Stop Predatory Gambling

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A Failed Government Policy

No issue lies more at the nexus of most of the major challenges we face today in our society than government-sponsored gambling. It impacts our economy, our politics, our ethics and our collective spirit as a nation. It is a defining issue about who we are as a people.

Government sponsored gambling is dishonest, financially damaging to citizens and is a major contributor to the unfairness and inequality in American life. It’s a policy experiment that has failed.

It has failed because it is proven itself to be blatantly dishonest

The dishonesty starts with the forms of gambling that government sponsors and promotes to the public. These games, especially electronic gambling machines, are designed mathematically so users are certain to lose their money the longer they play. At the same time, the machines are literally designed so citizens cannot stop using them, exploiting aspects of human psychology and inducing irrational and irresponsible behavior.

Another part of the dishonesty of this public policy is it hasn’t delivered on what the predatory gambling promoters promised. It hasn’t improved the financial condition of states….it’s worsened it. It hasn’t helped the economy, locally or nationally…it’s been drag on it. It hasn’t expanded the middle class…it’s shrunk the middle class. It was supposed to be harmless for citizens…it definitely hasn’t been harmless, evidenced by the millions of Americans who have suffered because of it.

Lastly, nearly all of the gambling operators, gambling machine makers and the politicians who promote gambling, don’t frequently gamble themselves. This reality exemplifies the dishonesty of government-sponsored gambling.

It has failed because it’s financially damaging to citizens, increasing the divide between the powerful few and everyone else

As predatory gambling has spread into economically-distressed communities, first with lotteries then with casinos, the evidence shows it has lured far more citizens from the lower rungs of the income ladder. Low-income workers, retirees, minorities, and the disabled comprise a disproportionately large share of lottery and regional casino users. By targeting the least advantaged, government-sponsored gambling adds to the increasingly separate and unequal life patterns in education, marriage, work, and play that now are dividing America into haves and have-nots.

Instead of expanding the middle class, it has driven citizens deeper into America’s debt culture. Predatory gambling has created a Lottery Class in America. While most of us save and invest money in retirement accounts and 529 college funds for our kids, government is turning hundreds of thousands of people who are small earners with the potential to be small savers into a new class of habitual bettors – the Lottery Class. They represent the 1 out of 5 Americans who, according to the Consumer Federation of America, think the best way to achieve long-term financial security is to play the lottery.

It has failed because it’s created unfairness for taxpayers

Casinos and lotteries have proven to be a failed source of government revenue and haven’t delivered on their promises to fund education, lower taxes, or pay for needed public services. States generally expand gambling operations when tax revenues are depressed by a weak economy, or to pay for new spending programs. Yet income from casinos and lotteries does not tend to grow over time as rapidly as general tax revenue. Expenditures on education and other programs will generally grow more rapidly than gambling revenue over time. Thus, new gambling operations that are intended to pay for normal increases in general state spending add to, rather than ease, long-term budget imbalances.

More troubling for taxpayers, casinos are not allowed to fail by the state. When casinos come up short, states usually provide new infusions of money, reduced taxes, reduced funding for gambling addiction measures, or other concessions such as lifting smoking bans and loss limits, in order to sustain revenues and profitability. Rhode Island, Delaware, and New Jersey, to just name a few, have all recently taken special steps to help casinos that might otherwise fail. Public tax dollars too often prop up casinos.

It has failed as a form of “harmless entertainment”

Advocates of predatory gambling promote the intentionally deceptive PR narrative that their operation is no different than other forms of “entertainment.” They promote it in an attempt to hide the dishonesty of what they do and the financially damage they inflict. MIT Professor Natasha Shull’s book Addiction By Design reported that gamblers who manage to follow “responsible gambling codes of conduct”- the so-called casual player- contribute a mere 4% of gambling revenues. Endorsed by its partners in government, the entire revenue model for casinos hinges on getting citizens to lose control of themselves, not entertainment, ultimately causing harm to them and the people around them.

The same is true for the lottery business model. As The New York Times reported, lotteries take up to 80% of their profits from just 10% of its users. The out-of-control citizen is the lifeblood of state lottery programs everywhere.

Entertainment, as a dictionary will tell you, is activity that aims to please, amuse or delight. Sometimes it involves a financial exchange (buying a concert ticket), and sometimes it doesn’t (playing charades). When a financial exchange is involved, the exchange (buying the ticket) exists only to facilitate something else (enjoying the concert). But gambling is always and in essence a financial exchange. Any entertainment connected to the exchange—any pleasure, excitement or stimulation—merely stems from the exchange itself and cannot exist without it. Would people go to casinos if no one could win or lose money in them? Commercial gambling is a financial exchange which takes place not in order to facilitate something else, but for its own sake.

All forms of predatory gambling have in common numerous characteristics that don’t exist in actual entertainments. For example:

– No other form of “entertainment” causes significant harm to people who “enjoy” it frequently, including the loss of thousands of dollars per hour.

– No other form of “entertainment” depends on profits generated by those who suffer from problems of addiction linked to the entertainment.

– No other form of “entertainment” is often urged (and typically refuses) to provide information to those being entertained about its risks.

– No other purported form of “entertainment” requires such high levels of taxation, regulation and government oversight when it constitutes a business as opposed to a private, small scale activity and, most regrettable of all:

– No other form of “entertainment”, in recent times, is heavily promoted by government.

Here is the rule of thumb: If a practice is basically dishonest, its advocates will speak of it dishonestly. They will call it by wrong names. They will allege that its purposes are other than what they are. They will engage in this fraudulent language partly to hide the dishonesty of the actual activity, and partly because they themselves are at least somewhat ashamed of what they are doing

It has failed to validate the myth that people will gamble anyway and money will be recaptured from going out-of-state

The evidence is overwhelming that the “citizens are already going-out-of-state to gamble” argument is a continually-recycled, phony, public relations strategy to breathe life into efforts to legalize casinos and lotteries- a strategy that gambling interests have used in virtually every state in America. These are national and international casino companies who simply position state after state against one another so they can expand their market. For a taste of this willfully-deceptive narrative, watch these TV ads that ran in recent lobbying campaigns in four different states… Maryland in 2008, Maine in 2008, Ohio in 2009 and Massachusetts in 2014. It’s the same message in all four states.

The  “going-out-of-state” argument has been and always will be a phony public relations attempt by casinos and lotteries to evade scrutiny about what they are really doing: cheating and exploiting citizens. The facts are that regional casinos and lotteries take the bulk of their profits by turning local citizens who may have been going out-of-state a handful of times a year into everyday gamblers. 

When less predatory gambling is available, people lose less money and gambling problems are less. For example, South Dakota outlawed video slot machines for 100 days and the number of gambling addicts treated each month dropped by 93.5%.

It has failed because electronic gambling machines are unsafe when made easily accessible in a local region

As 60 Minutes revealed in January 2011, electronic gambling machines like slots and video poker represent the purest form of predatory gambling and, not surprisingly, are the most profitable. Eleven independent studies over the last decade show that between 40%-60% of slot machine profits are taken from citizens who have become addicted gamblers.

According to the research findings of Natasha Schull, associate professor in MIT’s Program in Science, Technology, and Society whose work was showcased in the 60 Minutes investigation, the machines are designed to get every user “to play to extinction’’ — until all their money is gone — by using technology described as a “high-tech version of loaded dice.”

Dr. Schull has testified that a slot machine is designed to be so effective at extracting money from people that it is “a product that, for all intents and purposes, approaches every player as a potential addict — in other words, someone who won’t stop playing until his or her means are depleted.” Dr. Bob Breen, the Director of the Gambling Treatment Program at Rhode Island Hospital, has been even more direct in his public comments about slot machines: “Given the right circumstances, almost anyone can get hooked on slots.”

It has failed because casinos and state lotteries are now the most predatory operations in the country

Casinos: Leading casino operators like Caesars can trace more than 75 percent of its gambling revenue back to specific customers. People are targeted based on factors such as how fast they play a slot machine and how much they wager, information that can be collected through their “Player’s Rewards card” because many players use these cards directly in the machine. The faster someone plays, the more likely they are to play recklessly. The casino staff use statistical models to set calendars and budgets that predict when a targeted person will gamble as well as to calculate the person’s “predicted lifetime value” – the sum that each gambler is likely to lose to the slot machines over his or her lifetime. Other predatory practices used to incite out-of-control gambling include: using mail, phone and email solicitations to offer free slot machine play; giving visitors interest-free loans known as “markers” that are gambled away inside the casino; aggressively targeting people who use casino ATMs because they demonstrated a weakness to chase their losses; using “hosts” who are in constant contact with heavy gamblers away from the casino to lure them right back; enlisting “Luck Ambassadors”- casino employees who hand out small cash vouchers to losing gamblers identified by the player tracking system in an attempt to uplift their spirits and keep them in front of the gambling machine in real time on the casino floor; and providing gamblers free alcohol, free meals and free lodging.

Lotteries: State lotteries make 80% of their profits from 10% of its users. Lottery games are designed to override people’s common sense, especially people who don’t believe they have control over their lives. Lotteries are exempt from truth-in-advertising laws. The advertising content and practices of state lotteries target specific groups or economic classes of people– it’s racial-profiling, Lottery-style. And despite the willfully dishonest claims of lottery officials that “people are already gambling anyway,” lotteries relentlessly seek to “reach people who have never played.”

It has failed because serious gambling-related problems are now an epidemic among America’s youth

Serious gambling-related problems has emerged as an epidemic among America’s youth. Today, at least one out of every five young people has a serious gambling-related problem, up from one out of every ten in 1988.

It has failed because it has turned many citizens who have never before committed a crime into criminals

Desperate to “chase” and recover their losses to government’s gambling program, many citizens turn to crime to get access to more money. Fraud and embezzlement become common among formerly hard-working and highly-trusted people, as two out of three citizens have done something illegal to obtain the money to feed their gambling addiction, many of whom have never had any kind of criminal record before. There are now millions of gambling addicts across the country – in Wisconsin alone, 7% of its citizens are now problem gamblers.

It has failed as a form of limited and efficient government

When government partners with gambling interests, it is not merely permitting private, consensual behavior. It is granting monopolies and awarding regulatory advantages to favored firms. This has little to do with limited government and free market principles. It is the active, predatory state.

States have high costs for every dollar raised through predatory gambling. Furthermore, the state lottery and casinos have become the most visible faces of state government for many citizens – diminishing the dignity of the state and its traditions of service to citizens.

It has failed to protect the personal freedom of millions of Americans

Predatory gambling operators and some public officials peddle the myth that casinos and lotteries represent “personal freedom,” attempting to elude charges of exploitation by framing it as a “voluntary” act.” But the revenue model is financially damaging to citizens and it only works if our government, in its role as promoter and regulator, takes away the freedom of millions of Americans. By definition, someone who is an addict or someone who is deep in personal debt is not free. They have lost their free will and their freedom to choose. In a country where everyone is considered equal, how can the state actively promote a government program that renders many of our fellow citizens as expendable? John Stuart Mill, the father of the libertarian vision, famously wrote that each individual has the right to act as he wants so long as these actions do not harm others.

It has failed to gain strong public support

The predatory gambling lobby promotes the illusion that public opinion supports their business by pointing to polls paid for by predatory gambling interests. Yet independent surveys reveal the opposite is true. A 2010 national survey on predatory gambling by PublicMind, Fairleigh Dickinson University’s research center, found that a majority of Americans believe casinos hurt local communities and among those who live within 30 miles of a casino, nearly one out of two people said casinos have a negative impact. And a 2010 poll in USA Today showed that casinos rank at the top of the list next to garbage dumps for most unpopular projects with 73% of the citizens in opposition.

It has failed to diminish organized crime

No jurisdiction has EVER documented a decline in illegal gambling following the introduction of legalized gambling. In fact, illegal gambling tends to increase for a number of reasons. “We loved legalized gambling,” said former Chicago mob casino boss William Jahoda. “It created more customers for us.” Untaxed illegal operators can offer better odds, bigger payoffs and loans that legal operations cannot. Once gamblers start betting legally, they become less averse to gambling in unlicensed establishments. Law enforcement in gambling states view illegal gambling as a state revenue issue rather than a criminal activity, making enforcement less of a priority. Lastly, when commercial interests gained control of the casino business from organized crime, they obtained the ability and the license to abuse and destroy customers to an extent that was not possible when casinos were run by criminals.

It has failed to show it is the same as legalizing alcohol

Drinking a glass of wine or a can of beer is far different than buying a $20 lottery scratch ticket or playing a slot machine. No sip of a Miller Lite has ever offered the false promise of “life-changing jackpots.” While alcohol can be habit-forming, no one has ever compared the potency of its high or the speed at which it addicts people to that of cocaine – unlike intense gambling experiences, which can be comparable to cocaine. One out of five Americans don’t think the best way to achieve long-term financial security is to drink Budweiser. Most tellingly of all, the vineyard owner drinks his own wine – most predatory gambling operators don’t gamble. Unlike the prohibition of alcohol, which most regard as a failure, the criminalization of casino gambling was successfully practiced for most of the 20th century.

It has failed to generate genuine economic growth

Predatory gambling is a something-for-nothing scheme that veils the most cut-throat business in the country. It milks existing wealth instead of creating new wealth because it is a business based on people losing money.

The failed energy giant Enron, the subprime lender Countrywide Financial and jailed investment manager Bernie Madoff are all examples of businesses that employed people and made a lot of money. But hardly anyone believes these kinds of business practices are the right direction for the state and for the country. After a decade of housing bubbles and financial speculation, the days of phony prosperity are over.

Predatory gambling operators push the “jobs” story line for their public relations but no one defends these jobs as jobs with justice because they can’t. These are jobs with injustice. We are going to have to get out of this economic crisis the old-fashioned way–by digging inside ourselves and getting back to basics: improving U.S. productivity, saving more, reducing our debt, strengthening our families, studying harder and inventing more products and services to export.

It has failed as a revenue source for state governments

There is overwhelming evidence proving the government program of predatory gambling has failed as a revenue source for our society. Despite promising it would fund public education, the California state lottery provides only 1.3% of the state’s entire education budget. States with lotteries and casinos have not lowered their taxes and according to a recent national report by The Rockefeller Institute, it has made their budget problems even worse. Predatory gambling costs more than the revenue it brings in, leaving those citizens who rarely gamble to pay the bill. Each compulsive gambler costs the economy between $14,006 and $22,077 per year, which is why in its recent independent study about the costs of predatory gambling, the 2010 New Hampshire Gambling Commission showed taxpayers will need to fork over an additional $68 million in taxes to cover the social costs of one proposed casino, 24% more than state government will receive in revenue. These numbers are only for one casino – there are now almost 900 casinos in America. It helps explain one of the reasons why casino states like California, New York, Pennsylvania, Illinois and Nevada face enormous budget deficits.

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