Gambling and Tourism Won't Save the Economy

image: Little Cubs Field--a desperate attempt to generate tourism dollars

The most surprising thing about the recent announcement that one-quarter of the casinos in Atlantic City are shutting down is that anyone is really surprised by it. The article from nj.com I just linked provides the following explanation:

Since 2006, Atlantic City's casino revenue has plunged from a high of $5.2 billion to $2.86 billion last year. It has been beset by competition from Pennsylvania, which has surpassed it as the nation's No. 2 casino market after Nevada, and suffered further losses with additional casinos coming online in New York and Maryland.

Israel Posner, executive director of the Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism at Stockton College, said the resort has been dealing with casino saturation for a while now.

"We know that the oversupply of gaming product is a regional issue, as we're seeing the effects of the pressure all around Atlantic City," he said.

So in other words, when every state and jurisdiction opens a casino to draw out-of-town visitors who'll spend the money that will then replace jobs and tax revenues being lost in other sectors, sooner or later they stop being an advantage for everybody. I'm not really sure just how dumb you have to be not to see that obvious fact, but the article states that economists predicted this inevitable occurrence as if it were some sort of blinding revelation.

This simple truism about gambling can also be applied to tourism in general. Many depressed locales have tried to reinvent themselves as prime tourist destinations, such as Cleveland did by landing the Rock'n'Roll Hall of Fame, handing out hundreds of millions of dollars to billionaire sports team owners for new stadiums and sprucing up its downtown area so visitors would feel safe walking the streets at night. So how did all of the that work out for Cleveland? Well, beyond the downtown's glitzy bright lights it is still almost as big a shit hole as Detroit--the kind of place where just being born there tags you as someone who has no hope of a future even remotely resembling the pie-in-the-sky American Dream.

Even my own hometown of Freeport, Illinois got into the act. Regular readers of this blog will recall that back during the last thoroughly discouraging and depressing presidential election, I wrote several posts about Romney's old pals at Bain Capital shutting down one of the local factories, transferring the jobs to China and having the unmitigated gall to ask the workers there to train their Chinese replacements.

Not coincidentally, Freeport made an effort a few years ago to try and combat the relentless loss of industrial jobs in the town by trying to generate tourism. Now, I can tell you from having spent the first two decades of my life there that a little rust belt city entirely surrounded by nothing much except cornfields has very little to recommend it as a tourist attraction. 156 years ago, one of the famous (assuming you know your American history) Lincoln-Douglas debates took place there. Nearly a quarter of a century later, a mentally unhinged Freeporter assassinated the President of the United States, but that probably isn't the sort of thing the local Chamber of Commerce is really interested in playing up. Since then? Um...I've got nothing.

So what did they finally decide to do to bring in hordes of visitors and their loose dollars? They, I shit you not, built a miniature replica of Wrigley Field. Never mind that the REAL Wrigley Field is only about a two hour drive away. Even sadder is how the website describes Freeport: "Freeport, Illinois, A Scenic And Historic Section Of Northwest Illinois Between Chicago And Galena." Because that's all Freeport really has going for it these days: history. And as I've pointed out above, there ain't really all that much of it.

Obviously, Little Cubs Field, as it is called, hasn't done much to save Freeport's economy, much as Atlantic City's casinos have ultimately proven a failure in lifting that unfortunate burg out of the postindustrial age mire. Just a couple of weeks ago my father, who was once employed by the local Goodyear factory, told me that the plant is cutting its work force again, and will be down to about one-tenth of the 2400 employees it had when he retired 20 years ago. Dad also expects the plant will be closed down for good in a few years, having existed for merely the entirety of his adult lifetime. But don't worry, I'm sure some of those laid off workers can get jobs this summer working at the concession stands at Little Cubs Field.

It's amazing to me that a country in which wages and benefits for most workers, especially paid vacation days, are being endlessly slashed and the word "staycation" has entered the popular lexicon, that any of the so-called "experts" who get paid to consult with state and local governments about how they might increase revenues and employment could with a straight face espouse the idea that an endless sea of tourism dollars is out there just waiting to be exploited. As it stands right now, the tourism industry is being propped up by more affluent older Americans who are downsizing their living arrangements (i.e: selling off their assets) in order to do at least a few of the things they wanted to do while they were still working. But when the country begins to run out of bucket-listers who still have a bucket to pee in, tourism is yet another industry facing an inevitable epic crash.

But hey, if you're interested, all events at Little Cubs Field feature free admission. And for this little bit of faux Americana, it's worth exactly what you pay for it.


Bonus: The problem these days, Bruce, is that the trouble ISN'T "busing in from out of state"

One Town's Desperate Casino Gamble To Fix Unemployment

In putting together the posts for this blog, I have to read a lot of depressing stories. It kind of goes with the territory. As depressing as reports of factories closing, or college students being saddled with unpayable debts or retiree pensions getting slashed may be, the most depressing stories are those in which desperate people are given false hope by some business-as-usual scheme that is destined to fail. Here is the Boston Globe with one such story:

Tom Hoye called a casino resort a one-time chance for this struggling city. Mashpee Wampanoag chairman Cedric Cromwell lavished praise on Taunton’s movers and shakers. And many residents here, accustomed to decline, predicted that a gambling emporium would revive a city that lost its luster long ago.

That buzz of good feeling enveloped the interim City Hall yesterday, as Hoye and Cromwell announced the beginning of a complex process to build a destination casino costing at least $500 million near the heavily traveled intersection of Routes 24 and 140.

“This proposal has the potential to create thousands of employment opportunities for our residents,’’ Hoye said to applause and Native American whoops. “This could potentially be the shot in the arm that our city needs to once again be the gem of Southeastern Massachusetts.’’

The officials stressed that their announcement was merely a beginning and that many hurdles must be cleared before a casino could be built by the Mashpee Wampanoag on a 77-acre, privately owned site in the Liberty and Union Industrial Park.

But yesterday, none of the legal minutiae and mazelike complications seemed to matter to many residents. They spoke of jobs, first-class entertainment, even access to gambling as benefits for a city that has hemorrhaged the mill and precious-metal jobs that once inspired its nickname of Silver City.

“Walk down the streets here and see everybody that’s out of work’’ said Jim Gillon, 59, as he sat at the counter at Joe’s Diner. “It’ll bring jobs to the city. A casino’s got to go somewhere, right? I’ve seen all the silver places and factories go out of business. It’s time to bring some jobs back.’’

Joe Resendes, a 57-year-old landscaper, gave his thumbs-up during a stop at City Hall.

“Taunton needs a kick,’’ Resendes said. “Taunton may be on its last breath. Let it have some air. I’m all for it.’’

The Mashpee Wampanoag hailed the potential for doing business here.

“I have goosebumps, and that’s a good feeling,’’ Cromwell said. “It’s good medicine.’’

“I’m excited about the opportunity for prosperity for our people,’’ said tribal secretary Marie Stone.

Could that set of quotes be any more pathetic and sad? Legalized gambling is already in big trouble in places like Las Vegas and Atlantic City because so many of the players suckers are tapped out, but these people do not seem to have noticed. Worse still is the idea that it is at all desirable to try to rebuild a local economy decimated by globalization by centering it around a predatory industry that often preys on those who can least afford to lose their money.

There was a time in America, not much longer than a generation ago in fact, when legalized gambling faced a steep uphill battle all across the country because of the moral objections and concerns about the ethics of raising revenue on the backs of the vulnerable. But now the desperation out there has grown to the point where a whole community now embraces the idea without hesitation despite the mounting evidence that, moral and ethical questions aside, it no longer works as a form of economic stimulus.


Bonus: Doug Stanhope has a different take on the lost factory jobs

7-11 Store Owners: Online Lottery Sales Could Mean Massive Layoffs

It has been apparent for many years that the continuing advancements in technology are no longer contributing to progress in our society but have in fact become a zero sum game. Here is CBS Chicago with the latest details:

Owners of 7-Eleven stores are warning of massive layoffs to come, unless the Illinois Lottery protects them from competition from the online sales that are expected to start this year.

As WBBM Newsradio’s John Cody reports, the franchise owners say they online lottery sales could force them to lay off 7,000 employees statewide.

Joe Rossi, the head of the Chicago franchise owners’ association, estimates lottery sales bring in 30 percent of the business at 7-Elevens, because lottery buyers buy an average of $5 in goods on top of their tickets.

Rossi says he is not trying to block internet lottery sales, just suggesting the lottery find a way to protect 7-Eleven lottery business and jobs.

Rossi is recommending that the state Lottery require players to fill up a Lottery credit card at 7-Elevens – leaving the store owners with their present 5 percent cut of the business – rather than allowing players to gamble without limit on their credit cards on line at home.

Memo to Joe Rossi: nothing personal, but go fuck yourself. In case you haven't noticed, countless millions of factory workers have been losing their jobs for the past couple of generations thanks to technological innovations and globalization. If we collectively were not willing to try and protect the livelihoods of people who actually built something for living, why would we suddenly start caring about 7-Eleven clerks?

How many of the items stocked on the shelves at 7-Eleven are made overseas because it's cheaper? Perhaps, while we are needlessly burdening lottery players just to protect your company, we should also enact high tariffs to bring the jobs back to America destroyed by 7-Eleven's insistance on purchasing those imported goods just to maximize your bottom line. In fact, I'd rather do that since I don't give a flying fuck about a predatory lottery system designed to separate lower income people from money they cannot afford to spend.

Funny how everybody in America is all about singing the praises of the "progress" that technology and globalization supposedly brings until the day comes that it actually affects their own bottom line. Then they suddenly get all butthurt and protectionist on us.


Bonus: "When I win the lottery, I'm gonna buy all the girls on my street a color teevee and a bottle of French perfume"

States Doubling Down on Bad Gambling Bets

I've posted several stories here on TDS about recent decline of the gaming gambling industry in the United States as the throngs who used to fill the casinos find themselves unable to come up cash to throw away on the slots or at the Blackjack table. And yet despite all of the evidence that the industry is in deep trouble and no longer the cash cow it used top be, there are still plenty of localities lining up, hoping to boost tax revenues by overcoming their previous resistance to legalizing gambling and opening casinos of their own. MSNBC has the details:

A Malaysian company's plan to build a $4 billion convention center and big-time casino on the outskirts of New York City could be the biggest shot fired yet in a tourism arms race that has seen a growing number of Eastern states embrace gambling as a way to lure visitors and drum up revenue.

New York Gov. Andrew Cuomo announced last week that he would work with the Genting Group, one of the world's largest and most successful gambling companies, to transform the storied, but sleepy, Aqueduct horse track into a megaplex that would eventually include the nation's largest convention center, 3,000 hotel rooms, and a major expansion of a casino that began operating at the site in October.

The proposal came less than two months after once-puritanical Massachusetts passed a law allowing up to three resort casinos, plus a slot machine parlor, at locations around the state.

Ohio is poised to see its first commercial casinos open this year, after voters approved up to four gambling halls in 2009. Maryland's first casino opened last year, with more on the way. Pennsylvania's first casinos opened in 2006, and already the state is threatening to surpass Atlantic City as the nation's second-largest gambling market.

And in Florida, lawmakers are hotly debating a whopper of a bill that would allow up to three multibillion-dollar casinos, plus additional slot machines at dog and horse tracks. Genting appears confident the law will pass. It has already spent around $450 million to acquire waterfront property in Miami, where it wants to build a $3.8 billion complex that would include a casino, dozens of restaurants and a shopping mall.

States have embraced casinos, after years of trepidation about their societal costs, for two simple reasons: a promise of a rich new revenue source, plus the possibility of stimulating tourism.

The article itself actually does a very good job of raising questions as to whether this latest desperate revenue grab by the state governments is at all advisable:

Some experts, however, have questioned whether revenue bonanzas that large are realistic, and say states should be cautious about giving up too much to lure these projects. Competition for a limited pool of gambling and tourism dollars is already fierce, and recent years haven't been kind to casinos.

Nevada's larger casinos lost $4 billion in 2011, according to a report released this month by the state's Gaming Control Board, as the state continued to feel the effects of the global economic slump.

As gambling options have increased in the East, revenue has slid substantially at the pair of Indian tribe-owned casinos in Connecticut and declined by a dramatic 30 percent in Atlantic City, which has lost customers in droves to the new casinos in nearby Philadelphia, according to David Schwartz, director of the Center for Gaming Research at the University of Nevada Las Vegas.

So the latest players in the legalized gambling game plan to spend billions of dollars to spread the wealth that much thinner even as the slowly collapsing economy continues to squeeze the mass of players suckers they need to be able to make a profit.

How much more proof do you need that the so-called "leaders" of our society are completely out of ideas and have resorted to merely shuffling the deck chairs on the titanic?


Bonus: Wait a minute, is that music I hear on the promenade deck?

The Powerball Lottery is Betting that Doubling the Price of a Ticket Will Increase Sales

In the interests of full disclosure, I should start this post by stating that I have never once in my life bought a lottery ticket. These government run gambling entities are even more tilted in favor of the house than any Las Vegas casino. For most of them, half of the collected revenue is taken right off the top in taxes, and I already pay enough money in taxes, thank you very much.

It's a good bet that the economic downturn is hurting the bottom lines of the state lotteries as people find themselves with less spare cash to blow on lottery tickets. To combat this phenomenon, the Powerball lottery has come up with a rather baffling solution, double the cost of a ticket. Here is Yahoo News with the details:

Get ready to pay more for Powerball: Ticket prices are going up to $2.

Lottery organizers hope the price change will entice more people to play because jackpots are getting bigger and the odds of winning are improving.

Because raising the cost of your product by 100% during troubled economic times is ALWAYS a sure fire way of increasing sales. You would think that would be obvious, but apparently is isn't to the morons who are running the Powerball lottery, as shown by this quote:

Lottery officials say they are betting players will like the variety and changes made in the game. But some players say the price increase may keep them from playing as often or not at all.

The real problem, of course, is that the lottery is being run by a bunch of well-to-do twits who can't fathom why a mere extra dollar in cost would deter people from buying their product. After all, they themselves have plenty of extra dollars lying around. I suspect that what they really need to do is spend a couple of hours sometime hanging around at a shabby convenience store observing the broken down state of many of the people who actually buy lottery tickets. Then they might understand that not everyone in America has spare dollars just falling out of their fucking pockets. But of course they'd never condescend to do anything like that.


Bonus: The short film version of Shirley Jackson's classic short story is now available on You Tube:

The Mohegan Sun Casino is $1.6 Billion in Debt

In yet another blow for state and local governments who think more legalized gambling is a great way to increase tax revenues comes a story from the Norwich Bulletin about deep financial problems being experienced by the Mohegan Sun casino in Connecticut:

The parent entity of Mohegan Sun recently received a waiver from its bankers, something the casino operator sees as a vote of confidence in its future. Yet it could be the calm before a major storm in Connecticut’s economy in 2012, an analyst said.

Foxwoods Resort Casino, whose parent also is in talks to restructure debt, and Mohegan Sun are on course for severe financial problems in the year ahead, said Clyde Barrow, a University of Massachusetts Dartmouth professor of public policy who follows the New England casino industry.

The Mohegan Tribal Gaming Authority was unable to complete a refinancing agreement during its fiscal first quarter, which ended today. With that, the authority’s auditors attached a “going concern” warning to 2011 financial statements, authority CEO Mitchell Etess said Thursday.

A filing with the Securities and Exchange Commission said lack of a resolution would materially impair Mohegan Sun’s ability to operate.

So just how bad is it?

Mohegan’s total debt as of Sept. 30 was $1.6 billion, the authority reported. Of that, $811.1 million comes due within the next 12 months, including $535 million that needs to be paid by March 9 and $250 million in 8 percent notes that mature on April 1. This debt will need to be refinanced before the due dates, the authority said Thursday.

So what are the overall implications for the Nutmeg State?

Foxwoods and Mohegan Sun are two of Connecticut’s largest employers and major sources of revenue to the state government. Both are members of the Chamber of Commerce of Eastern Connecticut. Chamber President and CEO Tony Sheridan declined to comment on the Sun’s finances Friday, saying he was still studying them.

What is there to study, exactly? The casinos are deep in debt, and unless there is a miraculous economic recovery they are soon going to have to declare bankruptcy. Looks like Chamber of Commerce President and CEO Tony Sheridan is about to find out what Las Vegas already knows: a gambling-based economy is only sustainable so long as the marks still have money in their pockets. As the old saying goes, you can't get blood out of a stone.

The Las Vegas Housing Market Craps Out

The news regarding the housing market in Las Vegas just gets worse and worse:

Las Vegas-area home prices fell again in September to a new low during the current recession, Standard & Poor’s reported Tuesday.

Stung by elevated unemployment and high levels of foreclosures and underwater mortgages, Las Vegas saw housing prices fall 1.4 percent from August and 7.3 percent from September 2010, Standard & Poor’s said.

Data from Standard & Poor’s S&P/Case-Shiller Home Price Indices show Las Vegas-area prices are now at levels last seen in February 1998 after September’s decline.

Here are a few more statistics to ponder:

Tuesday's data follows release of statistics by the Greater Las Vegas Association of Realtors Nov. 8 finding that in October, the median price of single-family homes sold locally was $121,000. That was down 1.9 percent from $123,400 in September and down 9 percent from $133,000 in October 2010.

Also Tuesday, mortgage data provider CoreLogic reported that at the end of the third quarter, Nevada had the highest negative equity percentage in the nation with 58 percent of its mortgaged properties underwater, down from 60 percent in the second quarter.

In the Las Vegas-Paradise Metropolitan Statistical Area, 61 percent, or 257,345 of residential properties with a mortgage, were underwater, CoreLogic reported.

What has happened to Las Vegas is really quite simple: during the bubble years a whole host of gamblers in the casino and construction industries made a sucker bet that the party would go on forever. Then the music stopped, the lights came on and the $1000-a-night hooker turned out to be a middle-aged transvestite.

The recently reported national numbers for housing were not a whole lot better than the Las Vegas figures. Without a recovery in housing, there will be no recovery in the real economy. So rest assured, what has happened in Vegas isn't going to stay in Vegas. It will be visiting your city, town or state sometime in the near future.

Hooters Casino Declares Bankruptcy

In the wake of the passing of the debt limit compromise, the financial news this morning is returning to the doom and gloom of an impending double-dip recession. One item that particularly caught my eye was from VegasInc.com:

The owner of the Las Vegas Hooters resort on Tropicana Avenue filed for Chapter 11 bankruptcy reorganization on Monday to block a threatened foreclosure — the latest in a series of financial debacles to hit the local casino industry since the onset of the recession.

The company, 155 East Tropicana LLC, in its initial filing in U.S. Bankruptcy Court listed assets of $10 million to $50 million against more than $162 million in liabilities.

Wow—more than $100 million in the red. They need to get some high roller suckers in there, pronto!

I discussed the woes of the gambling industry in my July 18th post, “America’s Domestic Oil Production Peak Presaged the Rise of Legalized Gambling.” No city’s fortunes have more dramatically illustrated that of the whole country during the bubble years than Las Vegas. Sin City benefited immensely from Americans’ pathological desire to get something for nothing in recent years even as their real wages stagnated. Easy credit allowed for the construction of ever bigger and gaudier casinos until the financial crisis of 2008 finally brought the big party to a screeching halt. Now the hangover is a real killer.

And really, what institution is more quintessentially American than Hooters, which built an empire on crappy food served up by comely young women in tight outfits? Sex appeal selling mediocrity—a technique that Madison Avenue has perfected over the past 30 years.

Dude, you know that hot chick in the orange shorts serving our drinks who has been flirting with you? I think she really likes you. Give her a big tip, willya?

This time, however, what happens in Vegas won’t be staying in Vegas. Bankruptcy and financial ruin will shortly be visited upon all sorts of commercial enterprises that exist for no other reason than to separate the suckers from their hard earned dough. Casinos, chain restaurants, fast food joints, big box stores, multiplex cinemas, outlet malls, Starbucks—all of these blights upon the landscape have business models based upon oil and gasoline being cheap forever and ever. As markers of our civilization, I doubt they will have the same archeological staying power as Stonehenge, the Pyramids, the Coliseum or the Parthenon.

America’s Domestic Oil Production Peak Presaged the Rise of Legalized Gambling

As a lifelong history buff and someone who became Peak Oil Aware several years ago, I find it interesting to reexamine the past 40 years of American history since America’s domestic oil production peaked in 1970 through that lens. Some aspects of that momentous event are clearly obvious—for instance we have since become totally dependent upon oil imports to keep our economy running. Other changes in our society are much subtler—such as the fact that the average working person’s wages when adjusted for inflation have been virtually stagnant since the Nixon administration.

Not coincidentally, I would argue, gambling has in recent years shaken off its Mafia-dominated roots and has ridden a wave of legalization to spread far and wide across the landscape. In 1970, there was only one place in America where you could go a wager your paycheck without the risk of being arrested, and that place was Las Vegas. And it wasn’t the sanitized, Disneyfied Las Vegas of today either. The casinos were grungier, and effectively run by the Kansas City mob. If you failed to make good on your losses, you’d likely get a visit from a couple of hired goons who had a price list of what body part they would break depending on how much you owed.

Beyond southern Nevada, there were a handful of state lotteries, the first one having been established by the state of New Hampshire a mere six years earlier. Gambling was frowned upon by religious institutions who fought vigorously the keep the wages of sin away from local communities.

This all began to change during the first era of economic stagnation in the 1970s. Three years after the first round of gas lines hit the country in 1973, Atlantic City became the second location in America to legalize “gaming” as it came to be known, and began building its own casinos as fast as it could. The rundown New Jersey beach resort would become the first of many locales to try to use Americans’ insatiable desire to get something for nothing as a basis to finance urban renewal. Though controversial at the time, this pattern would become so pronounced going forward as to become routine today.

Meanwhile, enticed by the idea of easy revenues, state legislatures everywhere fell all over themselves to pass their own lottery bills. In order to get the public to swallow the bitter pill of legalizing “sin,” proceeds from the lotteries were supposedly committed to help fund education or other popular programs. In reality, lottery proceeds instead merely replaced appropriated funds so the money could be used elsewhere. Actual levels of spending on education usually did not change.

My favorite hypocritical trick was the communities that built “offshore” casinos to assuage voters who were still uptight about gambling. For this reason, riverboat casinos sprung up everywhere along the banks of the Mississippi River in the traditionally conservative Midwest. Down south, the state of Mississippi similarly built its Biloxi casinos out in the Gulf of Mexico. The folly of the latter ludicrous idea was seen when Hurricane Katrina ripped the unfortunately placed buildings apart as it slammed ashore in 2005.

Today, there are so many casinos dotting the landscape that they are draining the revenues from America’s original Sin City in Las Vegas. Forty-three states and the District of Columbia now have lotteries. Whatever moral qualms there used to be about gambling have been buried under a mountain of easy revenue for state governments. Vinny the Nose and his crew would have been proud and probably a little dismayed to know that they used to risk serious jail time for providing this exact same service.

Of course, as with many other aspects of modern America, we are now facing Peak Gambling. Las Vegas has been particularly hard hit from declining revenues, as evidenced by the city having one of the most dramatic housing bubble collapses in the country. Empty subdivisions, condo towers and commercial developments have become an all too common feature around the famous Strip. Elsewhere, lottery revenues are no longer sufficient to save insolvent state governments from fiscal disaster.

The tale of the rise and now imminent fall of legalized gambling in America is just another sad example of the ending of the American Dream. Gambling always was a sucker bet, often strip-mining assets from those who could least afford it. Vinny and his buddies knew that, which is why they always kept the brass knuckles handy. The problem for those that pushed so hard to bring it to every corner of the United States during the past four decades is that the “suckers” are rapidly becoming tapped out. You can’t get blood from a stone, as the old saying goes. And now it is the entire U.S. economy that is rapidly turning to stone.