Davies: Gambling won't be the jackpot New York needs
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This week, Gov. Andrew M. Cuomo signed legislation to expand casino gambling in New York. The plan authorizes four upstate casinos, which must also be approved by voters in a statewide ballot referendum in November.
The governor has said the move is all about jobs, jobs, jobs. To be sure, casinos will create jobs. But the large-scale expansion of gambling across the state is a zero-sum game. Many studies show the social and economic costs of casinos outweigh the benefits.
Baylor University economist Earl Grinols found that gambling creates $3 in social costs for every $1 it generates. Even the job gains -- the cornerstone of Cuomo's case for more gambling -- are offset by job losses as casinos cannibalize existing businesses, especially in the restaurant, retail and entertainment sector.
In Atlantic City, the number of independent restaurants decreased from 48 when the first casino opened in 1978 to 16 in 1997, according to a New York Times report. One third of the city's retail stores closed within four years after casinos arrived, according to Hampshire College professor Robert Goodman's 1995 book titled "The Luck Business: The Devastating Consequences and Broken Promises of America's Gambling Explosion." A several-block stretch of discount retail stores has since been added, but the unemployment rate last year was 17.8 percent, just below the 18.1 percent in 1977. The poverty and crime rates have also increased since the arrival of casinos.
The last time New York considered legalizing casinos, a 2002 study commissioned by then-Gov. George Pataki found 1,208 more jobs would be lost than gained. That's because unlike Las Vegas, which attracts millions of tourists and conventioneers, the isolated casinos proposed for upstate New York will feed mainly off locals.
As such, the casinos won't generate much new spending for the local economies. Instead, casinos shift spending in what economists call the substitution effect. In extreme cases, money for food, rent, medicine, child support and other necessities will get plowed into slot machines.
This is where Cuomo and other casino supporters are particularly wrong to try to build an economy and state revenue model that relies heavily on gambling. The first duty of elected officials is to protect the public, not enable an industry that strips wealth from residents and creates costly social ills.
Studies show casinos lead to an increase in theft, violent crime, substance abuse, divorce, suicide and bankruptcy among the people who live near them. One study by Baylor's Grinols, University of Georgia's David Mustard and the University of Illinois' Cynthia Dilley found 8 percent of crime in counties with casinos could be traced to gambling. A study by the St. Louis Federal Reserve found riverboat gambling in Mississippi increased personal bankruptcies in the state and neighboring counties.
In New York, there's been little effort to conduct an independent study or invite public discussion. Instead, Cuomo has repeated a claim that casinos could generate over $1 billion in economic activity. Where did he get that figure? A footnote in Cuomo's 2013 State of the State report cites the source as a newspaper quote from James Featherstonhaugh, an influential lobbyist and president of the New York Gaming Association.
Cuomo dismisses the costs of gambling by arguing that New Yorkers already gamble in other states, so why not keep the revenue here? The problem with this argument is that placing casinos closer to home leads to more frequent visits and creates new problem gamblers -- people whose gaming behavior causes psychological, physical, social or vocational disruption in their lives.
The National Gambling Impact Study Commission found that having a casino within 50 miles of home doubles one's likelihood of becoming a problem gambler. In Philadelphia, customers visit the casino that opened there in 2010 an average of three to five times a week -- or 150 to 250 times a year.
Grinols estimated that 52 percent of the revenue at a typical casino comes from problem gamblers. A study in Ontario put the figure at 35 percent. In either case, many regional casinos depend largely on repeat and problem gamblers.
There's a reason why New York's forefathers thought it was important to ban gambling in the state constitution. Cuomo and the Legislature have trampled on that precedent. But voters should keep it in mind before taking the extreme step to change the constitution in the fall.
Paul Davies is a research fellow at the Institute for American Values, a think tank based in Manhattan, and maintains its Get Government Out of Gambling blog.