Hail to the Bookie in Chief

Is government addicted to gambling?

by Patrick J. Shanahan
01/16/05

Among the most worrisome trends in current American culture is the seeming blithe acceptance of government involvement in the gambling industry. The collective attitude we used to have was, in my opinion, a fine example of highly effective "in the closet" cultural disdain. We heard routinely from the pulpits and form the keepers of the culture how bad and corrosive gambling was. We would not permit - Nevada excepted - government approval of gambling. Yet we generally turned a blind eye to its actual practice.

Gambling is one of those things that define the human experience. It is a universal attribute, all humans everywhere get a thrill form games of chance. It can be as harmless a diversion as a Saturday night nickel-dime-quarter poker game, or as high stakes and brutal as million dollar bets on sporting events. At the same time there is no doubt that it is addictive and deleterious to many. A certain percentage of people will, when exposed to gambling, allow it to ruin their lives and the lives of those around them. Thus it has always been one of those things that a libertarian-oriented conservative views with a grain of salt. We probably ought not to be encouraging it, but neither should we devote a lot of energy to stamping it out. It will be with us always.

That was until government discovered the therapeutic effects of gambling on the public budget. First with lotteries, then with casinos, revenue skimmed off the top of gambling enterprises became Manna for both liberals and putative conservatives. For liberals it was a promise of painless expansion of the welfare state, which since the Reagan years had seemed to hit the limit of public tolerance for taxation. For fiscal conservatives it was a way to balance budgets and dispense with the icky yet inevitable pork barrel spending without hurting Joe Q. Taxpayer. Often, the benefits from gambling enterprises were earmarked for pet causes such as K-12 education or the environmental initiatives. This sure seemed to be win-win all around. Who could complain?

Well, for starters it is worth bearing in mind that precisely the same role currently being played by government is the role that used to be - and still to a lesser degree is - played by the Mafia. That alone ought to give one pause.

Whenever money flows from person A to person B with no apparent damage, it means one of two things is happening. It is either a free market exchange in which individuals voluntarily exchange things of value, or it is a coercive exchange in which the costs of the exchange are hidden. Gambling between consenting adults represents the first. When a gambler makes the choice - however sad to some of us watching - that the money in his hand is of less value to him than the thrill of chance, he is making a voluntary choice in his own perceived best interest.

Get government involved in the process and the free market is inevitably warped, and indirect/hidden costs are imposed. When governments begin to run lotteries, they are making a deliberate decision to tax the desperate. Knowing that a certain subset of the population will become more or less addicted to the process, they deliberately set up a product and a process designed to bleed the suckers dry. Then they cynically put flyers inconvenience stores advertising help for gambling addiction. Because the government creates a monopoly - as only government can - they get to set the rules, the terms of use, and the odds with absolutely no competition. It is as close to a rigged game as you could get. The money that flows looks "free," but it represents money that otherwise would have been put to use for myriad purposes in the private sector in accordance with free market principles. Virtually every penny coming to government from lotteries represent an "opportunity cost" - an opportunity to do something else with that money that is now lost.

Again, it is worthwhile to remember that prior to 1980 or so, exactly the sort of behavior the government is engaged in with lotteries would have been the sort of criminal behavior that would get a private citizen or corporation thrown in jail everywhere except Nevada.

Not content with the revenue from rigged lotteries, the states began to take advantage of a legal loophole which permitted Indian exemption from gambling laws. Faced with the additional tax revenue and political contribution potential from casino gambling, states began to fall all over themselves to promote casino gambling. What began as true "reservation gambling" became "riverboat gambling". Because many Indian reservations are far away from the centers of population, the definition of "Indian" and "reservation" became more and more flexible.

We have reached the point in my home state of Minnesota where our - supposedly conservative - Governor Pawlenty is trying to find ways to get Northern Minnesota tribes to open casinos in the Twin Cities to gin up some revenue. There has even been talk of a state operated casino. Why mess with the middleman, eh?

I am not the Tory-type of conservative (a la George Will) who believes that government has an active obligation to promote virtue among the citizenry. Doing that always requires some level of tyranny. But it remains true that in order to survive, republican democracies must generally value virtue. When we stop doing this, little will lie ahead but corruption and decline.

A state that promotes, profits from and is actively involved with gambling actively fights against virtue. It sends the message that virtue is for suckers. It preys on the weak and the desperate as a matter of policy. There is no substantive difference between the government's involvement in gambling and it getting involved in those two other staples of organized crime: prostitution and drug peddling.

There is no conservative argument that I am aware of that justifies government involvement in gambling. I would love to hear of it if you think you have one. So it's about time we started putting up a fight when our opponents or - gasp - our friends, talk about expanding this corruption even further.