MEDILL NEWS SERVICE
Gambling's Rise from Las Vegas Isolation to Revenue Source for 48 States
By DOUG CANTOR and MARTA HUMMEL
MEDILL NEWS SERVICE

WASHINGTON -- Murderer, rapist, racketeer and ladies man, Benjamin "Bugsy" Siegel helped turn the desert wasteland of Nevada into a gambling empire and a bastion of organized crime in the years before World War II.

And for many Americans, the charming, blue-eyed sociopath came to symbolize what gambling was all about-crooked games, smoke-filled casinos, loose women, violence and corruption. In a word: sin.

Fast-forward to Washington and a meeting with the new face of gambling in America. In walks Frank J. Fahrenkopf Jr., a dapper 64-year-old lawyer with carefully coifed graying hair, stylish red suspenders and cufflinks bearing the White House seal. A former Republican Party national chairman and confidante of presidents, he exudes a manner that fairly shouts: "I'm an insider."

Indeed he is-and so is the industry he represents.

As head of the American Gaming Association, Fahrenkopf is spokesman and chief lobbyist for the 432 commercial casinos in Nevada and 10 other states. He is also a symbol of the transformation of gambling into a $65.7 billion-a-year industry that extends from coast to coast, enjoys widespread government support, and projects an image that is closer to Disneyland than Bugsy Siegel.

Today, some form of legalized gambling exists in 48 states, ranging from state-sponsored lotteries to Indian casinos and the increasingly popular racinos-casinos installed at racetracks. And almost 85 percent of Americans say gambling is "an acceptable entertainment option for themselves or others," according to a poll of 1,001 people conducted for the gaming association this spring by Peter D. Hart Research Associates and The Luntz Research Companies.

Even such a conservative avatar of virtue as Bill Bennett, former secretary of education and author of "The Book of Virtue," said in a 2003 MSNBC interview, "Theologically, I don't regard gambling - as wrong itself."

Bennett, who vowed to quit gambling after it was disclosed he had lost millions of dollars playing the slots, added that it's only a problem "when you do too much of something, as I was doing at that high-level amount. Then you should stop."

In both political and economic terms, gambling has become a force to be reckoned with.

In one sign of its clout and acceptance, the gambling industry has increased its contributions to political campaigns tenfold since 1992 to $14.2 million in the 2001-02 election cycle.

And the economic allure of jobs and government tax revenues has overwhelmed opponents of gambling at almost every turn.

Government Steps Up To The Table

In 1997, spurred by the explosion of commercial casinos, Indian casinos, state lotteries and other forms of gambling, Congress created the bipartisan National Gambling Impact Study Commission and gave it a $5 million budget to study legalized gambling and the social problems growing in its shadows.

Two years later a comprehensive commission report raised warning flags about a host of issues, including the personal and societal impact of compulsive gambling, rising demands for government services, uneven government supervision, and the tendency of lotteries and other forms of so-called "convenience" wagering to prey on the poor.

The commission called for a moratorium on the expansion of legalized gambling to permit more research into its consequences. But four years later the report has been largely ignored and the expansion of gambling has continued unabated.

The report did conclude that casinos at resort locations offer certain economic advantages, such as job creation, a fact that Fahrenkopf cites in speeches and the association's literature.

But John W. Wilhelm, a commission member and president of the Hotel Employees and Restaurant Employees Union, said, "most jurisdictions that have considered gambling have paid little attention to what [the report] says." Too frequently, he said, state and local governments usher in convenience gambling-installing slot machines or other electronic gambling devices in bars and restaurants, for example-rather than establishing resort-style gambling that creates more jobs and is less prone to problem gambling.

"The most serious consequences when we look back on it 20 years from now will be ignoring the commission's recommendation on the destination resort issue," he said.

Fahrenkopf, in an interview with Medill News Service, acknowledged some opposition to gambling persists, but talked expansively about how perceptions have changed.

"While there still are some people who disapprove of gambling on moral grounds, when you have government actually running gambling [state lotteries], it's a sign in more and more states that some of the stigma - in this country is going by the boards," he said.

In addition to the commercial casinos, the U.S. already has Indian casinos in 29 states, lotteries in 39 states and the District of Columbia, and horse racing and/or dog racing in 43 states.

Although churches once led opposition to gambling, today many of them take part, which Fahrenkopf points out. "You have charitable gambling in 45 states," he says, smiling. "And I'm not only talking about the bingo parlor in the basement of the Catholic Church."

From 1910 to 1931 gambling was illegal everywhere in the United States. Desperate to offset the impact of the Great Depression, Nevada broke the line and became the first state to legalize gambling. For three decades Las Vegas and its sister cities stood alone as meccas for legal gambling. Then in 1963, New Hampshire-a state famous for its low taxes-authorized the first modern state lottery.

That burst the dam. Since then, lotteries, casinos and other forms of gambling have spread so far and so fast that now only Utah and Hawaii are free of legal gambling.

Society's acceptance of gambling today is a far cry from 1938, when a Gallup survey showed 51 percent of Americans thought, "government lotteries would produce an unwholesome gambling spirit in this country." And from 1951, when another Gallup poll showed 55 percent of Americans opposed legalizing "such forms of gambling as betting on races, lotteries, numbers - throughout the country."

You Say Gaming, I Say Gambling

The spread of public acceptance may have been eased by a subtle shift in semantics.

The use of the term "gaming" has been part of the gambling industry's public relations drive to shake off what Fahrenkopf calls "the myths and stereotypes" still associated with gambling in some quarters. The lobbying arms for the commercial casino and Indian casino industries both use "gaming" instead of "gambling."

"There is a real significance to the word gaming," says the Rev. Richard McGowan, economics professor at Boston College and former member of the Massachusetts and Rhode Island gambling commissions. "Most Americans think gambling is bad. But gaming is fine. When you think of a game you think baseball or football."

Christian groups agree with McGowan that the switch to "gaming" tends to remove the stigma from gambling. "ëGaming' takes the weight off. It no longer seems bad. Let's go play monopoly, let's go play blackjack, poker," said Chad Hills, a gambling analyst at Focus on the Family, a faith-based group that opposes gambling.

Casino representatives insist the word choice reflects historical tradition. "If it's skill, it's gaming. If it's just a game of chances, gambling. I think the better word would be wagering. It's all wagering, whether or not it's gambling or gaming," Fahrenkopf said.

Since the average casino dedicates 60 percent-at a minimum-of floor space to slots and casinos outside of Las Vegas derive 75 to 90 percent of their revenue from them, most casinos should be called "gambling" houses, according to William Eadington, director of the Institute of Gambling and Commercial Gaming at the University of Nevada.

Nearly half of all Americans played the lottery in 2002 and more than a quarter visited casinos, according to the Hart/Luntz poll for the gaming association. The poll also showed that about a quarter of Americans gambled on sports, 7 percent on horse or dog racing, and 1 percent on Internet betting.

And millions go to hotspots like Las Vegas and Connecticut's Foxwoods Indian casino for reasons besides gambling, like food and shows-and business. Las Vegas offers the most convention space of any city in the United States. And for many people, it is a family destination, akin to Disneyworld.

For all the benefits of resort-style gambling, the impact study commission did cite evidence of the ill effects the anti-gambling faction has complained about for years. Recent estimates put the rate of lifetime pathological gambling at between .8 and 1.6 percent of the adult population, meaning that more than 3 million people may fit in this category. And that number is relatively small when compared with the problem and "at risk" categories.

Given the high prevalence of drug and alcohol addictions among people with gambling habits, it is difficult to isolate the relationship between gambling and social problems such as divorce and spousal abuse. Despite numerous studies on the subject, the findings remain remarkably inconsistent.

But some of the economic effects on addicted gamblers and their families are clear, credit card theft, escalating debt, and lost productivity of workers with gambling problems. While the problems persist, it is tough to attach hard numbers to them without the additional research the commission called for but has not happened.

The commission did find that the crime rate in cities with legalized gambling generally was similar to areas without it. But the commission never looked at illegal gambling, which industry executives say means it never got to the root causes of social ills.

As much as above-board casinos, racinos and lotteries continue to spring up, there remains a flourishing industry not sanctioned by law. This is especially the case with sports books, which are legal only in Nevada.

"In Nevada, about $2 billion is bet legally a year," estimates Chad Millman, author of "The Odds: One Season, Three Gamblers, and the Death of Their Las Vegas." "And $50 billion to $100 billion is bet nationwide [through] office pools and bookies."

And while the Bugsy Siegels of the world may have been replaced in the gambling industry by corporate executives, they are still lurking in the shadowy realm of back-room casinos and illicit bookmaking operations.

America's experiment with prohibition provides a good parallel for illegal gambling, says John Wilhelm, the union leader and former commission member.

"When you have something that people are going to do in large numbers and you make it illegal, organized crime is going to get a piece of it."

Economy Trumps All

With 46 states slogging through budget crises, halting expansion of legal gambling-regardless of social costs-seems as likely as members of Congress voting to lower their salaries. Tennessee just passed a law establishing a state lottery, and 11 states have been considering turning racetracks into "racinos" with slot machines.

In 2002, casinos paid $4 billion in tax revenues to state and local municipalities, $400 million more than in 2001. Lotteries made $13.7 billion for the states in 2002, up 17 percent from 2001, according to the North American Association of State & Provincial Lotteries.

Connecticut receives 25 percent of the slot machine revenue from its two Indian casinos, Foxwoods and Mohegan Sun. That amounted to $387 million in 2003, up from $30 million a decade earlier.

And in South Dakota, nearly 15 percent of the entire state budget comes from gambling taxes.

Some states have become so dependent on gambling taxes that they are protective of an industry politicians once shunned. "[In] what other industry," asks Boston College's McGowan, "does the state care whether your business has been successful or not?"

Return to America: Taking a Chance on Gambling