Legalized gambling only fuels economic crisis

Today, amid massive budget shortfalls, politicians are scrambling to find new sources of revenue. Many are turning to gambling. Talk about a sucker's bet!

If public leaders are serious about restoring economic health, they should do just the opposite: recriminalize many forms of gambling.

Academics, business experts, and government officials have consistently warned that government-sanctioned "predatory" gambling activities– such as casino facilities and lotteries – philosophically and fiscally corrupt US and international business, economic, and financial systems.

And they're right.

Here and abroad, legalized gambling negatively affects economic security, military readiness, and antiterrorism efforts.

Authoritative research shows just how harmful a new gambling facility can be in the surrounding area: The number of new addicted gamblers doubles over the course of five years; there is an 18 to 42 percent increase in personal, professional, and business bankruptcies; and crime increases (by about 10 percent each year). For the past 15 years, academic reports have also concluded that the socioeconomic costs to tax-payers and local governments are at least $3 for every $1 in benefits.

The good news is that shutting down gambling venues doesn't have to be a death sentence to the local economy. There's a record of success in transforming racetracks and casino sites into moneymaking, high-quality ventures. And if the US can stop wavering and learn from past gambling lessons, it can regain its moral and economic foothold.

Some limited US gambling is legal under US federal law, and states are free to regulate or prohibit the practice as they see fit. After the American Civil War, gambling was widespread.

Then, during the beginning of the 20th century, the Teddy Roosevelt generation and the Progressives recriminalized it. To make legalizing any future gambling as difficult as possible, they worked prohibitions not just into local ordinances and state statutes, but into state constitutions.

Other countries followed suit, very much aware that gambling does not thwart, but rather fuels, recessionary trends.

After the Great Depression, however, gambling regained popularity amid better economic times, and it was made legal in a number of places.

Once again, though, it became clear that gambling economies drain consumer wealth; undermine our nation's economic security; and destabilize banks, financial institutions, and stock markets. In 1999 the US National Gambling Impact Study Commission (NGISC) called for the recriminalization of various forms of gambling, as well as for a moratorium on the expansion of any type of gambling anywhere in the US.

Russian President Vladimir Putin, recognizing the economic and criminal costs of legalized gambling, recriminalized 2,230 Russian casinos during 2006. Also in that year, Austria, Italy, and France opted to maintain many antigambling laws – despite facing censure by the European Commission. In these countries, antigambling actions coincided with increased productivity and consumer spending.

The US, however, has veered the other way. To "help" the US economy after 9/11, the Congressional Gaming Caucus inserted a $40 billion tax write-off for slot machines and associated technologies in the 2002 economic stimulus act. There is similar gambling-enhancing pork in the 2009 economic stimulus legislation.

This pendulum must stop.

To be sure, it's not going to be an easy effort. Today, the casino lobby has massive political pull. For example, in Illinois, the second state to legalize riverboat casinos, the House of Representatives voted 67 to 42 in 2005 to recriminalize Illinois casino gambling and thereby create jobs. But this legislation was procedurally killed by former Gov. Rod Blagojevich.

By converting consumer dollars into nonproductive "gambling dollars," US state-sanctioned gambling constitutes a drain approaching half a trillion dollars per year in lost indirect consumer spending.

That's why the 2009 US International Gambling Report (a compilation of decades of academic and government research on gambling) called for a worldwide effort to pump-prime economies by eliminating legalized gambling.

Today, as states face budget shortfalls, the initial benefits of legalizing casinos – jobs, increase in commerce – look appealing.

From Massachusetts to Minnesota, governors are considering what it would mean to legalize gambling. But the reality of doing so is far from beneficial.

Instead, via new treaty provisions, the US State Department needs to extend the Internet gambling ban and, with the help of the Group of 20, encourage other gambling prohibitions worldwide, thereby reasserting ethical US economic leadership, restabilizing financial systems, and restoring consumer confidence.

Omaha, Neb., is a good example to emulate. There, repeated efforts to build casinos have been rejected for decades. One 1997 proposal to save the Omaha racetrack by building a casino resulted instead in the racetrack being bulldozed and the land being used for a new extension of the University of Nebraska plus a high-tech office park.

Casinos are easy to transform into educational facilities, similar to the way in which communities often transform Olympic dorms and cafeterias into health, business, and educational facilities.

Under the Commerce Clause of the US Constitution, Congress should be permitted to pump-prime the economy by prohibiting government sanctioned gambling. The Obama administration must reassert strategic ethical business leadership and recriminalize gambling to lead the world economy.

To paraphrase George Santayana, "Those who cannot remember the economic mistakes of the past are condemned to repeat them."

John Warren Kindt is an editor and contributing author to the multivolume United States International Gambling Report.