NGISC Report, Part 2
Costs and Victims
The Costs to Society
The costs of pathological gambling extend beyond the individual victim and his or her family, often including employers, business associates, neighbors, relatives, social service providers and others. The Commission attached an estimated financial price tag to a handful of the costs incurred by pathological gamblers. The immensity of these costs alone is troublesome-and points to the reality that if all the financial costs of problem and pathological gambling were tabulated, the totals would be staggering.
"In addition to the costs of problem and pathological gambling borne by the individual and his or her family, there are broader costs to society. NORC estimated that the annual average costs of job loss, unemployment benefits, welfare benefits, poor physical and mental health, and problem or pathological gambling treatment is approximately $1,200 per pathological gambler per year and approximately $715 per problem gambler per year. NORC further estimated that lifetime costs (bankruptcy, arrests, imprisonment, legal fees for divorce, and so forth) at $10,550 per pathological gambler, and $5,130 per problem gambler. With these figures, NORC calculated that the aggregate annual costs of problem and pathological gambling caused by the factors cited above were approximately $5 billion per year, in addition to $40 billion in estimated lifetime costs.
"NORC admittedly 'focuse[d] on a small number of tangible consequences' and did not attempt to estimate the financial costs of any gambling-related incidences of theft, embezzlement, suicide, domestic violence, child abuse and neglect, and the non-legal costs of divorce. As a result, its figures must be taken as minimums." (p.4-14)
Cultivating the Next Generation of Gamblers
The Commission report devoted extensive print to the epidemic of youth gambling, and the concomitant high level of gambling problems among adolescents. The Commission also cited numerous data indicating the alarming frequency with which youth are able to access legal gambling venues, indicating that many gambling entities either ignore or fail to enforce age limitations. The report further noted the fact that many adolescents are victimized by a parent's gambling addiction.
"Although illegal in every state, the sale of lottery tickets to minors nevertheless occurs with a disturbing frequency. For example, one survey in Minnesota of 15- to 18-year-olds found that 27 percent had purchased lottery tickets. Even higher levels of 32 percent, 34 percent, and 35 percent were recorded in Louisiana, Texas, and Connecticut, respectively. In Massachusetts, Connecticut, and other states, lottery tickets are available to the general public through self-service vending machines, often with no supervision regarding who purchases them. Thus, it is not surprising that a survey conducted by the Massachusetts Attorney General's office found that minors as young as 9 years old were able to purchase lottery tickets on 80 percent of their attempts, and that 66 percent of minors were able to place bets on keno games. Seventy-five percent of Massachusetts high school seniors report having played the lottery." (pp. 3-4, 3-5)
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"Pathological gamblers are more likely than non-pathological gamblers to report that their parents were pathological gamblers, indicating the possibility that genetic or role model factors may play a role in predisposing people to pathological gambling.
"Recent research suggests that the earlier a person begins to gamble, the more likely he or she is to become a pathological gambler." (p. 4-3)
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"One of the most troubling aspects of problem and pathological gambling is its prevalence among youth and adolescents. The available evidence indicates that individuals who begin gambling at an early age run a much higher lifetime risk of developing a gambling problem. Although the full scope of this problem remains to be defined, the Commission is unanimous in urging elected officials and others to focus on implementing more effective measures to address the problem of adolescent gambling.
There is much that the Commission does know regarding adolescent gambling, and much of it is troubling:
- Adolescent gamblers are more likely than adults to develop problem and pathological gambling. The NRC estimates that as many as 1.1 million adolescents between the ages of 12 and 18 are past year pathological gamblers, a much higher percentage than adults. In the NORC study, the rate of problem and pathological gambling among adolescents was found to be comparable to that of adults, but the rate of those 'at-risk' was more than that for adults.
- "Based on its survey of the research literature on problem and pathological gambling among adolescents, the NRC reported that estimates of the 'past year' rate of adolescent problem and pathological gambling combined range from 11.3 to 27.7 percent, with a median of 20 percent. Estimates of 'lifetime' adolescent pathological and problem gambling range between 7.7 and 34.9 percent, with a median of 11.2 percent." (pp. 4-11, 4-12)
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"With a growing number of underage gamblers, the social consequences of this illegal behavior are significant. In NRC's survey of literature, they found that the percentage of adolescents who report having gambled during their lifetime ranges from 39 to 92 percent, with 39 percent functioning as an outlier, with the next highest percentage as 62. The median was 85 percent. NRC also found that the prevalence of adolescent gambling during the past year ranged from 52 to 89 percent, with a median value of 73 percent.
"And the impact is felt throughout the nation. In a survey of 12,000 Louisiana adolescents, one-quarter reported playing video poker, 17 percent had gambled on slot machines and one in 10 had bet on horse or dog racing. In Oregon, 19 percent of youths ages 13 to 17 reported having gambled in a casino, with 12 percent having done so in the past year. In Massachusetts, 47 percent of seventh-graders, and three-quarters of high school seniors, reported having played the lottery.
"The conclusion is startling, but confirmed by every study: children are gambling, even before they leave high school. NORC did note 'adolescents were notably absent from casino play, with barely one percent reporting any casino wagers. This presumably reflects well on the enforcement efforts of casino operators, among other factors.' NRC, however, examined thirteen relevant studies and found that a median of 27 percent of adolescents reported having gambled in a casino, while 10 percent reported having done so in the past year. While the majority gamble on illegal activities, a significant number gamble on legal forms of gambling. This fact alone raises serious and troubling concerns regarding the accessibility of gambling, particularly convenience type, and the ineffective safeguards that are presently in place." (pp. 7-20, 7-23)
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"It may be important to note the impact of proximity to legalized gambling on adolescents. One study found that college students in New York, New Jersey, and Nevada had higher rates of gambling than did students in Texas and Oklahoma." (p. 7-23)
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"Several studies have shown that pathological gambling is associated with alcohol and drug use, truancy, low grades, problematic gambling in parents, and illegal activities to finance gambling. How does one place a dollar value - a cost - on that conduct? How do we, as a nation, quantify the value of lost opportunities to these young individuals?
"One recent study found that gambling behavior was significantly associated with multiple drug and alcohol use. For 28 percent of those surveyed in the same study, gambling was associated with carrying a weapon at least once in the past 30 days, and for those who reported a problem with gambling the figure rose to 47 percent. Violence was also associated with gambling: while nearly one-fourth of the non-gambling students reported having fought in the last 30 days, the figure rose to 45 percent for those who reported gambling and 62 percent for those who reported problems attributed to gambling. In addition, the researchers suggested that the data may have been significantly underreported." (pp. 7-23, 7-24)
No Master Plan
The Commission found that legalized gambling's growth over the past decade has not been the product of careful forethought and analysis. Rather, it has been driven primarily by politicians ravenous for more revenues, while the substantial social and economic costs which accompany such expansion have been virtually ignored.
"This Commission … believes that gambling is not merely a business like any other and that it should remain carefully regulated. Some Commissioners would wish it to be far more restricted, perhaps even prohibited. But overall, all agree that the country has gone very far very fast regarding an activity the consequences of which, frankly, no one really knows much about." (p. 1-7)
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"Inevitably for a Commission of such diverse makeup, some differences in viewpoint refuse to melt away and the existing evidence is insufficient to compel a consensus. But there is an encouraging breadth of agreement among Commissioners on many individual issues, such as the immediate need to address pathological gambling; and on one big issue: The Commissioners believe it is time to consider a pause in the expansion of gambling.
"The purpose of the pause is not to wait for definitive answers to the subjects of dispute, because those may never come. Additional useful information is, of course, to be hoped for. But the continuing evolution of this dynamic industry has produced visible changes even in the short lifetime of this Commission and indicates that research will always trail far behind the issues of the day and moment. Instead, the purpose of this recommended pause is to encourage governments to do what to date few if any have done: To survey the results of their decisions and to determine if they have chosen wisely.
"To restate: Virtually every aspect of legalized gambling is shaped by government decisions. Yet, virtually no state has conformed its decisions in this area to any overall plan, or even to its own stated objectives. Instead, in almost every state whatever policy exists toward gambling is more a collection of incremental and disconnected decisions than the result of deliberate purpose. The record of the federal government is even less laudatory. It is an open question whether the collective impact of decisions is even recognized by their makers, much less wanted by them….
"Without a pause and reflection the future does indeed look worrisome. Were one to use the experience of the last quarter century to predict the evolution of gambling over the next, a likely scenario would be for gambling to continue to become more and more common, ultimately omnipresent in our lives and those of our children, with consequences no one can profess to know.
"The Commission, through its research agenda, has added substantially to what is known about the impact of gambling in the United States. The Commission also has tried to survey the universe of information available from other sources. But it is clear that Americans need to know more. In this context, the Commission's call for a pause should be taken as a challenge - a challenge to intensify the effort to increase our understanding of the costs and the benefits of gambling and deal with them accordingly. Policymakers and the public should seek a comprehensive evaluation of gambling's impact so far and of the implications of future decisions to expand gambling. In fact, state and local versions of this Commission may be an appropriate mechanism to oversee such research. If such groups are formed they will find as did the Commission that the search for answers takes time. Therefore, some policymakers at every level may wish to impose an explicit moratorium on gambling expansion while awaiting further research and assessment." (pp. 1-7, 1-8)
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"The evolution of state lotteries is a classic case of public policy being made piecemeal and incrementally, with little or no general overview. Authority is divided between the legislative and executive branches, with the result that the general public welfare is taken into consideration only intermittently. Policy decisions taken in the establishment of a lottery are soon overcome by the ongoing evolution of the industry. It is often the case that public officials inherit policies and a dependency on revenues that they can do little or nothing about." (p. 2-4)
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"The record of state decisionmaking regarding riverboats is not comforting. In the hierarchy of considerations of state policymakers, the original arguments in favor of tourism and economic development have often been displaced by the need to generate and maintain tax revenues. The various states' decisions have been driven to a surprising extent not by a steadfast concern for the public welfare but by a fierce interstate competition for tax dollars (and in the process revealing remarkably similar patterns of decisionmaking)." (p. 2-7)
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"Despite the intense search for money from outside their borders, the resulting counteractions have meant that the net revenue gains from, and losses to, non-resident populations tend to cancel each other out. But the very same strategy has ensured that every state's population is now within an easy commute of the casinos. In setting out to tap into their neighbors' pocketbooks, state governments have ended up tapping into that of their own citizens." (p. 2-7)
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"[M]ost government decisionmaking has been chasing rather than leading the industry's growth and evolution and has often focused on less-than-central concerns, to the neglect of the larger public interest. One of the more damning criticisms of government decisionmaking in this areas is the assertion that governments too often have been focused more on a shortsighted pursuit of revenues than on the long-term impact of their decisions on the public's welfare." (p. 3-2)
Lotteries
The Commission leveled some of its strongest criticisms at state lotteries. Those criticisms run the gamut from lotteries' predation on the poor to dishonest advertising practices to their seduction of America's youth. The Commission, in its recommendations, urged lotteries to cease aggressive advertising practices, stop targeting poorer individuals via marketing schemes, and halt the current trend whereby many lotteries now offer casino-style gambling.
Fleecing the Poor "As Dr. Philip Cook, a leading researcher under contract to the Commission, stated, 'It's astonishingly regressive. The tax that is built into lottery is the most regressive tax we know.' In addition, the inordinate number of lottery outlets in poor neighborhoods and the reliance upon a small number of less-educated and poor individuals for the bulk of the proceeds causes us serious concern. In fact, Cook and his colleague, Dr. Charles Clotfelter, found that lottery players with incomes below $10,000 spend more than any other income group, an estimated $597 per year. Further, high school dropouts spend four times as much as college graduates. Blacks spend five times as much as whites. In addition, the lotteries rely on a small group of heavy players who are disproportionately poor, black, and have failed to complete a high school education. The top 5 percent of lottery players (who spend $3,870 or more) account for 51 percent of total lottery sales." (p. 7-10)
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"How can we begin to measure the social impact of individuals who spend their children's milk money or cash their welfare checks to buy lottery tickets, as the Commission heard during visits to convenience stores? We cannot, but the Commission can acknowledge that when gambling is promoted as 'the only way to get ahead' and, in particular, targets those who do not have 'leisure dollars' to spend, the economic and social, indeed, the moral fabric of our nation is damaged." (p. 7-18)
A Giant Shell Game "Although earmarking might be an excellent device for engendering political support for a lottery, there is reason to doubt if earmarked lottery revenues in fact have the effect of increasing funds available for the specified purpose. When expenditures on the earmarked purpose far exceed the revenues available from the lottery, as is the case with the general education budget, there is no practical way of preventing a legislature from allocating general revenues away from earmarked uses, thus blunting the purpose of the earmarking.
"Although lotteries often are seen as a principal source of state revenue, actual contributions to state budgets are exceedingly modest." (pp. 2-3, 2-4)
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"Most lottery directors testified that the impact of lottery revenue was beneficial to the state and its citizens, but, in the cases where revenue distribution was specified, no state could prove that program funding would not exist in the absence of lotteries. To the contrary, several states experienced reductions in actual general funding for programs for which lottery revenue was earmarked." (p. 7-10)
Peddling False Hope "A further criticism is that, in pursuit of revenues, some lotteries have employed overly aggressive-and even deceptive-advertising and other marketing methods. Lottery advertising has advanced in recent years from simple public-service announcement type ads to sophisticated marketing tools. Critics charge that they are intentionally misleading, especially regarding such matters as the miniscule odds of winning the various jackpots. (As an agency of government, lotteries are not subject to federal 'Truth-in-Advertising' standards). Others assert that lottery advertising often exploits themes that conflict with the state's obligation to promote the public good, such as emphasizing luck over hard work, instant gratification over prudent investment, and entertainment over savings." (p. 3-5)
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"While gambling advertising is generally a controversial topic, it is even more controversial when state governments themselves actively promote gambling through advertising. Running a lottery places states in a new business. Many states 'have adopted the tools of commercial marketing, including product design, promotions, and advertising' to promote their lotteries. In 1997 state lotteries spent a total of $400 million to advertise, about one percent of total sales. Unlike many governmental promotions, which are straightforward, low-tech, and serious, lottery advertising can be characterized as persuasive, glitzy, and humorous. This attempt to make gambling attractive is sanctioned by the state, promoted by the state, and paid for by the state.
"One particularly troublesome component of lottery advertising is that much of it is misleading, even deceptive. State lotteries are exempt from the Federal Trade Commissions' truth-in-advertising standards because they are state entities and, in terms of their advertising, can in fact operate in a manner that true commercial businesses cannot. While the Federal Trade Commission requires statements about probability of winning in commercial sweepstakes games, there is no such federal requirement for lotteries. Lottery advertising rarely explains the poor odds of winning. Many advertisements imply that the odds of winning are even 'better than you might think.' For example, one video presented to the Commission stated that 'chances are good you can be $10,000 richer.' An ad aired in Texas compared the odds of winning the lottery to the odds of some everyday events, implying that winning the lottery is possible, perhaps even probable.
"In addition to being misleading, lottery advertising messages often exploit themes that conflict with the state's role as protector of the public good. For example, many advertisements emphasize luck over hard work, instant gratification over prudent investment, and entertainment over savings. New York's 'All you need is a dollar and a dream' ad campaign was particularly emblematic of the theme that lotteries provide an avenue to financial success. The idea that the lottery is an investment in your future is particularly troublesome when targeted toward populations that are least able to afford to play.
"Lottery advertising is also manipulative when it encourages players to play the lottery in order to contribute to state programs. Because lottery revenues are often earmarked for specific purposes, such as education, lottery advertising sometimes exploits the idea that playing the lottery can make you 'feel good.' This message implies that buying a lottery ticket is akin to supporting social programs, with the added benefit that you could become a millionaire yourself in the process. One video clip presented to the Commission emphasized that lottery dollars provide education and job training, encouraging the idea that by playing the lottery, a gambler can help other people improve their lives.
"There is also concern that lottery ads target particularly vulnerable populations, specifically youth and the poor. Some lottery ads presented to the Commission showed young people playing the lottery. The appeal of such images, and the illegality of underage lottery purchases in most states, raises justifiable concerns about the role of state governments as a promoter and participant in this type of gambling promotion." (pp. 3-15, 3-16, 3-17)
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