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Is America Taking a Chance on Gambling?

Think Tank Transcripts: Is America Taking a Chance on Gambling?

ANNOUNCER: 'Think Tank' has been made possible by Amgen, arecipient of the Presidential National Medal of Technology. Amgen,bringing better, healthier lives to people worldwide throughbiotechnology.

Additional funding is provided by the John M. Olin Foundation, theRandolph Foundation and the Lynde and Harry Bradley Foundation.

MR. WATTENBERG: Hello. I'm Ben Wattenberg. Gambling is bigbusiness in America. From the glittering casinos of Las Vegas to theVermont General Store, Americans wager billions of dollars a year ongames of chance. But should the government be your bookie?

Joining us to sort through the conflict and the consensus are:William Eadington, professor of economics at the University ofNevada, Reno, and the director of the Institute for Gambling andCommercial Gaming; Gabrielle Brenner, professor at the University ofMontreal Business School and author of 'Gaming and Speculation: ATheory and History,' and 'A Future of Some Human Decisions'; FatherRobert Drinan, professor of law at Georgetown University and authorof 'The Fractured Dream: America's Divisive Moral Choices'; andRobert Goodman, director of the United States Gambling Study andauthor of the forthcoming book, 'The Luck Business: America and theCulture of Chance.'

The question before this house: Is America taking a chance ongambling? This week on 'Think Tank'.

Americans love to gamble. They bet everything from dogs, horses,sports, and jai alai to lotteries, blackjack, bingo, and roulette.For the last 200 years, much of this was done through illegalbookies, game rooms and numbers rackets. But in the last 40 years,much has changed.

State lotteries have largely replaced illegal numbers rackets.Millions of Americans buy tickets in the hope of becoming instantmillionaires despite astronomical odds against them.

In 1964, New Hampshire became the first state to legalizelotteries. In 30 years, lotteries have spread to 37 states. And thereis big money to be made. In 1964, New Hampshire residents wagered $5million on the lottery. By 1993, Americans bet $25 billion on thelottery. State typically rake in 40 percent of that in profits, whichthey spend on schools, highways and other public projects.

Now casino gambling is exploding across America. It used to bethat you had to go to Atlantic City or Nevada to gamble. Todayriverboat casinos line the Mississippi, and casinos on Indianreservations are sprouting up almost everywhere.

State governments back these projects because they are eager forthe jobs and tax income that casinos promise. And there is a lot ofmoney to be taxed. Americans spend nearly $35 billion a year ongambling. That's seven times more than they spend at the movies or atsporting events.

Some opponents argue that the promises of economic benefits fromgambling are exaggerated. Others say that the idea of government asbookie teaches wrong moral lessons. Government-approved gambling,they say, appeals to greed and deceives people, especially poorpeople, into believing that they can get something for nothing.

But with nearly every state interested in opening casinos,gambling in America is on a roll.

Let's begin by going around the room once with you, GabrielleBrenner. Are people who gamble in public venues, like casinos orlotteries -- are they suckers?

MS. BRENNER: No. They are no more suckers than people that buy'People' magazine or go to a movie even if it's a bad movie. Theydecide how to spend their leisure dollar.

MR. WATTENBERG: Okay. Bill Eadington.

MR. EADINGTON: Well, gambling has become more and more a commodityin the last 20 or 30 years in the perception of both individuals andthe general public. And the real issue is, is gambling truly acommodity?

MR. GOODMAN: I think gambling has changed so much in the lastcouple of years that it's no longer gambling the way it used to be.And what's happened is, government has basically become the largestpromoter of gambling in the country. So I think it's a problem not ofpeople being suckers; people have always gambled. But it's a problemof the government trying to get them to gamble more and trying tomake suckers out of people, if you look at it that way.

MR. WATTENBERG: Okay. Father Drinan.

FR. DRINAN: America in the last generation has done something thathe never did for 200 years -- namely, pander to people and exaggeratetheir greed. All of the churches and synagogues, we're opposed, arestill opposed to this organized gambling. We don't know yet what it'sdoing to the psyche of the people. More and more problems can occurwith people addicted to gambling and the devastation of families. Ithink that it's time to reconsider the whole thing.

MR. WATTENBERG: But don't churches hold raffles where people winmoney or turkeys or --

FR. DRINAN: Yes, but that's not organized by the state, and it isat a very, very low level.

MR. WATTENBERG: Would you favor private gambling, where thegovernment is not involved? I mean, like Las Vegas, where BillEadington is from, is not government-run. Those are privately run.

FR. DRINAN: Well, I'd have less objection to that, but the realobjection that people have now more and more is the fact that thegovernment, while it seeks to cure us from alcoholism and from drugsand from other addictions, it is urging the addiction to gambling.And with the latest on the Indian reservations, we don't know theenormous consequences of what we're doing.

MR. EADINGTON: You know, it's interesting. When most of thegambling that was going on was the province of organized crime, youdidn't have full-page ads in the newspapers and spots on TV urgingpeople to gamble more. The governments are now spending $300 milliona year just in advertising their gambling products. Organized crimenever did that.

Now, that's not an argument for organized crime to do it.

MR. WATTENBERG: And the state lottery business is probably theworst bet you can make in gambling.

MR. GOODMAN: It's not a good bet, but I mean I don't have anyproblem if people decide to do things that are against theirinterest. I have no concern with that.

The concern I have is the role of government in that process.Government at one point was regulating this industry. It was tryingto protect people's interest in it. And I think they've shifted theirrole from being a regulator to being a promoter.

MS. BRENNER: I believe the problem of gambling per se is not aproblem. People have gambled since the cave age -- they must havebeen gambling then. But what is new now is the role of government.The proper role of government in the gambling industry is to regulateand to tax, not to promote.

Now, you are speaking about state lotteries, which are maybe thebiggest instance of government being the promoter of gambling. InCanada, we have also state casinos now. The casinos are state-owned.In Montreal, we have one of the most successful ones, and inWinnipeg, we have another state casino. And some are coming.

Now, governments are not constrained by the same accounting andfinancial constraints as every private business, and there may be toomuch gambling because they don't look at the bottom line like aprivate business would. MR. GOODMAN: Well, not only that, but they'rehaving these major negative impacts on other private businesses. Thegovernment has essentially given the gambling industry in certainlocations a monopoly to run their enterprise. So while they have theexclusive role of providing gambling products, a particular company,meanwhile other businesses, like bowling alleys or people who sellshirts or furniture, are losing business. Now --

MR. WATTENBERG: You mean because there is a finite amount of moneyand --

MR. GOODMAN: There is a finite amount of money, and what we'reseeing in all our studies now is money being shifted out of localenterprises and into these new gambling ventures.

MR. WATTENBERG: Bill Eadington, defend your industry.

MR. EADINGTON: Well, I would like to make a point on the role ofgovernment that I think is very important, and that is that in thelast six years, we've seen a phenomenal proliferation of casino-sidegaming in the United States and Canada and in many other countriesthroughout the world. And I think the United States is perhapsweakest in terms of its own perspective as to why it is doing it. Wehave, in effect, competition among jurisdictions to legalize casinosto capture tourist dollars or exported dollars from otherjurisdictions, which I think is perhaps the wrong reason to legalizegambling.

The underlying question that you have to come back to, and it'sone that Bob is alluding to, is that, is gambling an activity that isa legitimate activity for citizens to participate in, or is itsomething that we really don't like, but we're going to legalize itin spite of itself to capture the ancillary economic benefits, suchas taxes or job creation, that it might bring about.

I think it's very important for jurisdictions who are consideringgambling that they ask the question, is this an activity that, onbalance, is worthwhile for our citizens to freely participate in?

MR. GOODMAN: Well, we also have to ask whether it creates jobs. Imean, that's -- it's basically a jobs program. I mean, the lottery --

MS. BRENNER: No, it's not. No, it's not.

MR. WATTENBERG: It's basically -- on the state side, it isbasically a revenue enhancer, as we say in this wonderful town. Imean, it's bringing taxes in.

MR. GOODMAN: The lotteries were essentially put in place as arevenue enhancer.

MR. WATTENBERG: Right.

MR. GOODMAN: They -- the lotteries employ very few people. Nowwe've escalated that. Governments escalated that, and they're lookingat casinos, riverboats, slot machines, basically to create jobs andto bring in revenue. And you'll notice that almost all of the newventures are in places that are economically depressed. You don'thave casino companies going into affluent areas trying to locatecasinos there. They're saying, this is your way out of poverty, thisis the way to create jobs. It's the single most significant economicdevelopment policy on a local and state level right now.

As I say, we spend hundreds of millions to promote gambling, butwe're spending only $50 million nationwide on supporting our localmanufacturing industries, local small businesses. We're spending sixtimes that amount on our gambling industry.

FR. DRINAN: And I hope that the United States learns the lessonagain. We had gambling from the beginning of the republic, and thenit grew into the 1830s and 1840s. Then there was a great crusadeagainst it. It was corrupting people. And the Quakers particularlycame forward and said, this is debasing and degrading to humanbeings. And then the states abolished it, and the federal governmentcame in and abolished it. And until, really, 20 years ago, 15 yearsago, we abided by that moral decision.

And now we're trying to learn again what they learned in Americaand they just abolished it. And of all of the forces that lead tothis deception, I think 'The London Economist' said it well, that thegovernment is seeking to deceive people, and if they had the truefacts, they would not bet because they can't possibly win. It's all abig deception.

MS. BRENNER: No, that's not true. I believe this has been found alot of times, that people do know that the odds are against them. Butthey also know, especially for the lotteries, that for a lot of them,it's their only means to get rich. So people who want to abolish itare people that have other means to get rich. They can play on thestock market, they can play on the commodity market, they can marrysomebody, or they can inherit wealth.

MR. WATTENBERG: Or they can work hard and earn it.

MR. GOODMAN: Those are not just the people who want to abolish it.

(Cross talk.)

MS. BRENNER: I would like to interrupt on the moral aspect. MR.GOODMAN: Not just the rich people.

MR. WATTENBERG: Yeah, I want to come back -- please.

MS. BRENNER: For the last 20, 30 years, what has characterized oursocieties has been government getting out of the business of tryingto legislate morality. Now, there was a problem about sexual conduct,and now there is a problem about gambling, and there are a lot ofother problems.

And this legalization of gambling would go into the same aspect.

MR. WATTENBERG: I want to ask Father Drinan a question. If I spendThursday evenings with a group of buddies, with beer and pretzels,and we play poker, is that immoral?

FR. DRINAN: No, no, but I don't think that you have the samegovernmental things, and you don't have an outside syndicate runningit with machines you're going to resent.

MR. WATTENBERG: All right, so gambling itself is not immoral?

FR. DRINAN: No, no. It's always --

MR. WATTENBERG: Now, if you have a private company without anygovernment subsidy in a casino having gambling, that the governmenthas licensed and they get a piece off the top, is that immoral?

FR. DRINAN: Well, you're approaching the stage where you areaddicting people, the poor people and the young people.

MR. WATTENBERG: But they were going to bookies before, before thestate gaming.

FR. DRINAN: Well, I know, but that was all illegal. And theenforcement was very, very difficult, so the government, wrongly inmy opinion, decided that let us legalize all of this and that we arethe ones that are promoting it.

MR. GOODMAN: There's a real conflict of interest. Let me give youan interesting example. In Japan, the government has the monopoly onselling cigarettes. Eighty-five percent of the cigarettes sold inJapan are sold by the government of Japan.

In Japan, you cannot even get a label on a package of cigarettessaying this might be dangerous to your health. The health careindustry there has difficulty getting any money to do research,government money to do research, on the dangers of cigarette smoking.

The problem is, what is the role of government? Should thegovernment become so dependent on these revenues that it has aconflict of interest in terms of regulating that industry, in termsof controlling what that industry is doing? If they're the industryand their revenues are so dependent on it, they can't take anunbiased position on it. And we see that in Japan.

MR. EADINGTON: Yeah. There are really three main reasons whypeople have opposed gambling -- legalization of gambling in the past.The first is the morality argument, which in recent years hasdiminished in impact, partly because the institutions of the churchand state have diminished in their influence over the body politic.

The second is organized crime and corruption linked to gambling,which is more a byproduct of illegal gambling and prohibitionsagainst gambling than it is of legal, highly regulated gambling.

The third is, I think, the real issue we're going to deal withover the next 20 or 30 years, or into the indefinite future. And thatis problem gambling, or people who have difficulty controllingthemselves when they gamble. And I think what is needed as part ofthe public policy debate is a better understanding of what are therealities you're confronting and what are the real costs of problemgambling?

MR. GOODMAN: Well, one of the real costs is when people -- we'reexpanding the base of problem gamblers right now. The more venturesthat we create, the more problem gamblers we have. This has veryserious impacts on our economy. People who gamble and get in troubledon't pay off their debts. They borrow money. They wind up writingbad checks. They embezzle money. They engage in fraud. This is moneylost to the private economy.

When you see it as a jobs problem, it all seems like we're justcreating jobs and bringing in revenue. But we're losing a lot ofmoney by expanding gambling.

MR. WATTENBERG: Isn't that also true with, say, alcohol andcigarettes? I mean by legalizing alcohol and cigarettes, some peopleget addicted and get lung cancer or get cirrhosis of the liver?

MR. GOODMAN: Absolutely, but the government is not promoting --

MR. WATTENBERG: What?

MR. GOODMAN: The government is not promoting cigarettes. Thegovernment is not promoting alcohol.

FR. DRINAN: In fact, they're deterring it. They're seeking inmany, many ways to --

MR. GOODMAN: They're trying -- you've got sectors of the --exactly.

FR. DRINAN: To urge temperance and restraint and abstinence.

MS. BRENNER: Well, not all governments. In Canada, for instance,alcohol distribution is also state-regulated, and I didn't see such atemperance movement. So again, we're coming back to the problem ofgovernment.

MR. WATTENBERG: It is -- in many states in the United States, youhave state liquor stores.

MS. BRENNER: We are coming back to the problem of governmentinvolvement.

MR. GOODMAN: You have state liquor stores, but you don't havethose state liquor stores promoting the sale of liquor.

MS. BRENNER: I think it's a red herring to speak about governmentbeing so dependent on the revenues from gambling. If you are lookingat the money involved, it is a small amount. There is absolutely nomodern government that could reduce its deficit --

MR. GOODMAN: Why do you think the government is doing it, then?

MS. BRENNER: Because they are desperate for money. MR. GOODMAN:Well, that's right.

MS. BRENNER: But if you are looking at the money per se, at thesum per se, compared, for instance, either to the deficit of thegovernment or to the total revenues of the government, we arespeaking about a very, very small percentage.

MR. WATTENBERG: How much do governments in the United States takein from gambling?

MR. EADINGTON: It's a significant industry. The gaming industry isnearly as large as the commercial airline industry in terms of grossrevenues. In terms of tax revenues accruing to government, lotteriesis the largest tax collector. And I think if you are concerned on thepublic policy issues, the appropriate role of government, lotteriesis where you end up focusing.

MR. WATTENBERG: Lotteries bring in more money to a state than asales tax?

MR. EADINGTON: To the government -- not than a sales taxgenerally, but lotteries in the United States in 1993 generated totalsales of about $25 billion, gross revenues after payment of prizes ofabout $13 billion, and contributions to state tax coffers, orearmarked monies, of about $9 billion.

MR. GOODMAN: Yeah, but I agree with Gabrielle that as a percentageof what the state budgets are, it's quite small. In many states, thelotteries make up anywhere from 1 to 3 percent of the total budget.

It's really a political process that we're looking at here,because it's very easy for politicians to say, let's bring in a newlottery game, let's bring in a new casino; we won't have to raiseyour taxes. The reality is, they're not bringing in that much money,and the reality is, it's harder -- it's getting harder and harder toget people to gamble more and more.

What's happening is the revenues are actually increasing, but thepercentage that the governments are taking out of this is actuallydecreasing. By and large, all the surveys have shown that theindustry has not been able to keep up with the revenue demands beingmade on them. So you see this enormous surging interest, interestfalls, and then they bring in new games.

MR. WATTENBERG: Now, what is your problem with gambling? Is iteconomic or moral?

MR. GOODMAN: It's economic. I gamble myself. I have no problemwith it. I don't have any problem. It's economic. Is it a jobcreation program? Do you really create jobs?

You're not really creating -- as this expands, you're saturatingthe market, you're sucking money out of other local businesses,you're asking other local businesses to lose revenues and lose jobs.

FR. DRINAN: Why should the government be involved in doing this?It's totally inconsistent with the role of the government as weenvisioned it in the history of America, and in Canada. Thegovernment is supposed to be promoting the virtue of people and themorals of people, helping them with their health and to get rid oftheir addictions. That's the traditional role of the government asthe educator, as the uplifter.

And now they come along and say, well, we need a free lunch, andwe don't want to tax you according to an equitable formula.

Let the people work it out that they will pay sales tax orproperty tax or income tax, or something like that, rather than say,we are going to the poor and the people who are weak, and we areencouraging them. I think that's just totally inconsistent withAmerican morality.

MR. EADINGTON: I think the real issue here is a question ofpaternalism versus self-responsibility, and whether gambling shouldbe treated differently than other commodities. That is thefundamental issue. The reason we have seen so much legalization hasbeen because jurisdictions do want the jobs and they do want the taxrevenues and the investment and the stimulation that gamblingpromises, or gaming promises. The real question is, does it deliveron its promises? And in some jurisdictions it does, and in somejurisdictions it does not. Nevada, where I come from, has been thefastest growing state in the U.S. over the last three decades becauseit has had, if you wish, a moral monopoly on legal, casino-stylegambling.

That monopoly is now diminishing, and we're seeing newjurisdictions, many of them, capture the latent demand in thoseregions with high profits and large job creation. The real questionis, does that sustain itself in the long term?

FR. DRINAN: I'm in favor of paternalism, okay? I'm in favor ofpaternalism. That is not paternalism. This is the good governmentthat urges virtue in our people. And that's what the U.S.Constitution does and the whole American history.

MR. WATTENBERG: You said that gambling -- I thought you said thatyou do not think that gambling itself is immoral. Then how can youmake a virtue argument for it?

FR. DRINAN: No, I'm not saying -- this is a tendency that goesback to -- in all of recorded civilization. However, it is sodangerous that people -- a certain number of people can get out ofcontrol, and I don't think that the government should be saying, doit, do it, and you'll be a millionaire --advertising it.

(Cross talk.)

MR. WATTENBERG: All right, hold it, hold it. Just stop for onesecond. I want somebody -- there is another twist on this gamblingargument, which is the role of the Indian reservations. Couldsomebody sort of speak to that, just for our viewers? Bill, why don'tyou just lay it out, what the facts -- what's happening.

MR. EADINGTON: Well, I think what's happened with Indian gaming,Indian gaming is a phenomenon that has occurred in the last fewyears. It has created tremendous economic opportunity for autonomousIndian tribes throughout the United States who have been able toexploit especially casino-style gaming.

And what has happened is those tribes have done the same thingthat Nevada has done over the years, and that is to be the monopolythat has captured the latent demand for gambling within theirregions. The tribes themselves, in many cases, have become quiteaffluent. The question as to whether this is good or not for thetribes really has to be analyzed on a tribe-by-tribe basis, becausesome of them are being foolish and some are not.

MR. WATTENBERG: On balance, as Sophie Tucker once said, 'I've beenrich and I've been poor. It's better to be rich.' I mean I assumethat --

MR. GOODMAN: No one's going to argue against being rich. Andclearly, for most of the tribes, it has been a benefit. But I thinkwe can't just limit our picture to just what's happening in thetribes. We have to look at what --

MR. WATTENBERG: But we've talked about some -- no, I want tofollow this Indian tribes thing a little further. I mean this hasbeen a disadvantaged class in the United States, Native Americansliving on reservations. Hasn't this helped them? You're a socialliberal, Father Drinan.

FR. DRINAN: Well, all right, it may have helped them in the shortrun, but in the long run, I don't think this builds up thatreservation, giving them jobs and opportunities and good health. Andthey may have a few jobs, but what do the young people coming alongthink? Will they think that the white people have victimized us onceagain?

MR. GOODMAN: In terms of what we've done in the past, we haven'tmade any opportunities available for either the tribes or manydisenfranchised groups in the United States. And to see gambling as apanacea, either for tribes or economically depressed cities oreconomically depressed race tracks, this is no magic bullet.

MR. WATTENBERG: Let us go again, very quickly, around the roomjust for a brief comment about what we -- this panel agrees upon andwhat you disagree upon. And Father Drinan, why don't you start?

FR. DRINAN: I am reinforced in my belief that the great moraltradition of America was correct, that if we allow gambling, wediscourage it, and certainly the government should not be therepandering to the weakest tendencies of people that 'I'm going to getrich all of a sudden.'

I have the hope that somehow in the plebiscites, that the voicesof the moral forces of America are going to be heard, and the peoplewill say that's not the way to go for this great country.

MR. WATTENBERG: Bob.

MR. GOODMAN: I think that we have the federal government and localand state governments operating at cross purposes. The federalgovernment is trying to expand the economy using industrial policy,trying to put money into high-tech industries so we can becompetitive on the global marketplace.

On the local and state level, we are basically trying to expand apredatory industry. And I say predatory in the sense that it can onlygrow at the expense of other local businesses.

MR. WATTENBERG: Bill Eadington.

MR. EADINGTON: I think that the real issue confronting both localgovernments and the federal government is one of where do we want tohave gambling as part of our society? Ten years ago, we said we wantit almost nowhere. Now we're saying almost everywhere.

I think the reality is, we want it somewhere in between those twoextremes, but there is tremendous difficulty getting to that pointbecause we basically have political jurisdictions competing againstother political jurisdictions to capture the economic benefits, andthat leads to bad policy.

MR. WATTENBERG: Gabrielle.

MS. BRENNER: I believe that gambling is a perfectly legitimateactivity like any other activity. What is not legitimate is to saythe role of government. The proper role of government -- I am sureFather Drinan won't agree with me -- is not to legislate morality orto try to uplift people, but to regulate and probably to tax.

Now, what we have now is governments that are so desperate ofmonies, they don't think about regulations, they think only abouttaxing. What I would see would be the future of an industry wheregambling would be allowed, but there would be a very strictregulatory framework for it, no monopoly given to one special groupor another, and let the free market see who is going to be the winnerand where people want to spend.

MR. WATTENBERG: Okay. Okay, thank you, Gabrielle Brenner, FatherRobert Drinan, Bill Eadington, and Bob Goodman.

And thank you. Please send your questions and comments to: NewRiver Media, 1150 17th Street, NW, Suite 1050, Washington, DC, 20036.We can be reached via E-mail at thinktv@aol.com. And do check out ournew home page on the World Wide Web at www.thinktank.com.

For 'Think Tank,' I'm Ben Wattenberg.

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'Think Tank' has been made possible by Amgen, bringing better,healthier lives to people worldwide through biotechnology.

Additional funding is provided by the John M. Olin Foundation, theRandolph Foundation, and the Lynde and Harry Bradley Foundation.

BEN WATTENBERG

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