM, all the automotive industries, and many more.
To help gamblers pay for these billions lost, organized crime sets up loan sharks. These loan sharks together are a ten billion dollar a year business , with ninety percent of the earrings coming from gamblers.14
Casinos have been the financial savior of many Native American tribes in the past decade. Taking what they thought as their sovereign rights, which exempted them from the laws of the states, tribes began putting card rooms and bingo halls in their reservations. Before long many people were coming by the busload to play.
Many tribes such as the Mashantucket Pequots, who are only 350 in number, began to seriously cash in on these casinos. The Pequots own the largest and most profitable casino in the western world, with an estimate income of 2.6 billion dollars.15
The incoming money from the casinos helps with the living conditions of the tribe. The members see huge benefits such as better health care, subsidized mortgages, scholarships, and of course jobs. With such benefits, there is bound to be some people who would like to be members of the tribe. People come to the tribe with forged documents in an attempt to become Indian but "you just can"t leap over and become an instant Indian" says Rick Hill of the National Indian Gaming Association.16
However, in the long run, tribal casinos may not be a sustained source of economic benefit. In the future, Tribal casinos will face stiffer competition from the non-indian gambling industry, as well as from more tribal casinos. "The Indian people can"t have things too long before the white man begins coveting them.17
People only have a certain amount of discretionary money. This is the extra money that they have to spend on items other than their monthly bills and necessities. When casinos are introduced into an economy, it tends to "Cannibalize" consumer dollars that wound go to other local businesses. If this money was instead diverted to the local economy, it would not only strengthen the local businesses, but it would greatly diminish the costs of caring for compulsive gamblers.
In 1994, The Illinois Economic and Fiscal Commission reported on five locations who received new gambling operations. They found that "no community demonstrated any real identifiable increase in general merchandise sales. In specific locations there were actually indications of losses."18 According to one local in Joliet, the behavior of the gambling crowd consists of this: "they on the boat, get off the boat, get in the car and drive home."19
Not only do casinos divert money away from legitimate businesses, but they also steal it from other forms of gambling. The public has only so much money to spend solely on entertainment. Horse and dog racing have competed against Casinos and suffered in communities where they have been implemented.
One of the single hardest hit businesses by the gambling industry is the restaurants around the casinos. Casinos offer an enormous amount of cheap food at the casinos to attempt to keep people inside. Many casinos have such specials as "Women eat free at 6:00" to cover the slower times of the day. The losers are the neighborhood restaurants, many of whom soon go out of business. In Atlantic city, the number of restaurants dropped from 243 to 146 between 1977 and 1987.20
As convenience gambling increases, not only do local businesses loose consumer dollars, but governments loose the sales taxes they would have received if citizens would have made these purchases. All of this adds to the drain on local government.
Probably the most devastating consequences of the gambling industry are the hidden social costs imposed on the gamblers and on their families. Gambling is an addicting habit which should be controlled, but for the most part is not. Perhaps this is because widespread legalization of gambling is such a relatively new phenomenon that the long term effects have not been totally seen.
The vast majority of citizens do not have a problem with gaming, but problem can be acquired. A study in Iowa showed that in 1989, only 1.7 percent of residents had a history of compulsive gambling. In 1995, four years after Iowa became the first state to admit riverboat gambling, the number of compulsive gamblers had jumped to 5.4 percent.21 This may be that some people had a tendency toward compulsive gambling but until it came to their community they did not have an opportunity to act upon this trait. It seems that when these people with inclination towards the addiction are allowed to gamble, their gambling problem comes to the surface.
Compulsive gamblers will bet until nothing is left: savings, family assets, personal belongings-anything of value that may be pawned, sold, or borrowed against. They will borrow from co-workers, credit unions, family, and friends, but will rarely admit that it is for gambling. They may take personal loans and possibly drive themselves into bankruptcy. A good example of this is that in the past two years since gambling began in South Dakota, the state has experienced significant increases in chapter seven bankruptcies, and small claims filings.22
Personal debt is by far not the only problem for compulsive gamblers. In the same two years that bankruptcy increased in South Dakota, the number of divorces increased nearly six percent, a jump of nearly 500 percent over the 1 percent yearly increase in the three years preceding the introduction of about 80 casinos in the small town of Deadwood, and of thousands of electronic gambling machines throughout the state.23 Gambling often leads to other destructive behavior. Compulsive gamblers also have a much higher rate of auto accidents. Some people attribute many of these accidents to suicide attempts, another costly behavior of problem gamblers. On average, compulsive gamblers have suicide rates that are five to ten times higher than the rest of the population. To add to the victim list are the people who get hit by the cars of gamblers. Many problem gamblers have driven themselves so far into debt that they do not have any auto insurance to pay for the damage that they have done.
Child abuse and neglect are high among the crimes that compulsive gamblers commit. While parents are in the casinos, their children are in the car parked outside. With numerous gamblers turning to alcohol to try to ease their pain, the number of child abuse cases goes upas well.
There are many economic costs of compulsive gamblers as well. By combining costs produced by problem gamblers such as fraud, embezzlement, unpaid debts, bankruptcies, and increases in criminal justice expenses, large sums of money are found the cost of legalized gambling. In fact, some estimated to be between twenty and thirty thousand dollars for each gambler, with some estimates that go as high as 52 thousand. These figures when multiplied by the number of problem gamblers in a large state such as California, the total jumps to nearly 900 million dollars.24
It is a fact that the economic status of a gambler, usually determines the psychological meaning of gaming for him or her. "The higher one"s income , the more one will tend to see gambling as entertainment or as a way to socialize with other people. Conversely, the lower one"s income, the more gambling tends to be seen as an investment"25 With the poor who cannot afford such investments as the stock market or real estate, gambling is meant to be less as play and more as a sincere chance to transform their lives for the better. While the poor do not spend much more than gambling than middle income families, they do spend a much higher percentage of their income.
Another disturbing situation in the gambling community is the changing percentage of women and young people who are becoming problem gamblers. At this time gambling is called "the fastest-growing teenage addiction, with the rate of pathological gambling among high-school and college-age youth about twice that of adults." In Atlantic City, the lure of gambling is so strong that over thirty thousand underage people are either thrown out, or stopped from entering the casino.26
A few years ago, the costs of counseling problem gamblers was relatively low. This was because relatively few states allotted much money for the treatment of them. With the number of compulsive gamblers increasing, the money for the treatment of gamblers will increase. At one time, most health insurance companies viewed compulsive gambling as a moral problem, and refused to pay for treatment. As the number of gamblers grow with the promotion of more state promoted gambling enterprises, there is likely to be even more lobbying pressure for increased government and insurance money for treatment and research. This will cumulatively increase the money that taxpayers will have to pay.
After thorough examination of the gambling industry, we find that it is not in the best interest of anyone for numerous reasons. For starters, it is not good for the individual because the legalization of gambling is closely related with the increase of many compulsive gamblers. It is also unfavorable for the individual, because it will lead a person who would never commit a crime on their own, to steal to finance their habit.
Gambling is also not very prudent for the families of gamblers. Many gamblers are also alcoholics who would beat their spouse and neglect or abuse their children. The community that the casino resides in is also hurt. Money that gambling was supposed to come, never came. And instead of tourists coming in to gamble the majority of gamblers came from the town itself. Money that could have been spent on goods from local stores was gambled away in the casinos.
Finally the state and local governments lose on this deal. Compulsive gamblers cost the state an enormous amount of money each year, and with the number of problem gamblers growing with the casinos, this is a problem that will not go away.
It is probably put best in the quote "once gambling starts, it does not slow down and there can be no standing in it"s place for those who would stop it"s spread"27


Bibliography


Abt, Vicki, James F. Smith, and Eugene Martin Christiansen, The Business of Risk, Commercial Gambling in Mainstream America,
University Press of Kansas, Lawrence, (1986)

Annin, Peter, "Looking for a Peice of the Action," Newsweek (June 13, 1994), p. 44

Eichenwald, Kurt, "Fool"s Gold in American Gambling," Newsweek (March 21, 1993) p.33

Goodman, Robert, The Luck Business, The Devastating Consequences and Broken Promises of America"s Gambling Explosion,
Free Press, (1995)

Hirshey, Gerri, "Gambling Nation," The New York Times Magazine (July 17, 1994) p.36

Lester, David, Gambling Today,
Thomas, (1989)

Popkin, James, "America"s Gambling Craze," U.S. News and World Report (March 14, 1994), p.42

Sasuly, Richard, Bookies and Bettors, 200 years of Gambling,
Holt, Rinehart and Winston, New York (1987)

Shapiro, Joseph P., "America"s Gambling Fever," U.S. News and World Report (January 15, 1996), p.52

Solotaroff, Ivan, "The Book on Gambling," Esquire (September 1995), p.159

Weinstein, David and Lillian Deitch, The Impact of Legalized Gambling: The Socioeconomic Consequences and Off-Track Betting,
Praeger, New York (1991)

Winston, Stewart, Harriet Harris, Nation of Gamblers: America"s Billion-Dollar-A-Day Habit,
Prentice-Hall, (1984)



Endnotes

1. Shapiro, Joseph P., "America"s Gambling Fever," U.S. News and World Report (January 15, 1996), p.57
2. Winston, Stewart, Harriet Harris, Nation of Gamblers: America"s Billion-Dollar-A-Day Habit,
Prentice-Hall, (1984) p.54
3. Popkin, James, "America"s Gambling Craze," U.S. News and World Report (March 14, 1994), p.48
4. Popkin, James, "America"s Gambling Craze," U.S. News and World Report (March 14, 1994), p.49
5. Lester, David, Gambling Today,
Thomas, (1989) p.37
6. Solotaroff, Ivan, "The Book on Gambling," Esquire (September 1995), p.162
7. Goodman, Robert, The Luck Business, The Devastating Consequences and Broken Promises of America"s Gambling Explosion,
Free Press, (1995) p.39
8. Shapiro, Joseph P., "America"s Gambling Fever," U.S. News and World Report (January 15, 1996), p.58
9. Goodman, Robert, The Luck Business, The Devastating Consequences and Broken Promises of America"s Gambling Explosion,
Free Press, (1995) p.73
10. Abt, Vicki, James F. Smith, and Eugene Martin Christiansen, The Business of Risk, Commercial Gambling in Mainstream America,
University Press of Kansas, Lawrence, (1986) p.97
11. Hirshey, Gerri, "Gambling Nation," The New York Times Magazine (July 17, 1994) p.36
12. Shapiro, Joseph P., "America"s Gambling Fever," U.S. News and World Report (January 15, 1996), p.60
13. Winston, Stewart, Harriet Harris, Nation of Gamblers: America"s Billion-Dollar-A-Day Habit,
Prentice-Hall, (1984) p.42
14. Winston, Stewart, Harriet Harris, Nation of Gamblers: America"s Billion-Dollar-A-Day Habit,
Prentice-Hall, (1984) p.57
15. Goodman, Robert, The Luck Business, The Devastating Consequences and Broken Promises of America"s Gambling Explosion,
Free Press, (1995) p.104
16. Annin, Peter, "Looking for a Peice of the Action," Newsweek (June 13, 1994), p. 44
17. Goodman, Robert, The Luck Business, The Devastating Consequences and Broken Promises of America"s Gambling Explosion,
Free Press, (1995) p.110
18. Solotaroff, Ivan, "The Book on Gambling," Esquire (September 1995), p.175
19. Eichenwald, Kurt, "Fool"s Gold in American Gambling," Newsweek (March 21, 1993) p.38
20. Shapiro, Joseph P., "America"s Gambling Fever," U.S. News and World Report (January 15, 1996), p.56
21. Goodman, Robert, The Luck Business, The Devastating Consequences and Broken Promises of America"s Gambling Explosion,
Free Press, (1995) p.74
22. Hirshey, Gerri, "Gambling Nation," The New York Times Magazine (July 17, 1994) p.38
23. Popkin, James, "America"s Gambling Craze," U.S. News and World Report (March 14, 1994), p.56
24. Abt, Vicki, James F. Smith, and Eugene Martin Christiansen, The Business of Risk, Commercial Gambling in Mainstream America,
University Press of Kansas, Lawrence, (1986) p.45
25. Goodman, Robert, The Luck Business, The Devastating Consequences and Broken Promises of America"s Gambling Explosion,
Free Press, (1995) p.39
26. Winston, Stewart, Harriet Harris, Nation of Gamblers: America"s Billion-Dollar-A-Day Habit,
Prentice-Hall, (1984) p.33
27. Shapiro, Joseph P., "America"s Gambling Fever," U.S. News and World Report (January 15, 1996), p.61