Editor's Note: All this week in our special series "Broken Government," CNN is taking a hard look at our nation's government; the frustrating problems and the potential solutions. Today, our Carol Costello looks at states trying to gamble their way out of the recession. And tomorrow on American Morning, President Obama says he wants to double U.S. exports in the next five years. So what's the plan and how can America even compete with cheap foreign labor?
By Bob Ruff and Carol Costello, CNN
Our cameras were rolling at The Rivers Casino in Pittsburgh as a contestant spun the “Wheel of Luck.” On this particular day the “Wheel” lived up to its name, coming to a rest on $5,000. A small crowd erupted in cheers and applause at the elderly man’s good fortune.
The owners of Pennsylvania’s newest casino are hoping that promotions like the “Wheel of Luck,” along with more than 3,000 slot, virtual roulette and Black Jack games, will entice big crowds and big bucks.
Someone else is hoping that the casino is a big winner: the state of Pennsylvania. Why?
Pennsylvania gets a cut – a very big cut – from every dollar spent in every one of the nine up-and-running casinos licensed by the state legislature. 34% of gaming revenues go directly to the state. Additional amounts go to municipalities, firefighters, and the horse racing industry.
Pennsylvania is not alone. In fact, there is a virtual stampede by states to authorize legalized gambling. 39 states either have or soon will have gaming available to one and all over the age of 21. And if you throw in lotteries, that leaves just two states without some form of legalized gambling: Hawaii and Utah.
Why are so many states betting on gambling? One word: recession.
The Rivers Casino's acting general manager, David Patent, told us, “If you look at the kinds of revenues that have been raised in this state and in other states, and how much money goes to … lower peoples’ property taxes and goes into the local community, we can be a huge piece of the solution.“
Dan Gilbert, the founder of Quicken Loans and owner of the NBA Cleveland Cavaliers, hopes to break ground soon with a casino in downtown Cleveland, one of four that Ohio voters approved last November. Gilbert says the casinos are good for the local economy.
“We really see this thing as a revitalization or a piece of a revitalization of the urban cores of the cities that we’re going to be in,” adds Gilbert.
“The [gaming] industry views recessions as their friend,” says Baylor economist Earl Ginols. “Every time the country goes through a recession, the industry renews efforts to expand. ... The argument is that somehow this is free money.”
So, what’s wrong with free money? What’s wrong with a revenue stream that helps balance budgets in tough economic times?
Grinols says that gaming is, in effect, a bad tax. Compared to a conventional tax, “the social costs to the community of collecting the revenues with tax by slot machine are greater.” Increased crime, breakdown of families, suicide, and gambling addiction are some of the social costs that he cites which result from gambling.
Pennsylvania’s Gov. Ed Rendell defends his long-standing support of more casinos.
“The state can get money without raising people’s taxes, so it’s enormously attractive at any time, but particularly attractive when we’re facing these enormous budget deficits.”
As for the social costs of problem gambling, he told us Pennsylvania has a program open to problem gamblers.
“In terms of the downside, they [gambling critics] scare you about people committing suicide and all that stuff. [There are] 54 people in our program. We can’t spend [ALL] the money we put aside for treatment for so-called gaming addicts.”
“Our city, our way. No casinos, no way!”
That’s the chant we heard from “Casino Free Philadelphia” demonstrators marching in support of 13 of their fellow supporters arrested (and later acquitted) for protesting the construction of Sugar House casino in Philadelphia.
One defendant, Rev. Jesse Brown, says building casinos is another example of broken government.
“Housing is still broken. Joblessness is too high. Government has failed and politicians continue to fail us when it comes to being creative in coming up with solutions.”
Paul Boni is the attorney for “Casino Free Philadelphia” who helped earn the acquittal of 13 members of his group.
“The politicians are finding that the only way they can politically raise money is to team up with the most predatory industry in America, which is the casino industry,” he says.
Back at the Rivers Casino, we asked several gamblers what they thought about all of this. Jamie Gaworski of Sarver, Pennsylvania spoke for most of them: “I’m not in favor of raising taxes. I hope this will kick in and help us with our property taxes.”