Monday, July 17, 2006

Can Iowa Gamble Itself Into Economic Prosperity?

From this Monday's (July 17) weekly Monday update to the Iowa Rain Forest Web site (

Gambling was a big story, as Iowa prepares to gamble itself into prosperity.

Remember Steve Martin's character in the movie "The Jerk" (Navin Johnson)? He's guessing peoples' weight at the fair, but so poorly that the boss has to explain to him how much money he's losing, giving away all those prizes. Finally, the character gets it, and exclaims, "Oh, I get it; it's a profit deal."

Well, gambling is a profit deal. And last week we learned that Iowans leave $1.15 billion at Iowa's casinos, not counting the three additional casinos run by Native American tribes. William Petroski, "Gamblers Left Behind $1.15 Billion at Casinos; Average Patron Lost $57 During Past 12 Months," Des Moines Register, July 12, 2006. I don't have the numbers, so this is from memory, but my recollection is that some slot machines return as much as 95 percent or more of what's dropped in them. But let's be real conservative and say that, on average, the payback is only 80 percent. (In other words, if you were to start with $100, play the slot machines, keep all your winnings separate (that is, not put them back in the slot machines), once your $100 ran out you would, on average, be able to walk home with $80 in your pocket.)

This would mean that Iowans had bet (as distinguished from "lost") $5.75 billion (or more, counting the other three casinos) during the course of a year. (And that's just at casinos; it doesn't include online gambling, private poker and bingo games, the lottery, and so forth.) For those concerned about the "tax burden" our State imposes, it should be noted that even the smaller $5.75 billion figure significantly exceeds all the State's General Fund Expenditures, combined, for FY 2003. Apparently Iowans agree that, when it comes to gambling, "too much is not enough." More casinos have, or will soon open -- including the one in Riverside. Although, at this point, the powers that be appear willing to hold up for a little before authorizing more. William Petroski, "New Licenses Likely on Hold 'till '08," Des Moines Register, July 14, 2006.

Can Iowa gamble itself into economic prosperty? Don't bet on it. Gambling doesn't manufacture or grow anything we can sell on the world market. Moreover, a good deal of that $1.15 billion -- as Ross Perot used to say -- just makes a giant sucking sound as it leaves the state for Nevada or, in the case of Riverside, South Carolina. Are we bringing in gamblers from out of state? To those casinos on or near the border, some, yes. But most gamblers go to the nearest casino; gambling increases in communities that find themselves near a new casino; few travel more than 50-100 miles. Mostly (I would guess, without having access to the data) these are Iowans who are imposing this equivalent of a "tax" upon themselves.

I won't take this occasion to expand upon the negative economic (and other) impact of gamblng: the increased cost to taxpayers of the necessary additional law enforcement, increased crime, domestic violence, family financial hardship -- up to and including the increase in bankruptcies -- as well as all the infrastructure costs (such as water and sewer), and cash grants and tax forgiveness.

By contrast, Dick Doak believes "it is possible for a community in Iowa to make it without having a casino," Richard Doak, "Muscatine Remaking Itself," Des Moines Register, July 16, 2006.

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