Monday, August 13, 2012

New York's Bad Bet: At Willets Point or Anywhere

In the City Journal Steve Malanga takes a hard look at the impact of legalized gambling-and what he sees doesn't bode well for its expansion in NYC, at Willets Point or anywhere:

"New York is one of several states that don’t want to be left behind as their neighbors institute more and more varieties of gambling. At least 12 states, facing downturn-depleted coffers, have already expanded gambling efforts over the last three years—including Massachusetts, which became the 16th state to sanction casinos. But this approach is utterly misguided, since gambling has often disappointed as a fiscal tool and as an economic-development strategy. As legal gambling has spread, competition for limited dollars has intensified, and the new gambling enterprises seem merely to be siphoning money from elsewhere in the economy instead of generating new economic activity."

Gambling also comes with huge social costs: “This is not an industry that creates wealth,” says Les Bernal, head of the Stop Predatory Gambling Foundation. “It’s an industry that transfers wealth.” And that’s before taking into account the documented social costs, including the disturbing fact that a significant part of gambling revenues comes from problem gamblers."

On the fiscal side of the ledger, gambling has never lived up to the promises of its supporters who claimed that the new revenues would help to close budget gaps:

"Over the long term, gambling revenue has failed to hold down taxes, despite supporters’ predictions. New Jersey was the first state to legalize both casinos and the lottery. When its first casino opened in 1978, the state was the fifth most heavily taxed in America, according to the Tax Foundation. Now, despite garnering more revenue from gambling than all but four states, its tax burden is the nation’s second heaviest. New York, which brings in the most money from gambling, is also the nation’s most heavily taxed state."

In fact, we would argue that these gambling monies only feed Leviathan and help to forestall meaningful budget reductions that would alleviate the beleaguered tax payers. And the new funds are never allocated where they are initially pledged for:

"Why haven’t gambling revenues provided budget relief? One reason is that they sometimes get captured by the same special interests that co-opt tax dollars. California instituted a lottery in 1985 to boost education funding, promising to use the revenue for classroom supplies and programs. But as the Orange County Register reported in 1988, nearly $6 out of every $10 in lottery revenue sent to the schools was used to boost teacher salaries instead."

The argument over Willets Point has been about economic development, but like the aborted convention center concept, gambling is a very poor economic development tool:

"Gambling’s record as an economic-development tool is no better. Supporters often point to the number of people that local casinos or betting parlors employ. But they don’t take into account the employment lost in other industries because of the introduction of gambling. The National Gambling Impact Study Commission, created by Congress, noted in a 1999 report that hundreds of restaurants and bars closed in the greater Atlantic City area after casinos began opening, offsetting some of the employment gains. The commission added that when it visited the city in 1998, it found unemployment substantially above the average for the nation and for much of New Jersey."

We're sure that the neighboring communities of Flushing, East Elmhurst and Corona would be happy to learn about the social costs of a casino as a next door neighbor:

"Another social cost is crime, which appears to rise after casinos open. The most comprehensive study of crime and legal gambling, conducted by economists Earl Grinols and David Mustard and published in The Review of Economic Statistics in 2006, examined 167 counties where casinos had opened over the 20-year period ending in 1996. In those counties, the authors estimated, 5.5 percent to 30 percent of serious crimes in six categories were attributable to gambling. The casino counties suffered 157 more aggravated assaults per 100,000 residents than non-casino counties did, for example."

It also goes without saying that gambling redistributes income-from those who can least afford it over to the government that will, whenever it gets the chance, waste it:

"The Tax Foundation argues that state lotteries represent one of the steepest of all taxes, since the government keeps an average of 42 percent of betting proceeds—far higher than the sales-tax rate that states would charge if the wagered money were spent on something else. The lottery tax is also hidden, since few people recognize it as a government levy. And the burden of this hidden tax is not equally distributed. Numerous studies have shown that lotteries tend to attract lower-income, less educated players, cutting significantly into personal income and private-sector spending in poorer neighborhoods. One recent study found that households with less than $12,000 per year in annual income spend 5 percent of it on the lottery. In part, lower-income households spend so much because they buy the aggressive advertising of state lotteries, which claims that participating in them will bring you riches."

So what we see with the latest trial balloon for Willets Point is more of the same inanity-promoting anything but the indigenous businesses that actual employ the most needy while advancing immigrant entrepreneurship. Malanaga deserves the last word: "So politicians, too, are addicted to gambling. Their addiction will damage many lives—and fail to help state finances."