After decades of politically useful fiscal mismanagement, many states and localities have become little more than underfunded pension systems with a few public services attached. At last count, they owed more than $6 trillion to creditors and public employees, leaving dwindling discretionary dollars for things such as libraries, police protection and schools.
A number of states — 23 at last count — have turned to gambling as a source of revenue, essentially forming joint ventures with gaming companies to squeeze some public benefit out of a common vice. This source of government funding has the added benefit of being voluntary. No one is forced to go to a riverboat casino or to play the racetrack slots.
For a public policy innovation this large, the casino-government complex has received little scrutiny, which a new report by the Institute for American Values, “Why Casinos Matter,” seeks to remedy. It is a crash course in the political and social hazards of funding public purposes through the exploitation of human weakness.
Modern gaming is different from the traditional image of destination resorts with swimming pools and showgirls. Now casinos are geographically distributed — often purposely located in communities desperate for development. They depend on commuters instead of vacationers — people who come in a few times a month, or a few times a week. Their target market is the middle and working class.
And the technology of gambling has been fine-tuned to encourage addiction. Slot machines — the main source of revenue — are sophisticated computers designed to elicit Pavlovian responses. Players are fed a diet of small wins on the way to larger losses. They are encouraged to enter the “zone,” to have a smooth, gradual “ride,” until their money is exhausted, known as “playing to extinction.” In this case, compulsive behavior is not the unfortunate side effect of a game of chance. It is the intended result of a software program.
State governments, which have often been improvident in their own finances, have turned to the active encouragement of improvidence in citizens as a source of revenue. In for a pound, I guess. But it is even more disturbing than this. “Why Casinos Matter” points to studies indicating that 40 percent to 60 percent of slot-machine revenues come from problem gamblers. Would the government exploit any other disability in this manner? Would it raise money from brothels catering to sex addicts? Open crack houses to profit from drug addiction?
This should disturb the libertarian right. Government, in this case, is not merely permitting private, consensual behavior. It is granting monopolies and awarding regulatory advantages to favored firms. States sometimes conduct casino border wars, positioning new facilities to poach revenue from their neighbors. This has little to do with limited government. It is the active, predatory state.
And the casino-government complex should naturally disturb the left. The whole enterprise amounts to regressive taxation by stealth. Revenues are drawn disproportionately from low-income workers and retirees.
Yet, as the Institute for American Values points out, “State sponsorship of casinos is one of the most successful bipartisan public policies in today’s politically polarized culture. . . . States like Mississippi and Massachusetts may be worlds apart politically, but both have decided . . . that casino gambling is a good way to win hard-won dollars from citizens who can least afford to lose them.”
For those of us in the remnant believing that statecraft can be soulcraft, the case is particularly clear. Most theorists of self-government have maintained that certain modest virtues are necessary to democracy and free markets: deferred gratification, diligence, a prudent concern for the future. There is an ongoing American debate about the degree to which government can or should promote such virtues.
But here is an extraordinary case of government actively undermining the moral underpinnings of market capitalism for its own benefit. It holds out the promise of sudden wealth without work or productive investment, engaging in a purposeful and profitable deception. A corrupting fantasy becomes a revenue stream, dependent on persuading new generations to embrace it. Perhaps we have given up on government as a source of moral improvement. Does this mean we must accept a government that profits by undermining public virtues?
Nearly 20 years ago, William Galston and David Wasserman wrote, “While history indicates that gambling is too ubiquitous to suppress, moral considerations suggest that it is too harmful to encourage. The most appropriate state stance toward gambling is not encouragement, but rather containment.”
Now we are seeing the cost of gambling, uncontained.