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February 24th, 2010
06:00 AM ET

Broken Government: Can we gamble our way out of recession?

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.”

Filed under: Broken Government • Economy
soundoff (43 Responses)
  1. Jen in Nevada

    Please study Nevada first.
    The Gaming industry leaders end up controlling a lot more than casinos. And it won't be discussed openly in the news.
    Just look at NV Sen. Ensign his father is a casino mogul.
    There is no short cut to good government...

    March 19, 2010 at 3:22 am |
  2. Jim

    Let's see how the Casino's do now with the new Credit Card laws. How do you think people get the money to go to the casino's. Swipe the card. Empty the accounts. People have to understand the credit card companys could care less about their customers. As soon as they see your balance up they will send you the letter that your interest rate is going up. Sure, put the people into more debt. People have to realize you are not going to win. Bring back the Bingo games. Put your money into organizations that need the money with buying a couple of Bingo cards for 5.00 and have fun. Why empty your pockets to casino's and Politicians. If you need a fix go fishing instead. Take up a new Hobbie. What does the American People get from the States that have casino's. Look at Atlantic City. Everyone in the State paid to build up Atlantic City. Has it done anything for your town that you know off.

    As per John Cornyn this morning on broken government ? He said it's not broken ???? Everything will be fixed come elections. Here we go again. Another waiting period. Just put it on the shelve.

    It's Doctor Jeckel and Mr Hyde with all policitians when it comes to election time. We feed the beasts and get nothing in return.

    February 25, 2010 at 8:44 am |
  3. Jorge

    Yes and Pimping and Drug dealing will be next. God forbid that a neighborhood average person partake of any of these enterprises, but hey since its money for government officials to afford themselves expensive homes, health plans and every other perk that comes along with being government personnel well then 'lets have Gambling'. We can make bigger desperadoes out of the losers and the banks who lend money to Casinos to build luxurious establishments well they'll profit by it all. Yes it makes sense why O'bama made his visit to Las Vegas a week ago now. we can all become Casino workers and live the American dream like Las Vegas employees do.

    February 24, 2010 at 2:48 pm |
  4. Barry Bazemore

    Tell all the Republicans to go home. We Dem. do not need them. All they want to do is vote negitive to all our Promotions. We have enough votes in congress to pass bills to our countries benefit.

    February 24, 2010 at 2:40 pm |
  5. joe

    Republicans keep saying their doing what Americans want, like opposing health care reform. But they’re doing opposite of what the American people want. Just take a survey every time they say that, and truth will be known. The American people don’t have the Republican views. They mostly have Independent views and want them to work together with the Democrats to get problems solved.

    February 24, 2010 at 2:25 pm |
  6. hceel

    Most politicians receive under-the-table money from big corporations to pass laws to help their business even if it hurts America. The nation would be aghast if they knew the truth and scope of money laundering in the government. Power is money, money is power it goes hand-in-hand. Money, the root of all evil. If we could delete money, problem solved. As much as I like money, I know the consequences of worshiping the almighty dollar. When we make to big a profit, then it becomes our god and clouds our prerogative. We have to work together for mankind or USA will undoubtedly fail. United we stand, Divided we fall.

    February 24, 2010 at 1:52 pm |
  7. Patrick

    I will share with you a piece of a letter I sent on to my Representative. I have not received a reply yet and so obviously there is no answer to this.

    I am struggling to see how people that fail to do their jobs and cause economic chaos for the country and then a year later receive bonuses for doing so (of which the taxpayer gave them), manages to get away with this and retain their jobs with absolutely no penalty imposed on them. I would like to sit with members of Congress to speak of these issues and see the looks on their faces and find out why these types of things occur and nothing seems to be done. I have not in any way shape or form gone above the law or caused economic struggles for millions of others and yet I lose my job (because I attend a family funeral) and my family has to suffer further.

    February 24, 2010 at 11:47 am |
  8. Martha

    One of your guests this morning, a gaming executive from Ohio, tried to justify his industry's expansion on the basis that people were already going across state lines to gamble. I guess that's like the folks from Alabama and Florida coming to Mississippi. Why don't you interview people in Mississippi? Gaming was sold to Mississippians more than ten years ago on the prospect of improving our educational system, then the poorest in the country. Guess what? It's still the poorest in the county, with half our children not graduating from high school. And–our governor is now making deep cuts to education in the brutal recession, in order to balance the budget. Gaming is not a viable option to improve anything. Even the industry jobs here are filled by folks from other suffering states. Most of the dealers in Mississippi came from Vegas.

    February 24, 2010 at 9:52 am |
  9. Mel

    Alabama, being right in the Bible Belt, makes big noise legislating "morality" - yet many Ala residents spend their gaming and lottery dollars just across state lines in every direction. Why should Alabama not benefit from those dollars?

    February 24, 2010 at 9:32 am |
  10. Joseph Daniel Brian Lawlor

    Love your work Carol...I think Nancy Regan hit on it. "Just say No" will never apply to all and I deal with the kids who say "hell yeah". Some will be against the gambling but we have to see who will say no and who will say yes. Currently feeding off the Peoples who have little to begin with connected to a system already taking their financial pieces from our/your pay check.

    Now to feed off a Peoples who were well fed financially alright but to feed off a Peoples not well fed financially all wrong girl. Government, Industry, Finance, Academic, Miltary, Media, Religion(spirituality+ethics) and the Peoples. The first seven tools for the benefit of all Peoples ensuring they are well fed but the tools used the Peoples and did not feed them right.

    Yes I would like to go to a casino but under proper conditions which currently are not in place for all Peoples. To understand the physiology, psychology and philosophy of the Primary Patient/Student which is the body of Humanity as a whole. Each of us like a gene to the forming genome of humanity. Each of us like a brain cell to the developing brain of humanity. Each of us like a flake of skin where we age and die we fall from the body and as new life is born new flakes form.

    There is a business above the table and a business below the table Carol so understand this clearly's all business...before we make it right we collapse what was made wrong. Watch your freaking steps out there at this time.

    Government, Industry, Finance, Academic, Military,Media, Religion(spirituality+ethics) and the Peoples. Media=developing ears,eyes and voice to the body of Humanity. Revelations..listed as seven kings on a hill, the seventhcontrols the eighth but are headed for destruction, five have already fallen"=direct quote from the Bilble you realize how far up the chain of command I have access too Carol? Global leaderships work for that Command...It's all business girl...

    Contractor sub contracts the parts without the parts knowing the fullness of what it is all is not that it is broken but more under development..Global Government, Global Industry, Global Finance, etc...still under development girl.

    February 24, 2010 at 9:30 am |
  11. Lanny Sanford

    I forgot to tell you our churches have more rap and crime then our casino I do not go to casino I help my parents and send money to my wife Anne I have never got help from The State of Montana I called a church here in Billings Montana the Pastor told me all women should be taken out and shot in the streets I can say I did not get loan from church our pastor hate women here so we need more casino

    February 24, 2010 at 9:29 am |
  12. Richard

    we have four casinos already in St. Louis and will open a new one on March 4. They keep saying that the money will go towards Mo schools not the general fund, but the money that should come from the state fund is reduced and spend in other areas. the money we pay to the state on our property tax has never been reduce.

    February 24, 2010 at 9:12 am |
  13. Lanny Sanford

    we have alot of casino here in montana and still wa are laying off State worker the casino tax help 's our school we have more churches then casino the Churches do not help the people in montana we have more crime and rap from the churches then the casino I have called alot of churches here in montana to help with my wife because Anne is a missionary and the churches told me they do not help missionary

    February 24, 2010 at 9:10 am |
  14. Carol

    Why is it that all states in the United States see nothing wrong with gambling through Lottery Gameing but it is a terrible thing for private citizens to play the slots as a recreation? In many parts of this big USA there are no forms of entertainment for seniors and it is wonderful day when you can get on a bus in your village or farming area and forget your troubles for a day by going to a casino. It is my money and I sure will be glad to spend some of it in Ohio (instead of surrounding states) when we finally get a casino there. It was a smart move when Gov. Strictlin signed that bill!!!!!!!!!!!!!!!!!!!!!!

    February 24, 2010 at 8:56 am |
  15. Bob G

    Gambling is just another revenue stream the politicians can squander. I am a life long resident of NJ where we had a lottery and gaming in Atlantic City for years. On top of that we have the highest property taxes in the country and the state is severely in the red. The problem is not revenue, its spending.

    February 24, 2010 at 8:53 am |
  16. Nancy Newell

    Ask the voters of Franklin County, Ohio...they voted against the casinos here in that it is of them is going to be built in their county...we already had the lottery...profits were to go to the schools and elderly...our school system has been in court for illegal funding of the system...we still have many elderly whose needs are not met...where are the dollars??? now we have the casinos...and like the minister on the piece...we still have extremely high unemployment, foreclosures...what do we Ohioan's have to look forward too? what a mess!

    February 24, 2010 at 8:52 am |
  17. Debi in Florida

    I suppose there are states where this would work......however, here in Florida, the Seminoles are simply trying to take back their share of what was originally theirs, it's a "gotcha" type attitude that has come full circle so sure, they have to pay taxes on the profits they make but the land is free and clear. I don't think however, you really ever make money, the few times I've won ($13,000 in one month), it was all given back to them the next win a little, they take back a lot!!
    Anyone feeling this is a good thing should have their heads examined, true, it's fun for a few hours, then you spend the next week regretting the fact you could have fixed your car with that's like sex, a little fun, a little enjoyment but is all that worth the real ramifications in the end???

    February 24, 2010 at 8:47 am |
  18. David Clark

    For years Detroit fought over whehther to have casinos based on fears about gambling problems. As a psychotherapist of 34 years I began to see many clients who developed serious gambling addictions. The city may have increased their tax base, but many individuals suffered serious economic losses and family problems as a result of their gambling problems. It is a "rob from Peter to pay Paul" propisition with too many families suffering as a result.

    February 24, 2010 at 8:42 am |
  19. Tammy

    Don't let the extra money that the casino's bring into your state fool you. We have had them for years and the taxes only go to those counties they sit in. Taxes are still rising for those projects the casino's was suppose to fix like roads and schools. And yet we still playing pothole bingo every day and the schools are closing right and left and districts on the verge of bankruptcy. The jobs that casino's bring to the table only work if the state can support all the casino's.

    February 24, 2010 at 8:41 am |
  20. Mark

    Hello Carol at CNN:

    In response to your question "can we gamble our way out of recession?". The potential of loss in gambling favors the house. It is of my opinion home owners as a whole have much better odds in not gambling their money away and spend it on paying their property taxes. My final answer is no way.

    Mark in Ohio

    February 24, 2010 at 8:38 am |
  21. Allen

    Casinos are not intended to replace manufacturing or other industries. Indirectly, they are a heavily "Taxed" form of entertainment that employ thousands of people and contribute financially to many social programs. They are not intended to be the backbone of commerce for the nation, but are simply a very popular form of entertainment for the communities where they are located.

    February 24, 2010 at 8:38 am |
  22. Bruce

    I sent an email to President Clinton recommending that the government should open 2 casinos in each state on government property. All the profits to be placed in the Social Security program. I would not mind losing my money if I had a chance to get it back in retirement. I did not even get a thank you for your letter from him.

    February 24, 2010 at 8:37 am |
  23. Adam, VT

    Lotteries and gambling are essentially a tax on the mathematically deficient. I would rather they pay it than I. Bring on the casinos.

    February 24, 2010 at 8:33 am |
  24. John-Francis

    Back off CNN why dont you do some research once in your life Rendell has been pushing gambling for years and when he didn't get his way he threaten to lay off a bunch of people. CNN grow up.

    February 24, 2010 at 8:33 am |
  25. Katherine

    I live in Pennsylvania. For the last two years, I have been waiting for the casino revenue to lower my porperty taxes. I have yet to see a dime in reduced property taxes. In fact my property taxes went up in 2008 and 2009. Where is Govener Rendal spending all this gambling revenue?

    February 24, 2010 at 8:32 am |
  26. mary powell

    here we go the rich getting richer,, off we the people. I am so tired of government taking we the people. I have written to the white house about gambling...they don't listen.. If they must start gambling to save our country, then why not do a lottery's instead of cassinos who keep most the incoming cash. A lottery could pay off the debit faster, and the rich wouldn't be making all that money to keep for themselves. I am so sick of the rich running our country into the ground and getting richer while the rest of us suffer going broke because of their mistakes. Fire them all... why not? Get average folks into office and watch how quickly the government can pull it together. New folks can't do anymore harm than those in office now! Fire them all I say..

    February 24, 2010 at 8:32 am |
  27. Demario87

    Ms. Costello you are very beautiful !

    February 24, 2010 at 8:31 am |
  28. Don

    With all of the Unemployment – Few have any money to Gamble, So What is the Point?

    February 24, 2010 at 8:28 am |
  29. Mike - Minnesota

    It might help to use gambling revenues to supplement State's income but someone needs to look at taxing play on table games. Currently, only slot play is taxed, table games do not get taxed. A huge source of revenue is not being collected from this aspect of gaming.

    February 24, 2010 at 8:28 am |
  30. Megan F.

    This is a horrible idea. Casino companies are naturally predatory businesses and state governments shouldn't be lured by the short-term impact that these organization seem to provide. Gambling can be a serious addiction, and making it more accessible only will hurt citizens in the long run.

    February 24, 2010 at 8:28 am |
  31. SavanCod

    I have a question. Is congress so aganist working that they have to put their collective noses into the business of toyota? when are they actually going to do their jobs instead of wasting time with issues that they have now right, legal, good sense being involved in. are they just takeing more pages out of oboma's handbook of mis direction and presume that the american public is too stupid to notice that if they put half their energy they placed into this "congressional hearing" and instead placed that energy into I don't know DOING THEIR BLOODY JOBS!!! we might have some progress on legislation and turning the economy around, instead we have have a pannel of hens clucking about everybody's business. talk about broken government just look at congress in todays hearing that is proof positive WASTE OF TIME!!!

    February 24, 2010 at 8:19 am |
  32. Walter L Johnson

    Gambling thrives when people have little to do, such as the few disabled retired with enough income after medical bills. I noticed at the casinos in Colorado even places to dispose of used disposable diabetic needles. It also thrives among the desperate who feel their only hope of paying all their bills is to gamble on paying all or none by winning or losing.

    The moral question is should government be a party to making gambling easier and more readily available. For my part I ruled out retiring anywhere in Nevada solely because I got annoyed having to pass by slot machines even to do such basic things as use a public restroom in a pharmacy, and I didn't want my teenage children exposed to that or later grandchildren. Minors cannot win slot machine prizes, but that doesn't prevent them from trying and losing money. It is just the winning ban that is absolutely enforceable, since the slot machines are everywhere in Nevada, marked off only with an adults only line on the flour.

    And, do we want taxes raised to replace revenue lost when the economy improves and gambling drops off? It could happen, or in many states the pressure happens to add new types of games.

    February 24, 2010 at 8:08 am |
  33. Mel

    Alabama is one of those states that could benefit from legal gambling and/or a lottery. As it is, everyone in my area goes regularly to Miss to gamble, or to Tenn & Ga to buy lottery tickets. We're spending our monies on it, so why not have it so Alabama benefits?

    February 24, 2010 at 8:06 am |
  34. Mitt

    We very well understand your broken strategy, CNN! You want to act tough on the current administration by saying that it is broken. Instead, you should be targeting the very elements or individuals that are causing this unnecessary gridlock in congress. Let's face it, CNN, you will never get Fox news' viewers.
    You better revise your strategy before it's too late.

    February 24, 2010 at 8:00 am |
  35. Gene Schmidt

    Our economy is based on gambleing and greed. But our real problem
    is to many people. Do you want to talk about this?

    February 24, 2010 at 7:52 am |
  36. Mark Brennaman

    [This corrects my previous typos]

    Oklahoma, the buckle of the Bible Belt, has nearly as many casinos as churches. We offer our citizens many "retirement plans" including the Wheel of Luck, Powerball, Mega Bucks and Hot Lotto. The money is supposed to go to education but our schools, government and gamblers are borke(en).

    February 24, 2010 at 7:48 am |
  37. James Hoyt

    All gambling is, is a quick fix. Preying on those folks who are addicted to game. States do little to crib the addiction problem, but rather they encourage those who have little to spend it all. We are becoming a nation of nothing but sharks feeding on the helpless.

    February 24, 2010 at 7:46 am |
  38. amanda

    Please get more information on the morality of gambling. It is a Social Problem, and addiction for many. As you research, you will discover many churches joining forces to oppose gambling, lottteries, etc. Please, please cover this in your news stories. It is a shared belief that gambling exploits the poor and forces people further into poverty.

    February 24, 2010 at 7:39 am |
  39. Don

    MORE Widespread Gambling? If you plan on doing that,then you need to Also Push for Cannabis Legalization for Medical,Recreational and Industrial use, Or shut the hell up, At least THAT will Serve a legitimate PURPOSE!!!! (Too many to list)
    If you think for one moment that it will not, YOU ARE STUPID and BEYOND HELP!!!

    February 24, 2010 at 7:33 am |
  40. Chris

    If gambling is going to be legal, I see nothing wrong with more states getting in on the act instead of watching tax revenue leave their state. Nor do I propose it be made illegal. But, will it help fix our broken government? Absolutely not. Gambling is big business and that's where the lion's share of the dollars will go. Our society accepts allowing corporate shareholders to hog more and more of the pie. We've hit a spot where there's not enough pie for everyone else. Are we learning? No.

    February 24, 2010 at 7:33 am |
  41. mike

    Gaming will not solve all our problems but it can help. I purpose a national lottery. One that only pays out interest from the money brought in. This way you don't lose your money and can cash in ticket to get your money back. It is not unreasonable to sell 150 million tickets a month and if the pay out was only 1/2 of a percent the winning ticket would recieve 7.5 million. Since you never lose your money, if you fell on hard times you could cash ticket in and get your money back.
    The way it works is the serial number of each ticket is loaded into a computer and the computer randomly kicks out the winning serial number each month. When you buy a ticket the number is loaded into the computer and if you cash it in the number is removed.

    February 24, 2010 at 7:29 am |
  42. Mark Brennaman

    Oklahoma, the buckle of the Bible Belt, has nearly as many casino as churches. We offer our citizens many retirement plans including the Whell of Luck, Powerball, Mega Bucks, and Hot Lotto.

    The money is supposed to go to education, but the schools, government and gamblers are broke(en).

    February 24, 2010 at 7:20 am |
  43. The logger

    We are rapidly degenerating into a third world country.
    Part of the role of government is to provide conditions in which the citizenry can flourish.
    We have many folks living in bangladesh-style housing, and dying from lack of health care.
    Our colleges and universities are the most expensive in the western world, freezing talented students out.
    Congress fiddles while the U.S. self destructs

    February 24, 2010 at 6:54 am |