Dr. Martin Luther King said more than once, “Laws cannot change the hearts of humans, but they can change their habits.” He probably did not have in mind casino gambling, but more than forty years after he spoke his profound words, gambling is the lesson de jour.

Gambling (or “gaming” as its proponents like to call it when they refer to it as being sanitized), is in many ways a zero sum game. The total amount of money that exchanges hands in a given geographic area is considered to be flat; i.e. essentially the same, regardless of how many outlets there are for legalized gambling. Yes, there are proportions that determine how much money government authorities receive, owners of the “enterprises” receive, and the more paltry amounts that the few winners of the “games” win. As the St. Louis Post-Dispatch reported on Sunday, June 10, 2012,

It’s called “cannibalization”— an economic term referring to businesses that grow solely at the expense of other businesses in a stagnant market. Virtually everyone in Illinois’ debate over gambling expansion agrees that some of that will occur in the Metro East if Fairmount Park [a horse-racing track] is allowed to host slots.

This is the current issue in Illinois: Should slot machines be allowed at Fairmount Park horse racing park in Collinsville – about 15 miles east of St. Louis? If so, it will be a cash cow for a horse racing track and a loss for the “boats in a moat” on the Mississippi and other rivers in Illinois. As Kevin McDermott continues to say in the Post-Dispatch, “It’s just going to take more money away from the existing casinos, and there’s not going to be that much of a net gain to the state.”

It’s possible that the demand for legal gambling was established long before “gaming” was ever made legal. One of the arguments advanced for legalizing gambling was that it already existed illegally in the form of the numbers game. It was fraught with violence, fraud, and abuse of minorities, women, and children. In a sense, legalizing gambling made sense, just as it would to permit the use and distribution of marijuana and possibly other drugs that are currently illegal. If that were to occur, there is no magic formula that the demand for marijuana and other drugs would go up. The main difference would be that it would be utilized in a way that avoided the harm and chaos of having it processed through the legal system.

As things stand now with gambling, the following is certain: (a) the owners of casinos make money, unless the supply of outlets becomes so large that the initial oligopoly that exists is significantly reduced, (b) the government collects taxes on money spent at casinos, though rarely is it used for education as initially promised, and (c) players lose money because the house is stacked against them. This situation is no different than it was when gambling was illegal.

The bill in Illinois to permit slot machines at Fairmount Park has not yet been signed by Governor Pat Quinn. He is of a mixed mind regarding the issue. He does not want the concentration of power at Fairmount and potentially other horse racing tracks, and he also wants to protect the financial viability of existing casinos.  On the other hand, Illinois is like most other states and is running a financial deficit. In a simplistic formula, the money from gambling would help the state meet outstanding financial obligations without raising taxes and potentially without cutting services.

When it came to civil rights, Dr. King was correct that laws could change people’s habits, at least prior to the renaissance of the states’ rights movement in the U.S. But the habit of gambling in the U.S. seems to be rather permanent, whether legal or not. The solutions to the problems are not easy. We teach our students about the risks of gambling about as well as we teach sex education. Abstinence without reasonable alternative approaches doesn’t work. Whatever happens in Illinois and elsewhere in the country, the winners will only be temporary, and they will never be the public. Truly a shame.

The post When casino gambling hits the race track: Who wins, who loses? appeared first on Occasional Planet.

Ever since casinos became legal in Missouri in 1992,  we’ve seen one broken promise after another, and now the gambling-industrial complex is doing it again. They’ve convinced at least one Missouri legislator [I wonder how they did that?] to sponsor a bill that would let them loan money to tapped-out gamblers.

Missouri is not the first state to contemplate allowing empty-pocket crapshooters to borrow from the house. According to the Examiner, Mike Winter, who lobbies for the Missouri Gaming Commission, says 10 of the 15 states with land-based or riverboat casinos allow casinos to grant credit. Pinnacle Entertainment, which operates casinos in Missouri, already handles credit applications at casinos in Indiana and Louisiana.

How did we get to this particularly unhealthy and unhelpful idea? Let’s see: In Missouri, we went from gambling only on riverboats that ostensibly “cruised” for two hours, to boats in pretend moats; from a $500-per-two-hours gambling-loss limit, to lose as much as you can lose whenever you can lose it; from a lifetime ban on compulsive gamblers to a welcome mat. One after another, restrictions on casinos have been lobbied and legislated into oblivion.

And now, under the pretense of helping hapless, high-roller professional athletes, Missouri is on the verge of turning casinos into loan sharks. Gambling [I refuse to use the term “gaming”] industry lobbyists and their paid employees—Missouri legislators—want us to believe that millionaire professional athletes who roll into town need loans for their high-stakes gambling entertainment. [Some of these people, apparently, gamble with as much as $30,000 in an evening.] We can’t expect them to carry that much cash around, argue the lobbyists, so we need to allow casinos to loan them the money to piss away at the craps tables.

That’s a very clever cover story, but it doesn’t hold enough water to float a toy boat in a fake moat. Do they want us to believe that athletes with huge salaries and financial advisors to manage them don’t have high-limit credit cards to tap into? Really?

No, loans to gamblers are not really for already-well-staked athletes. They’re a great way for casinos to rake in even more money—through a new revenue stream of interest payments–from everybody, particularly the average person who gets in over his or her head and needs just a little more to win it all back. What a great strategy for the casinos—keep customers gambling longer, losing more money, and then paying it back with interest.

They’d like us to believe gambling loans will be innocuous and that applicants will be carefully screened. If you want an instant casino loan, you’ll have to show that you qualify for a $5,000 line of credit. That sounds reasonable enough, until you find out that the casinos will be using criteria similar to those employed by furniture stores and used-car dealers—and they’re widely known as some of America’s most discriminating bankers, right?

And, by the way, does anyone know what the interest rates on gambling loans will be? Missouri already permits exorbitant interest rates on payday loans, [averaging between 300 and 400 percent],  and efforts to reduce those rates are regularly squelched in the legislature. Will borrowers do any better with a loan from a casino? Isn’t this what used to be called, in the old-time gangster days, “vig?”

Instant loans to gamblers is a lousy idea with no redeeming value, except for the added value it provides to casino operators.  Even casino operators themselves know this. A recent St. Louis Post-Dispatch editorial notes that some of the operators’ own websites offer links to tool kits that help people identify their own problem gambling.

The kit opens with 10 questions, a “yes” answer to any of which indicates a gambling problem. Question 7: “Have you ever borrowed money to pay for your gambling?”

[Another website] lists 10 statements under “How do you know if you have a gambling problem? One says, “You have borrowed money to finance your gambling.”

None of this subterfuge and cynical exploitation should come as a surprise. The history of the gambling industry in Missouri and elsewhere is a story of backroom deals and deliberate, patient, incremental erosion of the limitations initially promised by casinos and legislators to protect customers from themselves.

State-sanctioned gambling—under the phony pretext of helping to fund education—is already a giveaway to corporations whose product is designed to do nothing except empty its customers’ pockets. Do we really need to give the already predatory gambling industry another way to scam its customers?

The post Your casino, your loan shark appeared first on Occasional Planet.

The more we produce, the wealthier we are, unless our appetite for consumption grows at a faster rate than production. It’s a relatively simple ratio that is essential to the basic concept of making  America (or any other society) more self-sustaining.

Demographics are a critical determinant in the capacity of a society to be self-sufficient.  In Haiti, for instance, an inordinate percentage of the population is below the age of fifteen (38% compared to 21% in the U.S.).  To the extent possible (which is currently very limited), they must be fed, housed, and clothed.  Most schools in Port-au-Prince were destroyed in the January earthquake; it will take years to reconstruct and staff them.  Children must be supported but cannot, and in fact should not, be counted on to be producers.

Additionally many Haitians are infirm, suffering from malnutrition, or are emotionally traumatized and thus not capable of working.  There are others who may be healthy, but who never developed the skills to be productive.  Compounding the limited assets of Haiti to produce is the fact that the country has been stripped of much of its natural resources after years of excessive deforestation.  While charity may now be the most effective way of addressing the extreme poverty in Haiti, the long-term solution is similar to that in any other country. The capacity to produce as many goods and services as the population needs to survive must be developed.  There must be opportunities to be productive which will result in opportunities for people to work.  In a country with 80% unemployment, this is a long overdue must.

The United States is not immune from demographic changes.  As you can see in the table below, according to the U.S. Census Bureau, in 2050 the percentage of the population that is over 80 years of age will be over four times what it was in 1960.

The acceleration of this problem was cited by New York Times columnist Thomas Friedman on April 4, 2010:

It was just reported that Social Security this year will pay out more in benefits than it receives in payroll taxes — a red line we were not expected to cross until at least 2016.

Fortunately, some people over the age of 80 are productive.  In fact, they produce more for society than they consume.  At the same time, many people are retiring from work at earlier ages.  In the U.S. in 1910, the average age at which people retired was 74-years-old (although many did not live that long).  In 2002, the average retirement age had dropped a dozen years to 62.  While this may be a healthy development – rewarding people for “jobs well done–” it means that fewer people are pulling the wagon uphill to ensure that we adequately provide for all citizens.

If we have fewer people producing for our “society of consumers,” each one of these people must produce more.  Perhaps more importantly, he or she needs to produce “more smartly.”  In other words, as a society we must ensure that what is produced meets at least the basic needs of all citizens.  A fundamental tenet of a free-market system is that production will be driven by that for which people are willing to pay.  If you’re a smart entrepreneur, you can take advantage of this phenomenom, but it may not be particularly helpful to society at large.

For instance, a company such as Pinnacle Casinos can build a new casino (possibly in a flood zone), and make a large profit from the operation of the gambling mecca.  However, such a development can result in significant societal harm, as the people who can least afford to lose money do so.  They may then not be able to feed their children, meet a mortgage payment, or even be productive at work, if they are consumed with their gambling losses.

Similar reservations might be raised about the production of guns, alcoholic beverages,  pornography, and a host of other items that at the very least should come under closer societal scrutiny as to their value.  I am not advocating the prohibition of any of these items; only that we see them in a different light from what is needed to provide basic needs for everyone.  If it does not already exist, we need a metric that excludes the production of dysfunctional goods and services from the measurement of positive production in our society.   Perhaps such a measurement should even give them a negative value, because in the long run they weaken us.

As we examine the true benefits of what we produce, let us not forget the distortion that Wall Street shenanigans brings to our society.  When sub-prime mortgages are bundled together as an investment, and a financial institution purchases these “bad assets,” it does not add to our wealth.  Rather it weakens us, while a few individuals game the system.  When these bundles are insured by a company like AIG, we should not count the premiums they receive as wealth.  They really represent a foreboding of financial disaster for the most gullible among us; they have negative value.   As we all know,  speculators who have made money by swindling people, have  been rewarded by the government for “ceasing and desisting,” and then finally they go back to their play houses and start another round of swindling.

Sustenance for a nation, or for the world, involves many complicated variables.  But what remains simple is that we must at least produce as many goods and services as we need to survive.   The demographics of this equation are different from what they were at the beginning of The Great Depression in 1929; we have fewer producers.  Perhaps more alarming is producing items that can be detrimental to our society.  When guns are produced at the same time that we lack adequate health care facilities in inner cities or rural areas, we are in trouble.  When alcohol is a money-maker for businesspersons, but building adequate housing for low-income people is not profitable, we are in trouble.  When a casino can be built in a flood zone, we are in trouble.

We need to not only produce more, but to produce “more smartly.”  This process  involves judgments that at times will restrict some individuals’ freedoms.  It certainly will harm those who peddle vices as well as frivolous items.  We may not yet be ready to go full throttle in this direction, but at least we have to widen the conversation.  Necessary economic incentives must be provided for investment opportunities to produce what is healthy for our society.   These decisions are rarely easy, but the price we pay for ignoring them is too high for us to justice to both our own population and those who live outside our borders.

The post Trying to make America more self-sustaining – Part II appeared first on Occasional Planet.