So far, this year’s crop of candidates for state offices turned in a dismal performance on casino gambling. An initiative to repeal a Massachusetts law authorizing casinos brought the topic back to the front burner. Some candidates can’t take the heat and are trying to stay out of the kitchen.
Since at least the Revolutionary War, gambling has been a “fourth evil” for governments in the U.S., along with alcohol, tobacco and firearms–historically policed by a bureau of the U.S. Treasury but now by the Department of Justice. Unlike classic evils, for which the prescription became to tax and regulate, a common approach to gambling was to ban and prosecute, at least as written in the law books.
Anti-gambling laws were always hypocritical, with huge exceptions carved out for bingo, beano, horse racing and sometimes lotteries, and with enforcement that proved whimsical when not plainly corrupt. In the older states of the Northeast, there was at least a “bookie joint” for every urban neighborhood, often doing double duty as a tavern, as a barber shop or, in more recent times, as a pizza parlor. It was probably the small scale and ordinary character of these enterprises that kept fires banked instead of raging.
Like alcohol and tobacco–and, over the past century and a half, like recreational drugs–for some people gambling readily becomes addictive, wrecking careers and households. As with alcohol, tobacco and drugs, addiction becomes more likely as activity becomes more glamorous, intense, convenient and frequent.
The country’s engagement with Prohibition from 1920 to 1933–thanks to the former Anti-Saloon League–opened new opportunities for importers and home-delivery services. Those were quickly seized by criminal gangs–notably the Mafia, operating out of most large cities. Criminal gangs had long been running the “numbers racket” and “bookie joints.” Mastery of some illegal trades led to taking over another that became far more profitable, until the country came to its senses early in the Franklin Roosevelt administration.
With the end of national Prohibition and, over time, with the repeal of state and local “dry” laws, gambling resumed a role as the biggest source of Mob income. It became the everyday cash cow that helped to fund “loan-sharking” operations, “protection rackets” and “shakedowns” preying on local business. While there had been early, state-authorized lotteries, amid the post-Civil War campaigns against evils of alcohol and drugs, those lotteries were shut down before 1900, and stiff federal anti-gambling laws were enacted to keep them closed.
Light finally dawned in some dim corners of state governments during the 1960s. The insight was that a permanent state lottery could be a “win-win” proposition: to raise money for a state government and to take money away from criminal gangs and weaken them. New Hampshire, eager to avoid traditionally despised income and sales taxes, went first. In 1963, the state legislature authorized the New Hampshire Sweepstakes, using horse races at Rockingham Park in Salem as the arbiter of a lottery, to dodge federal anti-gambling laws of the time.
New Hampshire cities and towns had options, voted in a special election, to accept or reject local ticket sales. At first only 13 of then 211 communities chose to participate. That was enough to get started, and it was enough to get attention. New York followed suit in 1967, New Jersey in 1970. New Jersey created the first popular modern state lottery: large numbers of outlets, frequent awards and a high fraction of sales paid out in awards. The rule of thumb in “numbers rackets” had been 60 percent; New Jersey offered 70 percent.
Massachusetts followed a New Jersey pattern, starting sales in 1972 with 50-cent tickets, 70-percent payouts and weekly awards, arbitrated by drawing numbers from a tub at a public event. Then and now, tickets have typically been sold in small “convenience” grocery stores. Although local “numbers runners” maintained some business for a while, providing confidential services, they dwindled. Within a few years, the largest source of criminal income had collapsed, and the Mob became increasingly vulnerable to law enforcement.
The Massachusetts State Lottery had a dark, founding genius in Robert Q. Crane, a Democrat and former state representative who served as state treasurer from 1964 to 1991–by statute the Lottery Commission chairman. In 1974, during Mr. Crane’s watch, the Lottery introduced an original “product”: the so-called “scratch ticket.” At first, The Instant Game proved unpopular. Gamblers learned it paid out only 30 percent of sales as awards, most just a dollar or two.
In 1979, the Lottery Commission hired a new marketing manager, James “Jimmy” O’Brien–more recently at Scientific Games International near Atlanta, GA. Mr. O’Brien raised the payout percentage and used the added outlay for mid-range awards, $40 to $100. There were enough of them to generate a “buzz,” according to former Washington Post columnist David Segal. Mr. O’Brien doubled the number of retail outlets, mainly by allowing retailers to pay for tickets after they had been sold rather than in advance.
Mr. O’Brien also began “scratch ticket” promotions, including entertainment themes and holiday themes. Those changes attracted much more gambling. Ticket sales grew from $54 million in 1980 to $1.6 billion in 1995. “Scratch ticket” sales have now reached around $3 billion a year–more than two-thirds of state lottery revenue–although growth slowed during the past decade.
Mr. Crane and his successors as treasurer focus almost entirely on the “top line” of gambling: the state’s net income, sales revenue less direct expenses. They fail to weigh the hidden costs–personal, social and financial–from gambling addiction. Those include heavy impacts from family disruption and increased crime, as well as acute medical care, mental health services, substance abuse services, unemployment insurance, child protective services, domestic abuse services, public safety and prisons.
Profs. Earl L. Grinols (U. Illinois) and David B. Mustard (U. Georgia), well known as experts on social economics of gambling, have shown that hidden costs from gambling addiction are often at least three times the total benefits realized by states from gambling. When a state sponsors more gambling than it takes to suppress criminal gangs, the state loses rather than gains. Huge hidden costs paid by residents for increases in gambling absorb much more than the employment and government income provided by gambling operators.
Casino promoters tout job gains, but those can easily be outweighed by hidden job losses. As gamblers divert funds that would have been spent on ordinary goods and services into relatively high casino profits, ordinary businesses cut staffing or fail to grow it. The higher the profit margin of a casino becomes–often through monopoly licensing–the more likely the overall effect of the casino will be to reduce rather than increase total employment in its market area.
Flush from the “success” with the first popular modern state lottery, in 1977 New Jersey authorized casino gambling in Atlantic City. Since the nineteenth century, that had been a domestic industry limited to Nevada. Within Nevada, gambling addiction and its precursor, so-called “problem gambling,” were somehow tolerated as burdens borne to support the state’s unique industry. New Jersey provided a new lure into gambling for the far more populous states of the Northeast.
Casino gambling is the most intensive form of gambling now allowed in the U.S. and has the most potential to stimulate addiction, although so-called “gaming parlors” with slot machines and the newer video machines are also highly hazardous. As the Massachusetts development of “scratch tickets” shows, gambling promoters usually see themselves as business people rather than moral lepers. Like marketers of tobacco, they scheme and labor over ways to attract people into habits likely to harm them. Despite some pretentions, they are clearly unconcerned.
Gambling addiction is a major financial advantage to casino operators. As Prof. Grinols showed in a book published in 2004, around half of casino-gambling revenue typically comes from addicts and “problem gamblers.” Without that income it would likely be unprofitable to run luxurious casinos. Experience has shown that fairly plain state lotteries are enough to choke off gambling revenues from flowing to criminal gangs. There has been absolutely no valid social reason to allow gambling casinos.
Facts and reasoning about casino gambling appear to mean little or nothing to many of this year’s candidates for Massachusetts state offices. Consider those running for governor. The only vocal opposition to casino gambling comes from Dr. Donald Berwick, originally a pediatrician in family care and now a professor at Harvard Medical School–considered at best a long shot.
Among the other Democrats, Martha Coakley, now the attorney general, personally blocked from this fall’s election ballots an initiative to repeal the state’s casino law. She is being challenged in the state’s Supreme Judicial Court. Like his predecessors since Mr. Crane, Steven Grossman, now the state treasurer, has become a gambling promoter. He sounds oblivious to huge social costs caused by increasing state income from gambling.
Republicans are not encouraging. Charles D. Baker, Jr., former head of Harvard Pilgrim Health Care, looks likely to become the nominee. He says maybe Massachusetts should allow only one casino rather than three. Some other candidates have kept quiet on the casino gambling issue. However, Democrats Juliette Kayyem and Joe Avellone and Independents Evan Falchuk and Jeffrey McCormick are on record as supporting casino gambling.
Democrats seeking to replace Martha Coakley as attorney general differ on casino gambling. Warren Tolman, a former state senator from Watertown who sought the Democratic nomination for governor in 2002, is on record as supporting casino gambling. Maura Healey, a former assistant attorney general supervising consumer protection, fair labor, ratepayer advocacy, environmental protection, health care, insurance and financial services, civil rights and antitrust, opposes casino gambling and has been making her opposition to casino gambling a campaign issue.
– Craig Bolon, Brookline, MA, May 9, 2014
Edmund Mahony, [Former, jailed New England Mob boss Raymond "Junior"] Patriarca pleads guilty but denies Mafia tie, Hartford Courant, December 4, 1991
Dong Kwang Ahn and Elizabeth Cardona, Massachusetts State Lottery revenue distribution, Interoffice memorandum to Massachusetts Gov. Deval Patrick, May 10, 2010
“Currently the Massachusetts State Lottery is regressive because poor constituents spend a higher proportion of their income on lottery compared to higher income consumers….”
David Segal, Gambling’s man, Washington Post, February 15, 2005
Earl L. Grinols, III, and David B. Mustard, Business profitability versus social profitability: evaluating the social contributions of industries with externalities and the case of the casino industry, Managerial and Decision Economics 22(3):143-162, 2001
Earl L. Grinols, III, Gambling in America: Costs and Benefits, Cambridge University Press, 2004 (in PB, 2009) See pp. 175-176 (in PB) summarizing social benefits versus social costs.
Shirley Leung, Gubernatorial candidates reflect on casino law, Boston Globe, December 4, 2013
Carolyn Robbins, Candidates Maura Healey and Warren Tolman differ on state casino law, Springfield Republican, April 16, 2014