America's Gambling Craze
The casino boom is growing daily. But it might not last forever, and its ill effects are potent
No one howled in protest last month when H&R Block set up makeshift tax-preparation offices in four Nevada casinos and offered gamblers same-day "refund-anticipation loans." And few people cared recently when a Florida inventor won a U.S. patent that could someday enable television audiences to legally bet on game shows, football games and even beauty pageants from their homes.
What's the deal? Not that long ago, Americans held gambling in nearly the same esteem as heroin dealing and applauded when ax-wielding police paid a visit to the corner dice room. But moral outrage has become as outmoded as a penny slot machine. In 1955, for example, baseball commissioner Ford Frick considered wagering so corrupt he prohibited major leaguers from overnighting in Las Vegas. Last year, by contrast, Americans for the first time made more trips to casinos than they did to Major League ballparks--some 92 million trips, according to one study.
It took six decades for gambling to become America's Pastime, from the legalization of Nevada casinos in 1931 to April Fool's Day 1991, when Davenport, Iowa, launched the Diamond Lady, the nation's first legal riverboat casino. The gradual creation of 37 state lotteries broke down the public's mistrust, conveying a clear message that the government sanctioned gambling; indeed, is even coming to depend on it as a tax-revenue source. Corporate ownership of casinos helped in its own way, too, replacing shady operators with trusted brand names like Hilton and MGM. Casinos now operate or are authorized in 23 states, and 95 percent of all Americans are expected to live within a three or four-hour drive of one by the year 2000.
Today, the Bible Belt might as well be renamed the Blackjack Belt, with floating and land-based casinos throughout Mississippi and Louisiana and plans for more in Florida, Texas, Alabama and Arkansas. Meanwhile, the Midwest is overrun with slot hogs, none of the porcine variety. Iowa, Illinois, Indiana and Missouri allow riverboat gambling, and a 50,000-square-foot land-based casino is scheduled to open in mid-May just outside Detroit, in Windsor, Ontario. Low-stakes casinos attract visitors to old mining towns in Colorado and South Dakota, and Indian tribes operate 225 casinos and high-stakes bingo halls nationwide. Add church bingo, card rooms, sports wagering, dog and horse racing and jai alai to the mix and it becomes clear why Americans legally wagered $330 billion in 1992--a 1,800 percent increase over 1976.
Calling for new games. Like the first bars that opened after Prohibition, modern gambling halls are enormously successful. "It will be impossible not to make a lot of money," one executive in New Orleans bragged before his casino had even opened. "It's like spitting and missing the floor." Such boasts--and the real possibility that the boom will create 500,000 jobs nationwide this decade--have not been lost on federal, state and local lawmakers. In the first six weeks of this year alone they introduced more than 200 bills regarding gambling.
But casinos and lotteries may not guarantee the jackpots many politicians expect. When urban-planning professor Robert Goodman reviewed the economic impact studies that 14 government agencies relied upon before deciding to embrace casino gambling, he found that most were written with a pro-industry spin and only four were balanced and factored in gambling's hidden costs. Goodman's two-year study, due out next week, concludes that newly opened casinos "suck money out of the local economy," away from existing movie theaters, car dealerships, clothing shops and sports arenas. In Atlantic City, for example, about 100 of 250 local restaurants have closed since the casinos debuted in 1978, says Goodman, who teaches at the University of Massachusetts at Amherst.
"Slum by the sea." States that get hooked on gambling revenues soon suffer withdrawal symptoms when local competition kicks in. Although pioneering casinos and lotteries typically are profitable, gambling grosses decline when lotteries or casinos open in neighboring states. In Biloxi, Miss., for example, slot revenues at first topped about $207 per machine per day. A year later when competitors moved in, however, the daily win-per-machine figure dipped to $109.
States frequently overestimate the financial impact of gambling revenues, too. "Legalized gambling is never large enough to solve any social problems," says gambling-law professor and paid industry consultant I. Nelson Rose. In New Jersey, for example, horse racing alone accounted for about 10 percent of state revenue in the 1950s. Today, despite the addition of a lottery and 12 casinos, the state earns only 6 percent of its revenue through gambling. "Atlantic City used to be a slum by the sea," says Rose. "Now it's a slum by the sea with casinos."
America's love affair with dice and cards has always been a fickle romance, and some academics predict a breakup soon. Legalized gambling in America has been running on a 70-year boom-and-bust cycle since the colonists started the first lotteries. "We're now riding the third wave of legal gambling" that began with the Depression, says Rose, who has written extensively on the subject and teaches at Whittier Law School in Los Angeles. The trend self-destructs after a few decades, when the public simply gets fed up and embraces more-conservative values. Rose believes a cheating or corruption scandal will trigger the next crash in about 35 years, an idea that most casino officials think is ludicrous.
The sky is not falling yet. Apart from a handful of academics and the odd politician, few Americans are seriously questioning the morality of an industry that is expected to help gamblers lose a record $35 billion in 1995 alone. Religious leaders have been oddly silent, perhaps because so many churches and synagogues rely on bingo revenues. "The biggest things we have to help people are churches and temples and the government," says Arnie Wexler, executive director of the Council on Compulsive Gambling of New Jersey. "And now they're all in the gambling business."
Getting hooked. The consequences can be damaging. Wexler says he got a phone call late last week from a man in his 70s who ran up $150,000 in debt just by buying lottery tickets. Although most gambling experts believe that only 1 percent to 3 percent of Americans have a serious gambling problem at any given time, a July 1993 Gallup Poll funded by Wexler's group suggests that the figure may be closer to 5 percent. Regardless, now that casinos are no longer located just in Atlantic City and Nevada it's reasonable to assume that the total number of problem gamblers will soar. "If you put a guy who wouldn't cheat on his wife in a room with a gorgeous nude woman, some guys would fall by the wayside," Wexler says. "When you make gambling legal and socially acceptable, people will try it and some of them will get hooked."
But try telling that to a gambler happily feeding a slot machine and waiting for a multimillion-dollar payoff. Fifty-one percent of American adults now find casino gambling "acceptable for anyone," and 35 percent describe it as "acceptable for others but not for me," according to a recent Yankelovich Inc. survey paid for by Harrah's Casinos. The attraction is simple. "The action for them is the thrill of what's going to happen in the next pull of that slot machine handle," explains Harrah's president, Phil Satre. Related material on U.S. News Online on CompuServe. Free start-up kit: (800) 510-4247. INVADING THE NATION Amount wagered on legal gambling in 1992: $330 billion Gain since 1976: 1,800 pct. Frequency in 1964 of the first modern state lottery, in New Hampshire: Once a year State and municipal lottery sales in 1992: $24 billion Retail price of a new slot machine: $5,000 Days needed to recoup its cost in Nevada vs. Illinois: 20 vs. 67 States with no legal gambling of any kind: Utah and Hawaii STACKING THE ODDS A "house advantage" of 5 percent means gamblers lose $5 for every $100 bet, on average. Examples: House edge, craps: .6 to 1.4 pct. House edge, roulette: 5.2 pct. House edge, "21": 2 to 10 pct. House edge, slots: 2 to 15 pct. House edge, big wheel: 15 pct. House edge, keno: about 20 pct.
This story appears in the March 14, 1994 print edition of U.S. News & World Report.