Fool's gold in the Golden State

Why is the California government promoting gambling? Why are we being asked by the Arnold to support four ballot measures that would authorize the biggest expansion of gambling in American history?

Tomorrow Californians will vote on four measures which , if passed, will authorize four Indian tribes to open casinos with more slot machines than Las Vegas.

It's no longer news that gambling is bad stuff. Gambling is fool's gold, both for punters and for the governments that promote the vice. Gambling is a tax on people who cannot do math. Gambling creates losers... no winners. Gambling spurs social ills of every type, including compulsive behavior, bankruptcy, and dependency. It's probable that the price of expanded gaming will be absorbed by the taxpayers fo the state of California.

How did we get here?

When I was a kid, the government put a lot of effort into preventing gambling. The general idea was that gambling was bad. Promoting gambling was something that bad people did.

In Cleveland, where i grew up in the 1970s, the local authorities waged war on criminal gangs that ran the local numbers racket. Pressure from the government spurred a violent gang war that lasted throughout my years at St Jerome's grade school. The parents of my classmates were involved: some worked for the police force, and some were associated with the Irish mob that ran the numbers racket. The Irish gang came to an ugly end when mob boss Shondor Burns was blown through the roof of his Lincoln Continental and, a few months later, Danny Green, the father of one of my schoolmates, was blown up in his dentist's parking lot by a rival gang.

Scenes like this played out across America in the 70s as the government clamped down on rampant street lotteries and racketeering. Internicine gang violence smothered the numbers racket even as the government introduced a legal alternative. By the late 1970s the state governments introduced official state lotteries in an attempt to siphon cash away from the criminals. The government succeeded in wresting control of the gambling monopoly, but proved unable to resist the lure of relentless expansion.

One by one throughout the 1980s, state governments set aside morals and propriety in order to cash in on the lottery boom. It was easy money, impossible to ignore, way more fun and popular than taxes. Lotteries funded road improvements, school programs and arts programs and made it possible for politicians to sidestep the challenge of bearing bad news to voters: they could authorize new spending and giveaways without raising taxes. By the early 1990s most state governments were addicted to lotteries, cranking out ever more enhanced versions like PowerBall.

It was only a matter of time before states began to eye Nevada's ever-expanding gambling revenue with a greedy eye. First New Jersey authorized casinos in Atlantic City, reversing decades of crimefighting effort against the Mafia. Then the states along the Mississippi River authorized riverboat gambling. The economic effects were unimpressive: higher unemployment, plus a rash of insolvencies, addictions and a rise in crime.

The introduction of "video lottery terminals" in states like South Carolina put one-armed bandits in local convenience stores and bars. In practice, such devices are indistiguishable from a Vegas-style slot machine. And the odds of winning are comparably dim.

And of course there is the domino effect. Every state that legalizes gambling sees an influx of dollars from neighboring states. This loss of tax revenue raises the pressure on nearby states to respond by authorizing casinos on their own turf. And so state-sponsored gambling expands ceaselessly.

By the late 1990s, when I was developing online games at Sony, we noticed a surge in online gambling revenue. American punters were placing bets in online casinos in the Caribbean islands. These fly-by-night virtual casinos were extremely dodgy. They had insufficient reserves, no player protection and the island governments provided no legal recourse for bilked gamblers. American politicians, funded by frightened Vegas gambling factories, raised a big fuss about offshore casinos, but even then it was clear that the state governments would eventually decide to extend their legal lottery franchises to the online world. I was acquainted with some of the pioneers in online gambling: they assured me that the US state governments would adopt online gaming as soon as the economy hit a speedbump. Like clockwork, just as predicted, that process is well advanced today with online ticket sales and virtual games provided by state lottery commissions.

Meanwhile native American tribes discovered a hitherto unknown right to operate casinos on their sovereign tribal soil. Since 2000, tribal gaming has emerged as an $8 billion business in California. And the state government encourages this growth, since Sacramento gets a slice of every dollar lost in the casinos. Free money! music to a politician's ears.

Perverse economics led to perverse political alliances.

So here in 2008 in California, we find some rather surprising political bedfellows on both sides of the debate about the future of gambling in this state. Over $100 million has been spent by both sides of the argument. The state government, facing a massive deficit, is suddenly staunchly in favor of a massively-expanded Indian tribal gaming enterprise. It is hoped by legislators of both parties that guileless Californians en route to Vegas will be lured by the glittering towers of the Morongo and other tribes, diverting disposable income into those venues instead of faraway Vegas casinos. A (small) percentage of the gambling dollars lost in those towers will be sent to Sacramento to pay for services that California taxpayers seem otherwise unwilling to fund directly via taxes. The governor has come out relentlessly on TV commercials to urge Californians to support gambling. So suddenly our highest elected state official is now an apologist for a vice that was previously considered a pernicious crime.

Meanwhile, tribal leader Mark Maccarro, who lately has been busy kicking families out of the tribe in order to keep a higher percentage of gambling wealth among the remaining few members, appears nightly on TV commercials surrounded by the children of the tribe to plead for support for Indian causes. The population of the four tribes numbers fewer than 2200 exceptionally wealthy individuals: this group has hired an army of lobbyists to grease the wheels in Sacramento. The tribes have spent $82 million on a relentless TV blitz to drum up voter support.

Their opponents? The massive Vegas casinos and the decrepit California racetracks. It's hard to cast these characters as "good guys" in the saga. They are funding a desperate attempt to defeat the bill not because of its crummy morals but because it will almost certainly siphon dumb money from them to the tribes.

Added to this mix is the general confusion about whether or not this decision should even be placed before the citizens for a vote. The state is obligated by Federal statute to negotiate with the tribes, which means that the result of the referendum may be moot. No matter which way the voting goes, you can rest assured that the legal fireworks will follow in the courts for years to come.

What a mess.

I suppose there is a rich irony in this saga for students of American history who see the tribal Indian as the victim of colonial avarice and expansionist greed, now cashing in on that selfsame greed. After three centuries of broken treaties and shabby treatment, certain native tribes are now enjoying a resurgence based on the cash geyser generated by legalized gaming. But this is a hollow prize indeed, as the wealth is distributed unevenly and many social ills on the reservation go unaddressed. Likewise, social ills of addiction and financial stress spill off the reservation into neighboring communities.

But gambling is, and always has been, a fool's game. There are no winners. Only a tiny percentage of the money lost in a casino is returned to the state government. And money lost in the casino means those sums won't be spent elsewhere in the economy where the government's take (in the form of taxes) is much higher.

I am a big believer in the wisdom of the crowds. Will my faith in common sense be confirmed? It will be interesting to see if the California voters support or defeat this ballot measure. Here's hoping they come to their senses and vote it down.

RT