Rolling the Dice

Turning welfare mothers into croupiers

By Paban Raj Pandey
Published September 18, 1996 10:43AM (EDT)

Who is going to pay for all those jobs that are supposed to replace "welfare as we know it"? Try America's gambling industry.

Under the new welfare law signed by President Clinton last month, expensive federal programs like Aid to Families with Dependent Children and Supplemental Security Income will be transferred to the states in the form of fixed block grants. The states
will be responsible for keeping the programs afloat, even if the block grants prove inadequate. Chronically short of funds, states will face a tough choice: cut welfare benefits even further or hike taxes.

Enter roulette, blackjack and one-armed bandits. Gambling has long provided cash-strapped states with a means to raise revenue without having to tinker with the tax laws. That explains how legalized gambling has grown into a $40 billion industry in the last two decades. In Nevada, 40 percent of state revenues come from gaming taxes. Today, only Utah and Hawaii do not permit any form of gambling. Since New
Hampshire became the first state to approve a state lottery in 1964, 36
more states have joined the club. Their argument: about 40 percent of the lottery revenue is channeled towards public education, economic development, the general fund, and other state accounts. The bottom line for each and all: revenue enhancement.

Gambling is also an industry that creates jobs. Following the collapse of its oil and gas industry in the early '80s, Louisiana permitted
commercial gaming in 1991. In Mississippi's rural Tunica County, the poorest
in the nation according to the 1980 Census, gambling chips have replaced cotton as the chief cash crop since the state legalized gambling in 1990. Indian
reservations that permit gambling have boomed. For some states, there is another temptation: If California, for example, had commercial casinos instead of just card rooms, the state could be saving billions that Californians spend every year in Nevada casinos.
Despite its economic benefits, there has been a voter backlash against gambling. When Tennessee officials, fed up with Memphis residents gambling in Tunica casinos, tried to legalize gambling, voters rejected the proposition. Attempts to broaden gambling in several states in 1994 and 1995 all failed. Organized
resistance groups have proliferated. Congress is now seeking to create a commission on the economic and social impact of gambling.

However, these recent reversals may be temporary.
Perhaps the most important factor holding back its growth has been the
expansionary cycle that followed the 1990-91 recession -- an expansion
that no economist expects to last forever. As boom follows bust, and
states desperately seek additional sources of revenue, gambling will
again become an enticing option.

Even without a recession, states will be looking for ways to expand job
rolls under the new welfare reform act which requires welfare recipients
to go to work within two years of applying for benefits.

Gambling may not be an ideal way to go about raising revenue or creating
jobs. But don't be surprised if the very same officials who inveighed
against welfare cheaters or the addictive dangers of tobacco are mum on
gambling. They may be eyeing the casino or the lottery as their one safe

Quote of the day

Getting the life

"When they talk about 'keeping it real,' what is the reality they base it on?
What's really real is you got to get down in the dirt and develop a responsibility that
says you can take care of yourself."

-- Abiodun Oyewole, a member of the Last Poets, on gangsta rap and the images portrayed by the late Tupac Shakur and other gangsta rappers. (From "Poet Warns of Rap Anger
Without Pride," in Wednesday's

New York Times

Paban Raj Pandey

Paban Raj Pandey is an economic analyst based in the San Francisco Bay Area.

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