Don't Bet on Government

Gambling is a particularly strange bedfellow for our government. Historically, gambling has been outlawed on the grounds of immorality. It is purported that gambling induces people to squander their much-needed earnings, become addicted to accumulating money and neglect responsibilities to themselves, their families and society. Gambling is also a staple source of revenue for organized crime.

However, under certain circumstances our magnanimous government seems to have a different opinion of gambling--when it gets a cut, that is. Foxwoods, in Ledyard, Conn., is the most profitable casino in the world. Private gambling is against Connecticut state law. Federal law, however, allows Indian reservations to do anything permitted by the state or national government. Since the state of Connecticut had already instituted a state lottery, it could not forbid the establishment of Foxwoods.

Once this happened, many private developers, including Donald Trump, wanted in on the action. Foxwoods, of course, was not so enthusiastic about the impending competition. Former Gov. Lowell Weicker, shrewdly sensing a potential windfall for the state, and desiring to make the best of a situation in which he had to allow gambling but did not want its propagation, worked out a deal with Foxwoods. As long as Connecticut prohibited all private gambling, Foxwoods would pay the state a portion of its intake every year (the amount paid last year approached $200 million), essentially purchasing a government-sanctioned gambling monopoly for itself.

It seems here that all parties at least broke even. The state gets hundreds of millions of dollars per year, guaranteed, for basically doing nothing, Foxwoods gets to become the most profitable casino in the world via its monopoly, and gamblers have at least one good casino at which to gamble.

Government obviously seems willing to give its imprimatur to gambling so long as it receives a monetary benefit. So eager is the government to do this, in fact, that it runs its own gambling ring--lotteries. Deals like the one with Foxwoods, and state lotteries even more so, are often upheld on the ground that their revenues are used to supplement funding for important social programs that have widespread support, thus giving the people what they want while keeping taxes low. This rhetoric is nothing but the usual prattle that regularly drips from politicians' mouths.

When California instituted its lottery, it did so under the pretense that the revenues would be put to use in the needy school system. But from 1984 to 1991 funding for public education increased by only two percent. Florida established its lottery for the same purpose; since it began, funding has decreased by five percent. Lotteries have been windfalls for these states, so why are the earmarked programs not benefiting as they should? The reason is that lottery revenues supplant instead of supplement funds, allowing the previous monies to be diverted to politicians' pet projects.

The government deceives the public in other ways about its "miracle money-raiser." Lotteries do not keep taxes low--unless the analysis is limited to the wealthy. It has been shown in numerous studies that lotteries act as a regressive tax. Poor people, chasing the dream of hitting the jackpot, throw away a significantly larger proportion of their disposable income, and often some of their nondisposable income, than do the middle and upper classes.

Also, the odds of winning are continually grossly misrepresented: One state lottery advertisement stated the "odds of winning" at one in 350, when they really were one in 13 million, ignoring the difference between winning one dollar and winning the jackpot. The Federal Trade Commission (FTC) frequently prosecutes private organizations that perpetuate such fictions, yet it has never challenged any state government on such grounds. Even if the FTC does not feel justified in attacking these government practices, should not the government be above this?

The arguments that lotteries are effective money-raisers and that they are an innocuous way for people to brighten their lives with a little dreaming and fun are clearly specious. The Founding Fathers conceived a government based mostly on negative principles; the Constitution's only prescription for positive action is that the government shall "promote the general Welfare."

By promoting gambling, the government undermines the very values that it is supposed to be promoting. It takes even more money from the poor. It deceives its own people in order to make a buck, and then exempts itself from its own laws so that it may continue its unconscientious practices.

If gambling is truly immoral, the government should not be participating in it. The government should not even be sanctioning it, for if revenue is sufficient justification for immoral activities, why not open, say, state-run brothels?

If it is acceptable for the government to participate in gambling, why not open it up to everyone? Why must it have a monopoly? It may be contended that private bookmakers will not put their income toward public programs, as the government purportedly does. First, it has already been shown that the government does not direct gambling revenues to their intended place. Second, the government could still take in revenues through gambling by taxing the parlors' receipts.

Third, there is no principle that states the market could not do for society what the government is supposed to be doing. Mississippi not only legalized gambling, but made acquiring licenses easy. Now its economy is booming, as casinos hire many who were unemployed, draw out-of-town money into the local economy, and revitalize the many destitute towns in which they have located.

The assertion that the government can operate the gambling industry better than the private sector is also incorrect. Adjusting for the fact that only betting with the government is legal, any bettor would much prefer a bookmaker. Bookmakers typically pay out 95 cents for every dollar bet, whereas state lotteries pay approximately 48 cents. Bookmakers pay on the spot, instead of stretching a million dollars into twenty annual payments of $50,000. They also offer much better odds: If bookmakers gave 13 million-to-one-odds, they would never take any bets at all; the only reason the government can get away with this is that it is the only parlor that can accept bets legally.

Bookmakers are not bastions of immorality--at least not any more so than the government. The government's gambling efforts undermine societal values and regressively tax the poor. This is against the better interest of bookmakers: They make every effort to avoid taking bets from those who are unable to pay.

Contrary to popular opinion, not all bookmakers are associated with the Mafia. If gambling were legalized, the seedier elements would probably no longer exist, as regulations and authoritative, legal enforcement would maintain honest wagering, timely payments, and civil means for resolving disputes.

Smarmy politicians, operating behind the aegis of public goods provision, have turned gambling, which was, or even still is, a socially unacceptable pursuit, into a fiscal and political treasure-trove. The bottom line is, if gambling is immoral, the government should get out, and if it is not immoral, it should open it up.