Cuomo’s Casinos: Bad Politics, Bad Economics

cuomoGovernor Andrew Cuomo has put himself in a no-win position. He has embraced the clamor for upstate casinos and the promise of the slot machine as a means of economic development in the state’s depressed regions. Casinos played a prominent role in the development plan he unveiled in his otherwise outstanding 2013 State of the State address. Compounding that error, Cuomo recently declared that he wants to keep politics out of the process of deciding where the casinos will go.

If the plan to sprinkle casinos across upstate New York proceeds, it will be a black mark on Cuomo’s resume. Casinos represent only a mirage of growth. And there is absolutely no way politics can—or should—be removed from the planning process.

According to a report by The Associated Press, Cuomo wants to build four casinos upstate. These casinos, to be placed on non-Indian land, would purportedly improve local economies in two main ways. First, they would provide a boost in construction and staffing jobs. Second, they would draw visitors from New York City and Long Island, where the economy is stronger, and from where gamblers currently travel to Las Vegas, Atlantic City, or Connecticut’s Indian-run Foxwoods and Mohegan Sun.

This is not a sufficient reason to build. As picturesque as New York State is, scattering casinos upstate will not draw visitors the way the glittering lights, attractions, and decadence of Vegas and Atlantic City do. Furthermore, New York State already has four Indian-run casinos upstate, the most well known probably being Turning Stone. Who is to say that these new casinos will tap into business that the current developments have been missing? It is also quite possible that the new casinos would simply divert visitors from existing ones.

Many academic studies have examined the regional economic effects of building casinos. Some have found that itcan be a successful development strategy. However, caveats abound. It is rare that the positive effects of a casino reach the governments or workers of the local area, instead leaking to other counties. One 2011 study by Professor Douglas Walker of the College of Charleston finds that casinos are a net drain on state revenues to the tune of $90 million annually. A 2012 Lexington (Kentucky) Herald-Leader report on casinos-as-stimulants summarized academic research with other discouraging conclusions: “…casinos cannibalize other forms of spending from which the states take a cut, from lottery tickets to gas and consumer goods.”

What most economic studies overlook, however, is the social cost of casinos. And though many policymakers may care more for the state’s fiscal bottom line, there are serious detrimental effects from importing gambling. For example, a standard estimate projects social costs of $19,000 for every pathological gambler. Though a full cost-benefit comparison may be helpful, a 2009 report detailed thehurdles to such an analysis, such as myriad counterfactuals, unreliable survey data, and lack of clarity or consistency in public finance. More importantly, these social cost studies help perpetuate exactly the type of dollar-obsessed thinking that leads policymakers to brush off the potential negative effects of casinos.

Even more galling than pinning the hope of struggling regions on casinos is the notion that the planning process should occur outside state politics. According to the Albany Times-Union, the governor wants the planning to happen among a commission of his selection, shielded from the influence of state politics. How exactly this commission will be shielded is anyone’s guess. The commission will include individuals who live in various locations in the state. A purely objective analysis of casino development is simply impossible. When that becomes clear, it may be too late for the governor to realize (or publicly admit) his mistake.

Cuomo recently did away with the laughably corrupt New York Racing Authority by initiating a state takeover of the agency. NYRA managed the state’s horse racing facilities as if from the script of a predictable gangster movie. It is amazing that Cuomo believes an independent gaming commission will not be similarly infected.

In 2011, Cuomo bemoaned the gambling culture of New York State. His solution—to make casino gambling a legal (read: taxable) business—is not the answer.

Note: this article appeared in The Wagner Review on February 10, 2013.

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