The Social Impact of Legalized Gambling - Part I

vice (vis) n. 1. Evil, wickedness, or great immorality. 2. An evil or immoral practice or habit. 3. A personal failing or shortcoming. 4. A flaw or imperfection. A defect.

- The American Heritage Dictionary

Is gambling a vice? Your government seems to think so. Two years ago this month, the National Gambling Impact Study Commission (NGISC) released the most comprehensive study ever conducted on the subject of legalized gambling. In 1997, the NGISC had been established to conduct an impartial examination of gambling activities inside the United States. Its final report, released two years later, intended to document the social and economic impacts of gambling on American society. But instead of turning out a report that could be used to improve the existing relationships between levels of government, the gambling industry, and citizens, the Commission resorted to the use of "inflammatory rhetoric, factual errors, and (made) several recommendations that do not conform with the evidence presented to the Commission," according to Frank J. Fahrenkopf Jr., president and CEO of the American Gaming Association.

The NGISC's most astonishing recommendation (of many) was a proposed "moratorium" on the expansion of legalized gambling in the United States. Think about what this means. At present, the federal government is explicitly opposed to the growth of an industry that employs more than one million people – and benefits another four million Americans in related businesses. Can you imagine the feds taking a similar position against any other industry? Think of it this way: Would the government ever recommend that the motion picture industry stop making movies? Or, that the aviation industry stop manufacturing airplanes? Or, tell Disney to stop building amusement parks? Never before in history has the federal government made such a bold and discriminatory statement that it opposes the expansion of an entire industry.

Fittingly, the NGISC's final report was ignored when it was released, and has since been forgotten. The report is now piled on a proverbial scrap heap of other worthless federal documents that litter government warehouses and keep millions of federal bureaucrats employed (it's too bad there's no commission that would propose a moratorium on the growth of government). Strike another blow for Uncle Sam – another government study, another $7 million of your tax dollars down the drain. But that's not the end of it.

Despite recent studies showing that an overwhelming number of Americans favor gambling in various forms, government opposition to gambling continues on many levels. Federal authorities and some states are trying to institute a ban on Internet gambling. Authorities in some areas are even prosecuting gamblers. In one instance, Honolulu police tried to arrest an Internet gambler who won more than $176,000 at an online casino. Since casino gambling is illegal in Hawaii, the man faces criminal charges if he declares his winnings. Oddly enough, if he does not declare his winnings, he risks prosecution for federal tax evasion by the IRS – talk about a "Catch-22."

There are other examples of our government being totally out of touch with reality. This year, a bill was reintroduced in Congress to outlaw gambling on college sports (S. 718). If passed, the legislation would take away the rights of millions of men and women who place legal bets on collegiate sports in the state of Nevada. Of course, the bill fails to address what it believes is the very real problem of college students betting illegally over the Internet or through campus bookies, which the NCAA acknowledges can be found on almost every college campus. But wait, there's more. Other bills now before Congress seek to levy higher taxation on gambling winnings – which would do irreversible harm to poker and other gambling games of skill. Despite the Bush administration's campaign pledge to "get government out of people's lives," the bottom line is that government is becoming more intrusive of law-abiding citizens' lives when it comes to gambling matters. If that doesn't frighten you and make you angry, it should.

The question is, "Why?" On what grounds does the government object to the expansion of legalized gambling? My view is that anti-gambling forces are terribly misinformed about the often-constructive role that gambling plays in our society. They have been brainwashed by an assault on gambling activities from fearmongers and have been misguided as to the real social and economic impacts of gambling. Critics claim that gambling is a self-destructive vice that does immeasurable harm to society. They cite alleged increases in crime, bankruptcy, compulsive gambling, and other social ills – presumably all caused by gambling expansion. However, the facts simply do not support these assumptions. In fact, most recent studies clearly contradict them.

Since the NGISC was formed and later disbanded, several notable studies have taken place that refute the myriad of myths perpetuated by gambling's worst critics. The time has come to fight these falsehoods with facts. In this column, I shall address the behavioral impacts of legalized gambling. In Part II (which will appear in the next issue), I will examine legalized gambling's economic impact.

Myth No. 1: The expansion of legalized gambling has led to a disproportionate increase in the number of problem gamblers.

Fact: Opponents of gambling argue that the increased availability of gambling, easier access to funds, and expanded hours of operation lead to more addicted gamblers. While this might seem to be a logical assumption, it is not accurate. Consider that the first federal commission on gambling was formed back in the 1970s. Then, it concluded that the number of "compulsive gamblers" was 0.77 percent of the U.S. adult population. Despite gambling's widespread expansion since that time, the estimate from the 1970s is virtually identical to the findings reported by the National Research Council (NRC) of the National Academy of Sciences in 1999. The NRC placed the number of pathological gamblers among the U.S. adult population at less than 1 percent. This caused the NGISC to conclude: "The availability of casinos within driving distance does not appear to affect prevalence rates (of compulsive gambling)." Similar government-sponsored research studies in Minnesota, South Dakota, and Texas all showed statistically stable rates of pathological gambling in those states as well – despite more legalized gambling. This clearly refutes the notion that "the more people gamble, the more likely they are to become pathological gamblers." Finally, a report issued by the National Opinion Research Center (NORC) in 1999 found that while considerably more people have gambled at least once in their lives (68 percent in 1975 compared to 86 percent in 1999), the number of people who have gambled in the past year has remained stable (61 percent in 1975 vs. 63 percent in 1999). This demonstrates that while more people are gambling now than before, their frequency of gambling activities remains about the same.

Myth No. 2: Ten percent to 15 percent of all gamblers have a gambling problem.

Fact: Gambling's critics tend to grossly overstate the number of compulsive gamblers. The most recent (impartial) estimate is that approximately 1 percent of the U.S. adult population are pathological gamblers (source: NORC). In the same 1999 report cited above, the NGISC reported this figure to be about 0.9 percent. Furthermore, a 1997 study by Harvard Medical School's Division on Addictions estimated the number slightly higher – at 1.29 percent. The Harvard report was a comprehensive analysis of 120 previously conducted independent studies on problem gambling disorders. Based on the three studies, there appears to be a general consensus that approximately 1 percent (or about three million people) of the U.S. adult population can be classified as pathological gamblers. While a serious issue, this is far less than the numbers afflicted with other compulsive disorders, such as drug abuse and alcoholism. This is also a far cry from the numbers alleged by opponents of gambling, which have estimated that as many as 15 percent of gamblers have a compulsive disorder.

Myth No. 3: The majority of gambling revenue comes from addicted gamblers.

Fact: Opponents claim that up to half of gambling revenue comes from problem gamblers. However, the NORC reported that the percentage is much lower – between 5 percent and 15 percent of gaming revenue comes from problem and pathological gamblers. There is no evidence whatsoever – either from independent studies or research organizations – that the percentage of gambling revenue coming from addicted gamblers is anywhere near the numbers suggested by critics.

Myth No. 4: Legalized gambling causes an increase in crime.

Fact: A study funded by the National Institute of Justice found no link between gambling and crime. To determine if a link exists, data was collected from police departments in seven random jurisdictions with gambling. The seven jurisdictions were Biloxi, Mississippi; St. Louis, St. Louis County, and St. Joseph, Missouri; Alton and Peoria, Illinois; and Sioux City, Iowa. Each of these areas introduced casinos in the last decade and has had gambling for at least five years. This time frame allowed comparisons to be made both before and after casinos were in operation. The data revealed that three communities (Sioux City, Peoria, and Biloxi) experienced an increase in crime. In three other jurisdictions (Alton, St. Louis, and St. Louis County), crime decreased significantly. In one city (St. Joseph), there was no change. In summary – it's a push. Other recent studies have found:

• Las Vegas, Nevada, has a lower crime rate and is safer than virtually every other major American tourist venue in terms of per capita crime.

• The crime rate in Atlantic City, New Jersey, has been declining steadily since 1991. An April 2000 report released by the General Accounting Office found "no conclusive evidence on whether or not gambling caused increased social problems in Atlantic City."

• Joliet, Illinois, is enjoying its lowest level of crime in 15 years.

• Crime rates in Baton Rouge, Louisiana, have decreased every year since casino gaming was introduced.

Most studies have found that where crimes have gone up following the introduction of casinos, the increase is not directly attributable to gambling; rather, it is the result of the additional population in these communities. One report stated: "Any place that has a dramatic increase in population due to visitors is going to have an increased chance of experiencing more crime. It doesn't matter if it's Disney World, a new shopping mall, or a casino being introduced into a community." More people equals more crime – regardless of what activities they enjoy.

Myth No. 5: Legalized gambling causes an increase in white-collar crime.

Fact: A recent study titled "Casino Gambling and White-Collar Crime: An Examination of the Evidence" was the most comprehensive examination to date of the impact of casino gambling on white-collar crime. The study, written by Jay Albanese, Ph.D., a professor of criminal justice at Virginia Commonwealth University, found a net decrease in arrests for white-collar crimes in the largest casino markets from 1988 to 1996, based on an analysis of arrest data in these communities obtained from the FBI crime reporting unit. These results were compared to similar-size destinations that do not allow casino gaming, which revealed "no unique white-collar crime impact in casino markets." The findings of the study were based on the examination of several kinds of data, including: (1) trends in embezzlement, forgery, and fraud both before and after the introduction of casino gaming in nine of the largest casino gaming jurisdictions; (2) embezzlement, forgery, and fraud arrest trends in two comparable jurisdictions without casinos; (3) comparison of these city-by-city trends to national trends in embezzlement, forgery, and fraud during the last decade; and other factors. The study not only found no connection between casino gaming and white-collar crime in the largest casino gaming communities, it also found considerable differences compared to national trends. For the crimes of fraud and forgery, casino jurisdictions reported significant decreases in arrests, whereas the nation as a whole experienced considerable increases. Arrests for forgery in casino jurisdictions declined 27 percent from 1988 to 1996, compared to a nationwide increase of 21 percent. Arrests for fraud in casino jurisdictions decreased 12 percent from 1988 to 1996, while increasing nationwide by 25 percent. "This suggests that the presence of casino gambling did not contribute to the national increase in forgery and fraud arrests," the study concluded.

Myth No. 6: Legalized gambling invites more corruption.

Fact: There is no credible evidence to suggest any link between instances of corruption and gambling – beyond marginal instances of corruption that exist in almost every industry. The NGISC report found that the gambling industry is now pretty much like any other industry in terms of its makeup and character. The report stated: "All of the evidence presented to the Commission indicates that effective state regulation, coupled with corporate takeover of much of the industry, has eliminated organized crime from the ownership and operation of casinos." Furthermore, gambling enterprises are the most highly regulated of any industry – another factor in maintaining integrity. Most casino companies are publicly traded and come under the scrutiny of the Securities and Exchange Commission (SEC). More than 1,500 regulators and gaming board members oversee the industry at a total cost of more than $135 million, helping to ensure that only legitimate interests are involved in the casino business.

Myth No. 7: The elderly are most often the victims of legalized gambling.

Fact: According to a poll conducted by Peter D. Hart Research Associates Inc. and The Luntz Research Companies, the majority of senior citizens visit casinos for the "fun and excitement," and cite "socializing" as far more important than gambling in their decision to go to casinos. The report states that seniors – like most average Americans – view casino gambling as a social activity, with more than 90 percent visiting casinos with family, friends, or an organized group. When compared with other casino customers, seniors are more likely to set a budget; 69 percent of senior citizens say they always set a budget before visiting a casino – vs. 62 percent of casino customers overall. More than 90 percent of seniors believe that people should be able to spend their disposable income the way they want, and that gambling is a question of personal freedom. More than 56 percent say that "fun and entertainment" is the primary reason they visit casinos. Furthermore, casino gambling provides indirect benefits to many seniors. In New Jersey, the 8 percent tax paid by Atlantic City casinos on gaming revenue goes into a fund largely dedicated to benefit seniors and the disabled. Since the first casino opened in Atlantic City in 1978, the state has collected $4.2 billion. This money funds a variety of innovative programs benefiting the elderly, including the Pharmaceutical Assistance to the Aged and Disabled program, which provides low-cost prescription drugs to more than 200,000 state residents.

Myth No. 8: Legalized gambling causes an increase in suicides and divorces.

Fact: Critics point out that Nevada has one of the highest suicide rates in the nation, and cite additional data about the rate of divorces in Nevada. But there is no evidence that shows a direct cause-and-effect relationship between the majority of suicides and divorces and gambling. Mark Nichols and B. Grant Stitt, from the University of Nevada, Reno, and David Giacopassi, of the University of Memphis, analyzed the impact that casino gambling has on suicide and divorce rates in eight casino communities. These rates were compared to the rates in noncasino communities. Five matching control communities were selected for each casino community to ensure fair results. The control communities were also selected based on their similarity to the casino communities on 15 demographic, social, and economic variables. Calculating the difference in divorce rates before and after casinos entered communities and comparing the changes to their respective control communities indicated that the rates significantly decreased in four of the eight casino communities. In only one of the comparisons did the divorce rate in the casino community show a significant increase when compared to the control communities. These results suggest that statements proclaiming that casinos increase divorce in a community are not supported by facts. When suicide rates were compared for casino and control communities, the results indicated that they increased more or decreased less in six of the eight casino communities. In the other two comparisons, the suicide rate decreased more in the casino communities than in the control communities. The results, however, reached statistical significance in only three of the eight comparisons, increasing significantly in two cases and decreasing significantly in one case. Based on the findings of the research, it is difficult to generalize about the effect of casino gambling on suicide and divorce. Casino communities tended to experience a greater decrease in divorce than in the control communities, whereas suicide showed the opposite effect. However, in examining both divorce and suicide, a few communities went against the general trend. What is apparent is that attempting to understand how casino gambling affects divorce and suicide in a community is not a simple matter, and the effect of casinos on these phenomena does not lend itself to sweeping generalizations, according to the report.

Note: To read more about the social impact of legalized gambling, visit the website of the American Gaming Association: http://www.americangaming.org/.

Next issue: "The Economic Impact of Legalized Gambling"