[Congressional Record Volume 140, Number 147 (Tuesday, November 29, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: November 29, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                   LEGALIZED GAMBLING NOT A GOOD BET

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Virginia [Mr. Wolf] is recognized for 5 minutes.
  Mr. WOLF. Mr. Speaker, legalized gambling is sweeping the Nation. 
Supporters of casino and riverboat gambling share the desperate 
gambler's addiction to the lure of easy money. They rationalize that 
casino gambling will bring an economic bonanza, but they fail to 
consider, though, that gambling can bring on economic problems that far 
outweigh any benefits.
  On September 21, 1994, the House Small Business Committee heard 
testimony which debunked the claims of gambling promoters. I am 
concerned that those looking toward gambling for an easy ``fix'' to 
their economic problems may ignore the impacts of gambling on economic, 
business, social, and governmental issues. These impacts will have 
ramifications in the short- and mid-term on local and State economies 
and could have long-term negative effects on interstate economies as 
well. Crime and social problems related to gambling could add to 
already overburdened criminal justice and social welfare systems. Mr. 
Speaker, this is an issue of national economic importance, and I 
believe the new Congress should examine it closely over the coming 
months.
  Organized and well-heeled gambling interests are enticing legislators 
throughout the country to legalize gambling. In fact, on November 8, 
voters in 10 States and members of the Navajos tribe were faced with 
ballot initiatives which asked voters to authorize the legalization of 
one form or another of gambling. Gaming initiatives were on more state 
ballots than term limits. Only three States--New Mexico, South Dakota, 
and Missouri--authorized some form of gambling. Voters in seven 
States--Florida, Minnesota, Nebraska, Wyoming, Rhode Island, Colorado, 
and Massachusetts--and members of the Navajos tribe rejected gambling 
ballot initiatives perhaps with the realization that gambling empties 
the pockets of the hopeful leaving nothing but despair.
  In my own State, lawyers, lobbyists, and businesspersons who 
represent casino gambling interests are quietly maneuvering behind the 
scenes to convince members of the Virginia General Assembly to roll the 
dice and bet on casino or riverboat gambling. They claim that gambling 
can be a great social good, revitalizing rundown cities, providing 
needed jobs, and generating tax revenue for education and other social 
programs. This sales pitch has been repeated in hundreds of communities 
throughout the country. My concern is that public officials throughout 
the United States will, as syndicated columnist William Raspberry has 
commented, ``succumb to the idea of windfall as panacea, and, like too 
many lottery winners, wind up deeper in debt and utterly dependent on 
the annual lottery check.'' As this recent election has demonstrated, 
voters are exercising considerable caution when high rollers promise 
big payoffs.

  One need only examine the experience of Atlantic City, New Jersey, to 
realize that the promise of easy money, jobs, and urban renewal is 
wishful thinking. In 1976, casino gambling was sold to voters of 
Atlantic City as an urban renewal device. Eighteen years later, the 
promises of urban renewal are still that--promises. Paul Teske and Bela 
Sur, researchers from SUNY-Stony Brook and the University of Nebraska 
at Lincoln, have concluded that the quality of life of Atlantic City 
residents has not materially improved.

       The economic benefits have not spread beyond the casinos; 
     the anticipated ``multiplier effect'' has not moved much 
     beyond the core industry. Many local residents are still poor 
     and unemployed, half the population still receives public 
     assistance, and city services continue to be substandard. 
     Social problems, including increased crime and prostitution, 
     are worse than ever. Since most people holding the better 
     casino jobs live in Atlantic City suburbs, they contribute 
     little directly to the city.

  Why do gambling special interests make inflated claims which fail to 
materialize? If the truth about gambling's negative economic and social 
impact were known initially, gambling promoters would probably never 
see a payoff.
  A recent study conducted by Professor Robert Goodman of the 
University of Massachusetts/Amherst found that, of the 14 economic 
impact studies analyzed, claims of economic benefits were usually 
exaggerated, while costs were underestimated. Professor Goodman 
concluded that ``[w]here such studies were done they tended to be self 
serving, examining gambling from a gambling industry, rather than an 
objective community economic development perspective.'' Furthermore, 
few of the localities studied prepared useful economic impact studies.
  Gambling proponents consistently underestimate the costs of police, 
infrastructure, and social services while overestimating the benefits 
of gaming. Moreover, few use dynamic economic models which consider the 
effects of job losses or cannibalization of existing businesses, market 
saturation, and the drain on productive sectors of the American 
economy. These negative effects make gambling less economically and 
politically attractive.
  Those in the restaurant business, entertainment business, tourism 
industry, as well as other businesses should be wary of the siphoning 
of existing business and services by gambling enterprises.

       ``Cannibalization'' occurs when a business increases its 
     customers at the expense of a competitive business which has 
     a decrease in its customer base, rather that the industry 
     seeing any overall expansion. All available theoretical and 
     practical evidence indicates that small businesses in the 
     tourism industry, particularly restaurants, suffer at the 
     hands of casinos as clients seek these services at the 
     casinos.

  Expansion of casino gambling into an already mature tourism economy 
such as Florida's or Virginia's could actually harm the very tourism 
industry supporters of gambling argue it would help. Gambling does not 
stimulate demand for entertainment; it merely shifts disposable income 
from one expenditure to casinos. One who spends his money on gambling 
forgoes some other form of entertainment like a trip to the beach or 
movies, a night out to eat, or a day trip to one of Virginia's many 
historic places. Furthermore, as gambling increases, expenditures for 
clothing, recreation services, business services, new cars and service 
stations will decline.
  An example of the cannibalization of businesses is the effect casinos 
have on established restaurants. Professor Goodman found that casinos 
have negative economic impacts on nearby restaurants. ``As a way of 
enticing players to stay on the premises, casino owners generally 
include a variety of low priced food services and restaurants within 
their casino complexes. Food prices are often subsidized--as a result, 
independent restaurants close or have difficulty competing with those 
in the casinos.'' As an example of the deleterious impact gambling has 
on the restaurant industry, Professor Goodman points out that the 
number of restaurants in Atlantic City declined from 243 in 1977, the 
year after casinos were legalized, to 146 in 1987.
  Saturation of the gambling market can also pose grave consequences 
for local, regional, and national economies. The Florida Department of 
Commerce succinctly summarized the consequences of market saturation as 
follows:

       Twenty-four states now have operational or authorized 
     casino gambling. It is estimated that by the year 2000, 95 
     percent of Americans will live within a 3-4 hour drive from a 
     casino. The result is, as potential tourists have casino 
     gambling opportunities closer to home, long-distance travel 
     for this purpose is likely to decrease as a tourism 
     motivator.
       Therefore rather than attracting new economic activity into 
     the state, casino gambling would generate a number of shifts 
     of economic activity within the state, at least in the short-
     term. The other implied economic result is that with the 
     number of destinations developing casino gambling facilities, 
     the competition among them will increase and the novelty 
     as an experience will decline. From an economic standpoint 
     this will eventually encourage governments to provide 
     regulatory, tax and promotional inducements to sustain 
     their investment and the job base now dependent on 
     casinos.

  In a September 29, 1992, press release, Illinois Gov. Jim Edgar 
expressed what would occur if another form of gambling were introduced 
in Chicago. ``Based on estimates by Mayor Richard M. Daley's gambling 
commission, the state would realize $82.5 million in gambling taxes 
from the casino in its first full year. But Edgar said lottery profits 
likely would drop by nearly $35 million, riverboat gambling revenues 
would be cut by about $40 million, and horse racing taxes are expected 
to lag by $26 million.'' Thus, the addition of casinos would have zero 
or a negative tax effect on Illinois' economy because the market would 
be saturated. This analysis does not account for the additional 
regulatory costs--between $30 and $60 million--the cost of new prisons, 
about $15 million, and other social costs.
  As gambling proliferates, it also shifts job-creating wealth from the 
productive sector of the economy by diverting funds that may have been 
used for private savings and investment capital and instead are spent 
on an unproductive activity which creates no product. Gambling is 
merely a wealth transfer from private citizens; purses and wallets to 
the casinos' vault. Professor Goodman explains that:

       [a]s expanded gambling continues to drain money from the 
     productive sectors of the American economy, private savings, 
     and, consequently, potential investment capital, is being 
     reduced; existing businesses which lose consumer revenues are 
     being pushed closer to decline and failure; workers from 
     these declining businesses will be laid off and people with 
     addictive gambling problems will increase--as will the 
     enormous public and private cost of dealing with these 
     addictive behavioral problems.

  Mr. Speaker, I already have mentioned the effect casino gambling had 
on the restaurants and people of Atlantic City, New Jersey. Another 
case where the cannibalistic nature of gambling has been experienced is 
in Deadwood, South Dakota. Jeffrey Bloomberg, state's attorney in 
Lawrence County, South Dakota, testified that:

       [n]o one predicted the dramatic changes which took place in 
     Deadwood once gambling actually commenced on November 1st, 
     1989. Within two or three months, a mainstreet that was 
     typical of any small town was converted to a four block strip 
     of small casinos, now totalling 82 separately licensed gaming 
     halls. Gone were the clothing, shoe, hardware, and grocery 
     stores as well as three separate car dealerships, all 
     converted to gambling establishments. Many of the 
     necessities of life such as clothing are no longer 
     available within Deadwood and customers of the town's only 
     remaining grocery store walk a gauntlet of slot-machines 
     as they exit with their purchases.

  Crime is another cost that defenders of gambling try to ignore. In 
response to the possibility that Florida voters might have passed the 
gambling referendum, the Florida Department of Law Enforcement [FDLE] 
studied the possible crime problems that gambling could bring to 
Florida. The FDLE opposed any form of legalized casino gambling. Their 
report stated that ``[c]asinos will result in more Floridians and 
visitors being robbed, raped, assaulted, and otherwise injured. Casinos 
are not worth the gamble.''
  The FDLE surveyed various jurisdictions which have legalized gambling 
and concluded that ``crime does accompany casinos.'' The FDLE 
anticipated that introduction of criminal activity in Florida would 
spur a rise in robberies, rape, theft, drug abuse, aggravated assault, 
traveling criminals, counterfeiting, youth gangs, profit skimming, 
prostitution, credit card scams, loan sharking, card cheats, and street 
level narcotics.
  Criminals, particularly those associated with organized crime, are 
well known to be involved in gambling as part of their racketeering 
efforts. Organized crime is associated with gambling because of the 
huge amounts of cash involved, making it an easy target of money 
launderers. Drug money, extortion money, and prostitution money are all 
laundered through such operations. Also, organized crime has 
infiltrated the labor unions at many casinos. In fact, in the early 
1980's, the Justice Department frustrated organized crime's involvement 
with the Hotel and Restaurant International Union Local No. 54 in 
Atlantic City by forcing it to accept Federal supervision.
  Because of crime associated with casino gambling, regulatory agencies 
in New Jersey spend over $59 million annually to monitor the city's 
casinos. This is a hidden cost that New Jersey never counted on. In 
1992, the Wall Street Journal reported that since 1976, Atlantic City's 
police budget had tripled to $24 million while the local population has 
decreased 20 percent. Prudence dictates that strained police budgets 
should not be burdened further.

       During the first three years of casino gambling, Atlantic 
     City went from 50th in the nation in per capita crime to 
     first. Overall, from 1977 to 1990, the crime rate in that 
     city rose by an incredible 230 percent. This excessive rate 
     of crime was more than 25 times the single digit growth rate 
     of 9 percent reported from the remainder of the State of 
     New Jersey and has required the City to increase its 
     police department's budget by 300 percent.

  Although Atlantic City has increased the officer to resident ratio 
since the inception of casinos, the crime rate has more than tripled. 
The crime-related budget--police, courts and jails--for Atlantic 
County, New Jersey, has grown five times faster than the New Jersey 
county average.

       Other illegal activities such as rigging construction bids, 
     kickbacks to owners and corruption among personnel who 
     service the electronic gambling devices are also possible. In 
     other jurisdictions, organized criminal activity is so 
     pervasive that the American Insurance Institute estimates 
     that 40 percent of all white collar crime is gambling 
     related.

  After the introduction of gambling in Deadwood, SD, crimes of theft, 
embezzlement, bad checks and other forms of larceny all increased. 
Jeffrey Bloomberg testified about some of the crimes committed by 
pathological or compulsive gamblers to support their addiction.

       I think of the pizza restaurant manager who had a spotless 
     record and embezzled $45,000 from his employers, or the 
     gaming business, bookkeeper who, having run up thousands in 
     debt, committed suicide or most tragically the technical 
     sergeant in the United States Air Force who, prior to gaming, 
     had an exemplary ten-year military career, who became hooked 
     on slot machines and eventually murdered a casino operator in 
     a desperate attempt to retrieve four hundred dollars in bad 
     checks he had written to the casino. Sgt. Cobb is now serving 
     a life sentence without parole at the potential cost of 
     nearly a million dollars to South Dakota taxpayers not to 
     mention the loss of training dollars invested by the federal 
     government or most tragically the loss of human life.

  Research also shows that the social and economic costs of behavioral 
gambling are considerable. Gambling social costs include direct 
regulatory costs, lost productivity costs, direct crime costs, 
including apprehension, adjudication, and incarceration costs, as well 
as harder-to-price costs such as suicide, family disintegration, and 
even increased car accidents.
  It is indisputable that compulsive and pathological gambling 
increases in communities that permit gambling. Within 2 years of 
legalizing video lottery terminals [VLTs], the tiny province of Nova 
Scotia in Canada went from zero to 12 chapters of Gamblers Anonymous. 
``Outraged over widely publicized reports of broken marriages and 
wrecked lives, Nova Scotians forced the government to remove 2,400 
machines.''
  Various studies indicate that the mean gambling related debt, 
excluding car loans, mortgages and other `legitimate' debt, of people 
in compulsive gambling therapy ranged from about $53,000 to $92,000. 
Compulsive gamblers in New Jersey were accumulating an estimated $514 
million in yearly debt. Who pays that debt? The answer is everyone pays 
in the form of increased prices on goods and services and increased 
taxes.
  Pathological gamblers engage in forgery, theft, embezzlement, drug 
dealing and property crimes to pay off gambling debts. they are 
responsible for an estimated $1.3 billion worth of insurance-related 
fraud per year which is borne by the rest of us in the form of 
increased premiums, deductibles, or copayments.
  Each problem gambler costs Government and the private economy $13,200 
a year according to conservative estimates. ``As an example, simply 
increasing the incidence of problems gambling in a small state like 
Iowa by only one-half of 1 percent of the adult population would cost 
private business and Government at least $73 million per year. This 
same slight increase in problem gambling in a much more populated State 
like California would result in yearly costs of about $780 million.''

       These involve such costs for the private economy as money 
     which problem gamblers borrow but don't pay back, work time 
     lost to private industry by problem gamblers who are 
     ineffective on the job, salaries lost by problem gamblers who 
     are laid off as a result of their problem; private insurance 
     losses as a result of fraud by problem gamblers, and losses 
     as a result of embezzlement and check fraud by problem 
     gamblers. in addition, there are the public costs of 
     processing problem gamblers who engage in criminal behavior 
     through the criminal justice systems--including the costs of 
     keeping those people who engage in more severe crimes in 
     prison.

  Valerie Lorenz, executive director of Compulsive Gambling Center, 
Inc., also testified before the House Small Business Committee than 
``in 1990, the Maryland Task Force on Gambling Addiction found that 
Maryland's 50,000 compulsive gamblers cost the State $1.5 billion per 
year in lost work productivity and monies that are abused--stolen, 
embezzled, State taxes not paid, etc.''
  Teenage Gambling is another daunting social problem which 
policymakers would be remiss not to consider. In 1991 New Jersey casino 
security ejected 21,838 persons under the age of 21 from casinos, and 
prevented another 196,707 from entering. Valerie Lorenz observed that 
``[t]he New Jersey Casino Control Commission regularly reports 25,000 
or more teenagers being stopped at the door or ejected from the floors 
of Atlantic City's casinos. One can only guess at how many teenagers do 
get in, gamble, and are served drinks. Today, research indicates that 
as many as 7 percent of teenagers may be addicted to gambling.''

  Mr. Speaker, it is impossible here to discuss all of the potential 
impacts legalized gambling may foist upon communities; however, 
politicians must realize that they will be paying for costly 
infrastructure to support casino gambling. The overnight transformation 
of Deadwood, SD, created enormous problems for the infrastructure of 
Deadwood and its city government. Parking, streets, water and sewer 
lines all proved to be inadequate; thus the city had to raise revenue 
bonds to take care of these problems. ``The result was a municipal 
building boom which has updated the city's infrastructure, but which 
has financially tied the city's economic viability to gambling. If the 
citizens of Deadwood wanted to get rid of gambling today, they could 
not without total bankruptcy.''

       While gaming has generated nearly six million dollars 
     annually in gaming taxes to the city and county those amounts 
     have been eaten up by increased administrative, law 
     enforcement, and infra-structure costs. The city of Deadwood 
     went from a pre-gambling 1988 budget of $1,430,919 to a 1994 
     budget of $9,113,796. As an example, the police force of five 
     officers more than doubled to eleven full-time officers.

  Proponents of riverboat gambling will argue that the costs I have 
described are costs associated with land based casinos, not riverboats. 
Riverboat gambling brings most of the same costs as land based 
gambling. Moreover, once riverboat gambling is established, land based 
casinos soon follow. In the Rust Belt, where riverboat gambling began, 
casinos now line the Mississippi River moored to the dock never to 
leave the riverfront. Also, once the riverboat gambling establishment 
sinks their hooks into a community, they extort concessions on drink 
limits, hours of operation, infrastructure improvements like roads, 
police, water and sewer, which attracts even more gambling related 
problems. Before long, the unsuspecting community is saddled with 
permanent, land-based casinos.
  The experience in the Rust Belt with riverboat gambling is similar to 
that of casinos. When Iowa authorized riverboat gambling, it was the 
only game in town. Iowa law limited the amount of money that bettors 
could win or lose, and that became a competitive disadvantage when 
Illinois boats, which had no such limits, were launched. Today, only 
one Iowa boat is operating on the Mississippi. Obviously as more and 
more boats from Ohio, Indiana, and Missouri compete with those from 
Illinois and Missouri, turning a profit becomes more difficult. As 
turning a profit becomes more difficult, casino owners demand relaxed 
regulation from the State or municipality or else they threaten to 
leave the area even though the State or municipality may have invested 
in infrastructure improvements to attract the riverboat.
  Mr. Speaker, hard data shows the costs of casino, riverboat, or 
dockside gambling far outweigh any of the benefits. Gambling eventually 
causes increased taxes, crime, loss of jobs from an overall region, 
economic disruption of established businesses, and large social-welfare 
costs. Members of Congress, governors, and State and county officials 
throughout the country owe it to their constituents to take a long, 
hard look at gambling initiatives proposed in their States or 
jurisdictions. After such study, government officials will determine 
that legalized gambling is not a good bet.

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