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Crippling Debt at Foxwoods Masks the Hidden Social Costs of Gambling

Today's post is an interview with Sam Skolnik, author of High Stakes: The Rising Cost of America's Gambling Addiction. Skolnik began his journalism career as a news aide and freelance writer for the Washington Post. He went on to report for the Legal TimesSeattle Post-Intelligencer, and Las Vegas Sun. He's won several national journalism awards and was selected to be a Knight-Wallace journalism fellow for 2007-08.

Skolnik spoke with Jessie Bennett, the editor of Beacon Broadside, via Skype earlier this week.

HighstakesThe New York Times Magazine cover story last weekend was about the financial problems faced by Foxwoods casino. I grew up in Southeastern Connecticut, where the Foxwood and Mohegan Sun casinos were seen as economic saviors for the region. But what are the hidden costs of gambling for regions that choose to embrace it?

In fairness to that story, it did raise some interesting points. I don't think that it had been widely known that Foxwoods was in trouble to the degree that it clearly is. And the article also raises points that are worth making, even for those like myself who are clearly skeptical about the long-term impact of gambling, about the fact that Connecticut has benefited from the jobs that have come into the state as well as from tax revenues. 

That said, there are always costs when gambling comes into a jurisdiction, and that is no different in Connecticut than it is anywhere else. New gamblers are created--this is always the case, even in the saturated market that we're in now. A new subset of gamblers are created: those who had never before gambled regularly, but because the casino or new gambling outlet is close to where they live or work, they start gambling. And what happens with those folks is, inevitably and as a result, there's another small subset of those folks who develop addiction problems. Independent studies have shown this to be the case time and time again. And so what happens when these folks become addicted is that it injures lives. Not just the lives of the gamblers, but the lives of their families, of their colleagues, of whole communities.

On a more concrete level, social costs related to gambling inevitably rise as a result of these new problem or pathological gamblers. You're right to label these as sort of "hidden costs" because, unlike other sorts of addictions, it can be tougher to determine if someone close to you has a gambling problem. The social costs range from indebtedness, home foreclosures, and bankruptcies, to crimes connected with  pathological gambling such as embezzlement and robberies, all the way to domestic types of crimes. And in the worst cases, these social costs include suicides.

Not so much in Southeastern Connecticut, but in other, more "mature" gambling markets like Atlantic City and Reno and especially Las Vegas, studies have shown that there is a direct connection between these rising social costs connected to pathological gambling and the advent of legalized gambling. Studies have shown that suicide rates are higher in Atlantic City, Reno, and Las Vegas than in anywhere else in the country, and the only conclusion that can reasonably be reached is that there is a direct connection between that and the advent of gambling.

Anecdotally, very soon after Foxwoods and Mohegan Sun opened up near my hometownI was working there as a bank teller at the timethe murmuring about problems began. "This one gambled away the life savings… they're getting a divorce because he lost the family business at the casino." These are huge personal costs and they seemed to pop up very quickly. But, long-term, it continues to be a problem—these stories haven't stopped.

You raise a good point, because the stories that come from individual gamblers and those who are related to them are devastating. I think that the industry and their political supporters like to say, "When you talk about individual anecdotes, it doesn't represent a scientific trend." Well, first off, if you add enough of them togetheras represented by an increase in the number of Gamblers Anonymous chaptersit does represent a trend. But if you look on an individual level, what happens is these problem gamblers and the problems that they create affect whole communities. All you have to do to see it is to sit in on a GA meetingand by the way, there are more of them than ever, all around the country.

In a recent ten-year period, there was a fifty percent rise in the number of GA chapters around the country. This coincides with an explosion in the amount of legalized gambling, spearheaded by the casino industry, both commercial and Indian casinos like Foxwoods. It would take a huge state of denial to not see that these two trends are directly related.

The Times article examines the fact that Foxwoods has serious financial troubles to the tune of $2.3 billion in debt. Mohegan Sun just restructured their own one billion plus dollars of debt. There is increasing competition from neighboring states, states from which they have been importing many of their dedicated visitors. Do you think we're seeing a beginning of a move away from these huge destination casinos and towards a more localized style of gambling?

With the exception of Las Vegas, most gambling around the country already takes place in local gambling rather than destination casinos. The majority of gamblers almost everywhere in the country with the exception of the Las Vegas Strip are "localized" gamblers.

But, looking at Foxwoods... it was one of the first Indian casinos in the Northeast, and what happened since it opened was that, especially in the last five years, other jurisdictions have come to the conclusion that this is an easy and--they say--relatively painless way to raise revenues. Of course, it's not painless. But what this has done from a strictly economic standpoint is that states around the region have been trying to copy what Connecticut has done by signing new compacts for new Indian casinos. And what they've also done is to allow for commercial casino growth. Massachusetts, Rhode Island, Maine, New York State... almost every state in the Northeast has recently considered or has on the table new commercial casinos, stand-alone slot parlors, or "racinos." Race tracks have seen their revenues decline, so what they've been trying to do is add slot parlors inside the race tracks in order to compete.

So this might be one of the first signs that we're coming toaround the Northeast and around the countrya saturation point. There is a clear limit as to how much these new revenue streams are going to earn money in the ways that their state overlords think works for them. This isn't unprecedented. If you look back to starting before the signing of the Declaration of Independence, there have been about three big waves of gambling in the United States. From complete acceptance, proliferation, and even inundation throughout the country of various forms of gambling to almost complete prohibition.

As the author of High Stakes, it was never my ambition to advocate for one side or the other. I certainly don't believe in full-scale prohibition. I don't think it's possible, I don't think it's realistic and, as a gambler, I don't want that to go into effect. But I do think that the negatives are starting to increase at a significant rate, as well as the economic downsides of the inundation of gambling around the country. We might be peaking on this third wave, which started about forty or fifty years ago with the modern state lotteries, which started in New England, and with Nevada legalizing casinos.

The Northeast is the busiest microcosm of this inundation. It very well might be that over the next ten or fifteen years, especially if the economy gets healthier, we'll see fewer and fewer proposals for more legalized gambling. And we'll see more folks seeing the impact of gambling on loved ones and colleagues and their neighbors.

The economic arguments for casinos is that they'll employ people. But now internet gambling is becoming a big issue, as states debate whether or not to legalize it. But there are real risks involved with legalizing online poker but without the big jobs payoff.

Online poker and online gambling were semi-legal or quasi-illegal up until about six months ago. Congress never fully outlawed it, but there were portions of the financial end of things that could be considered illegal. Over the last decade, while millions of Americans were playing, there were these companies which were based off-shore, that were earning their money mostly off of Americans.

About six or eight months ago, what the poker world calls "Black Friday," the Justice Department shut down three of the biggest poker sites. But recently, the Justice Department appeared to open the door for the states to legalize online gambling and online poker in their jurisdictions. While states have proposals on the table to open bricks-and-mortar casinos, many of them also have proposals to legalize online gambling.

Now, if local casinos are "convenience gambling," online poker is the most convenient form of gambling there is. You could do it any time of day or night. While some of these companies have safeguards to prevent underage or pathological gambling, there are arguments that these safeguards are patently ineffective.

Studies have shown that electronic gamblingslot machines and online gamblingare the most inherently addictive forms of gambling. This is because of the speed of these games and the convenience of them, and it's also because electronic gambling draws those who are predisposed to problem gambling: older folks and young adults. Younger gamblers, who are drawn to online poker, have been shown to have fewer inhibitions. And seniors, when you look at slot machines, which are the primary economic driver inside the bricks and mortar casinos, seniors are the ones playing these games. And seniors have been shown to have the same lack of inhibition when it comes to developing gambling addictions at a faster rate.

These games are unfortunately hitting some of the most vulnerable people in our society.

New York's Governor Andrew Cuomo was quoted in the Times article as saying, “In a perfect world, there would be no casinos... We have 29,000 gambling machines in this state, more than Atlantic City... You have gaming! You’re just in denial of the reality.” Do you think this is a logical argument, that people are gambling anyway, so you might as well benefit from it?

I think it's an unfair argument, and I think it's a false argument. And I've heard it time and again, from many proponents, including former Pennsylvania governor Ed Rendell. "Gosh, we're not creating new gamblers, we're just saving folks some gas money and keeping them at home in our state." Sure, there are some people who are already gambling who will shift their allegiances to a home-state casino. There is some credence to the argument, but the politics of casino expansion is that the gambling industry and the politicians they get on their side tend to ignore the downsides regarding the inevitable creation of new gamblers.

Many of these politicians should know better. Governor Cuomo's father, the former governor Mario Cuomo, even in times of economic hardship, felt that legalized gambling and casinos were clearly not the answer because of the social costs, because of the rising addiction rates, because of the fundamental changes in communities. Andrew Cuomo has come to what is a more expedient answer, but it is an answer that, in the long term, is going to do much more damage to that state.