Economy & Business

Gambling’s No Economic Panacea

Entrance to the Trump Taj Mahal casino in Atlantic City in 2012. (Dreamstime photo: Sean Pavone)
The failure of the Trump Taj Mahal helps show why.

With Monday’s closing of the Trump Taj Mahal casino/hotel/strip joint, the transformation of Atlantic City into a ghost town continues at breakneck speed.

The shuttering of the casino puts some 3,200 people out of work and adds another gap to the leering smile of the East Coast gambling mecca. Revel, which was supposed to be the biggest and best casino resort in Atlantic City, went into bankruptcy twice. It was supposed to reopen a few months ago — Governor Chris Christie went to great lengths to bail out the mismanaged mess — but it isn’t doing so. A new owner says it will reopen in 2017. We’ll see.

Trump spent nearly $1 billion on the Taj Mahal and was tormented by Merv Griffin, who, when Trump was struggling to finish the project — he was near bankruptcy in 1988, two years before the place even opened — made an unsolicited takeover offer to Trump’s partners. The Trump Taj Mahal opened in 1990 and went bankrupt in 1991, billions of dollars in debt. Trump was forced to sell half his ownership stake. There were more bankruptcies and more dilution of Trump’s share, until he was chased off the board and out of the business, though his name remains on the building for marketing purposes. Though if you tried to take Trump’s advice about women in the in-house strip club — that was Trump’s great innovation in the casino business, adding strip joints to the premises — you’d probably have ended up with damage to more than your reputation.

Grand, indeed. There was a “Trump’s Castle” casino, too. It, too, went bankrupt, and its ruins were acquired by Landry’s and reopened as the Golden Nugget Atlantic City.

My friend Nick Gillespie, speaking at FreedomFest in Las Vegas, gestured around the Wynn casino and spoke hopefully of “a world that looks more like this.” He means a more libertarian world, one more characterized by the anything-goes ethic of Las Vegas.

But the reality is that Las Vegas, like Atlantic City, is the opposite of libertarian paradise. Casino gambling is the apex of American crony capitalism — highly regulated, highly taxed, licensed, dominated by politically powerful Democrat-aligned labor unions, with political favoritism and log-rolling so deeply entrenched in the industry that it is hardly even noticed. When Chris Christie’s revenuers wrote down Donald Trump’s outstanding New Jersey tax bill to about 17 cents on the dollar, no one would have noticed or said much if the beneficiary weren’t a famous man running for president.

Gambling is not legal in Las Vegas. Schedule an unlicensed poker game at your house and the state of Nevada will be happy to put you in prison. Contrary to the unfortunate perception of more than a few tourists, prostitution is not legal in Las Vegas, either, though it is legal in a few small towns about an hour’s drive away. When Las Vegas police do their sweeps of the prostitution corners on West Tropicana, a disturbing share of the prostitutes working the streets are children. It is not uncommon to find 14-year-olds plying the sex trade.

In fact, the legalization of a few brothels far from the Strip has had perverse effects on Las Vegas. Whereas police might once have turned a blind eye to much of the street-level sex trade, the legalization of brothels and the emergence of online advertising (the CEO of Backpage.com, formerly a part of the Village Voice media group, was recently arrested on pimping charges in Houston) means that the women left working on the street corners are mainly those unable to secure a position in a legal brothel or organize online advertisements and a hotel room, the reason being, in most cases, that they are under age. Law enforcement and municipal government might tolerate a bit of prostitution, but not when it involves children.

In spite of its problems, Las Vegas is the sole American success story when it comes to casino gambling. It reversed the old cliché: a nice place to live but I wouldn’t want to visit there. (I did live there, for a year.) Aside from the tourist attractions at the city’s core, Las Vegas is rather like a large and prosperous suburb of Los Angeles without the traffic, taxes, and California politics. It is surprisingly conservative and religious, with the area’s numerous military families deeply influencing the local culture. The bacchanal of the Strip is contained by a fair amount of spontaneous order — Vegas’s valets probably do more to prevent drunk driving than its police checkpoints do, just as its casino managers probably do more to keep drug dealing (open drug dealing, anyway) out of the tourist areas than its police do.

A country as large, diverse, and odd as the United States can have a Las Vegas. The experience of Atlantic City suggests that it cannot maintain two.

Las Vegas is no more a model for American prosperity than Macau is for Chinese prosperity.

Still less can it maintain dozens of half-realized Las Vegases everywhere from Mohegan Sun in Connecticut to the Isleta Resort in Albuquerque and from Valley Forge to Palm Springs. Some who have studied the question have found that once the costs are truly accounted for — including higher crime and increased demands on social services — Atlantic City has lost money on gambling. It has not been the economic panacea it was promised to be. And it will not be in struggling Rust Belt towns or in the desert Southwest.

John Street, when he was mayor of Philadelphia, once argued that the city’s economic future would be sustained by tourism. Philadelphia, this was. Gambling speaks to the same sort of wishful thinking, that instead of building cities and states in which it is attractive to build things and invest in productive enterprises, we can create vice-based economies and wait for people to flood our coffers with revenue. That will always work for one or two places. But Las Vegas is no more a model for American prosperity than Macau is for Chinese prosperity.

Gambling is a nasty business at its best. With government in the mix as a senior partner — whether in the form of state lotteries or of Pennsylvania’s 54 percent tax on slot-machine revenues — it is even uglier.

Nobody, except perhaps Donald Trump at his most delusional, thinks the United States of America would be better off if it only were more like Atlantic City. One need not be a stuffy moralist to understand that the numbers simply do not add up.

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