New casinos: not real economic development

The expensive battle between the Potawatomi and Menominee tribes over permission to build a giant new casino in Kenosha, Wisconsin has unending twists, turns, pros and cons, but there is one thing it isn’t.

It isn’t economic development, even though proponents of gaming will make the case that casinos create jobs.

Any economist worth his or her salt will point out that the huge revenues piled up at casinos are mostly “transfer payments,” generally from low to middle income people to the tribes.

The tribes would say the entertainment aspect of gambling constitutes value, but most of us would see no “value added” to society in pulling the handle of a slot machine or throwing dice.

Put another way, if the money weren’t lost by patrons in a casino, it would be spent elsewhere in the economy – for food, medical care or other “value adding” necessities. The money not gambled away would support jobs in other parts of the economy.

The transfer of payments certainly has had the positive impact of eliminating poverty for the tribes lucky enough to win a casino franchise. Each of the 1400 members of the Potawatomi receives annual payment of $70,000.

That prosperity, of course, comes at the expense of the gambling losers.

And there is a downside to the value proposition presented by gambling, the negative financial fallouts to individuals and families from gambling addictions.
On the positive side of the value ledger, the state treasury siphons off an assessment on casino revenues, but less than 10%.

For millions of obvious reasons, the Menominees want in on the casino action. Gov. Walker holds the veto power over their dreams, so it will be interesting, to say the least, how much they pony up for his 2014 reelection campaign and whether he takes their contributions. He could set himself above the gambling fray by rejecting tribal donations.

Economists on his team should point out that another casino would not help him reach his goal of 250,000 additional jobs by the end of his first term in 2014. Any new casino jobs will be offset by job losses elsewhere in the Wisconsin economy. (The only exception to that reality is gambling money pulled in from other states.)

Walker has already set a high hurdle for his sign-off – a green light on the new off-reservation casino by each of the 11 tribes in Wisconsin.

The Potawatomi contributed almost $1.5 million to Gov. Jim Doyle and other Democrats in the 2002 and 2006 election campaigns. After his election, Doyle did an immediate about-face and allowed the tribe to expand its operations. He had opposed more gambling in the state in his career to that point.’

If the 11 tribes do cut a deal to spread the Kenosha money around, and they succeed in greasing the political skids again like they did in the last decade, the taxpayers should get a bigger slice of the take.

At 20% of casino revenues, there would be new state money to invest in “value added” services like education, infrastructure and real economic development.

The tribes have done charitable work, but relatively little real economic development with their gambling windfalls.

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