The Hindu Business Line : Gambling for public funds

Unfortunately, when you are close to a subject such as gambling, you are never too far from a moral slippery slope. The moral issues become stark when we see the impact of it among the poor who can ill-afford to spend their money gambling but seem unable to resist it.

C. Gopinath

An individual gambles in the hope of striking it rich to start living those dreams. Can the state do the same to meet its necessities? The Commonwealth of Massachusetts in the US is only the latest to go down this path.

Governor’s plan

Early this month, the Governor announced that the state would auction 10-year licences to start three casinos. Why three? That is the number he figures he needs to raise the money he wants. The licences would generate up-front fees of about $600 million (Rs 2,370 crore), and the state would receive 27 per cent of the recurring annual gambling revenues. This would mean about $400 million (Rs 1,580 crore) per year for the state, after allowing for the potential costs of treating gambling addicts, stepping up police enforcement, and the administrative costs of setting up a department to regulate the casinos.

The Governor presented his plan as an alternative to raising taxes. He further explained that the revenues would be used mainly for funding repairs for roads and bridges in the state, and to subsidise the property tax for those who presently pay more than 2.5 per cent of their income towards it.

And if these good causes are not enough, additional justification for the casinos comes from other quarters.

It is supposed to bring an economic boom to the state, creating an estimated 20,000 new jobs. Massachusetts officials have not been too happy about an estimated $900 million (Rs 3,555 crore) being spent annually by the residents of this state in the neighboring state of Connecticut where there are casinos.

To some extent, the Governor’s hand was forced. Early this year, after a prolonged battle with the Federal Government, the Mashpee Wampanoag, a native American tribe that resides in the state, received recognition. This certification brought with it some independence from the state’s laws since the tribe is viewed a sovereign nation for some purposes.

The Wampanoags could now initiate a process to apply to the Federal Government for a licence to open a casino. This started a debate in the state about the effects of a casino on the state’s economy. So, the Governor must have thought that if a casino was going to come anyway, why not take the bull by its horn and grab some extra benefit for the state.

The Governor hopes the tribal nation would chose to bid for one of the licences rather than go through the process of opening a fourth one, which can take some years of navigating federal bureaucracy.

Tapping gambling

Many states in the US have already gone down the path of tapping gambling for their revenues. Gambling casinos are legal in more than 27 of the 50 states.

Gambling revenues account for 5-37 per cent of total revenues in the case of 17 states, making them more dependent on this source than the others. This is also not the first venture of Massachusetts into gambling. The state has been running a lottery for about 35 years now and earns about $950 million (Rs 3,753 crores) per year from that operation.

States are in a bind about sources for revenue. The conservative right wing ideology in America has managed to shift the debate in the country on taxation.

Even the leaders of the liberal Democratic Party are afraid of mentioning raising taxes as a way of raising revenues and are often challenged, when they run for office, to take an oath that they would not raise taxes if elected.

Meanwhile, growing bureaucracies and increasing demands for public services continue to demand more revenue. So, the conclusion seems to be: Why not gamble and raise some money?

Destination resort

It has been a long struggle for respectability for this industry and euphemism has helped. It sounds too crass to talk about setting up gambling dens. A long time ago, the name changed to ‘casinos’ which was more acceptable.

The term gambling itself has given way to ‘gaming’ with similar effect. Now, even that has changed. The Massachusetts Governor calls it ‘destination resorts’.

The economists have helped here. They argue that when a casino only raises money from people within the state, it does not do much for the state’s economy. By making it a destination resort, throwing in a hotel, some entertainment, and so on, you also attract people from outside the state and reduce the focus on the gambling part.

It has also helped that these casinos are not being run by criminal gangs but by corporations listed on stock exchanges.

Gambling in living rooms

The ‘cleaning up’ of gambling has brought it into our living rooms. There is a channel on television that shows poker games and championships with large prize moneys round the clock. Poker playing is said to be one of the fastest growing activities on college campuses.

Even while the economists are calculating the impact on the state economy, and trying to figure out how much of the new revenue is only spending redirected from other areas, what is missing in the debate is the moral angle. America, a Christian nation (about 80 per cent of the population), is also religious with regular church attendance more than double what is seen in western Europe.

Yet, economic arguments have evicted the moral from most areas in society. The only place where you still see the moralists in the forefront is in the debate about whether abortion should be legal or not.

Unfortunately, when you are close to a subject such as gambling, you are never too far from a moral slippery slope. The moral issues (say, whether it is right to profit from a game of chance by taking somebody else’s money) become stark when we see the impact of it among the poor who can ill afford to spend their money gambling but seem unable to resist it.

Video poker games (called ‘pokies’) in bars in Australia (with cash machines right next to it for convenience) has made gambling addiction a major social problem there.

The moral question of whether the source of money matters also comes into play. Only last week, a Democratic Party fund raiser, Norman Hsu, was reported to be of the unsavoury sort who had cheated several people through phony business schemes. But he was also a major contributor to the coffers of party candidates. When he was indicted for fraud, those who had received money from him rushed to either return it to the original contributors or give it to charity. Presumably, they did not want tainted money.

But, now, in the Commonwealth of Massachusetts, we would probably drive around on better roads and stronger bridges in the future, all the while thanking the gambling proclivities of the good customers of destination resorts.

The moral objections

American politicians are also very good at framing the debate which has tamed the morality objections. Thus, any opposition to the war in Iraq is quickly turned as being unpatriotic and against the soldiers who are out there defending liberty.

Similarly, any arguments about the morality of expanding gambling opportunities is quickly pre-empted by couching the benefits as going towards education and senior citizens. So, if you oppose gambling, you are against the children and the elderly!

Activities such as gambling, prostitution and the like have existed from time immemorial and satisfy a human need. However, we have been uncomfortable with them.

So, some societies have banned them, a few have legalised and made it more transparent, but most have kept them in the background by making access difficult. Massachusetts is taking a big step by bringing gambling out to the front-burner. Let’s see what happens.

(The author is a professor of international business and strategic management at Suffolk University, Boston, US. He can be reached at cgopinat@suffolk.edu)

More Stories on : Entertainment & Leisure | Taxation | American Periscope

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