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Texas’ Bad Bet on Gambling
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Texas’ Bad Bet on Gambling

State-cartel gambling doesn’t provide the path to economic prosperity its backers claim.

The croupier holds poker cards in his hands at a table in a casino. (Photo from Getty Images.)

The guys in front of me in line are not what you’d normally think of as prosperous-looking, but I guess they are doing pretty well. These are not layabouts but working men of some description, Spanish-speaking, pickup-driving, jeans tucked into paint-splattered work boots, and they are getting off work—I hope they are not going to work—early-ish on weekday morning. They have stopped by the local 7-Eleven to buy one tallboy of beer each, some shrink-wrapped corporate snack food, and—because this is America, baby!—what looks like about $60 worth of lottery tickets. 

It could be less than $60. It could be more: The grossest thing in these United States of America at this moment is not Slate’s pornographic advice columns or Donald Trump’s post-indictment Festivus-style airing of grievances or people who use their speakerphones or play loud mobile-phone games in public without earphones or the Never-Ending Battle of the Drag Queens or anything like that: The grossest, nastiest, most shame-inducing thing you’ll run into leaving the sanctuary of your own home right now is offered by the Texas Lottery: a lottery scratch-off ticket that costs—and I am not making this up—$100. Let me repeat: That’s a lottery scratcher priced at 100 gently depreciating U.S. dollars

Each

That’s two days’ wages for a minimum-wage worker in Texas. I don’t think the guys picking up morning beers at 7-Eleven today are minimum-wage workers—if you have a truck and a good pair of work boots and are able-bodied, there’s no reason to be making minimum wage in Texas—but they aren’t exactly the Gelandewagen demographic, either. And the lottery is, disproportionately, a poor man’s game: Households earning $10,000 a year or less typically spend a full 6 percent of their income on lottery tickets. As the Focus for Health Foundation reports, the households in the lowest income quintile are the most active lottery players, African Americans spend five times as much per capita on lottery tickets as whites, lottery players lose 47 cents on the dollar every time they play, and, statistically, you have a better chance of being killed by a toppled vending machine—or being canonized as a saint—than you do of winning a lottery jackpot. 

As the proverb goes: One lottery ticket is gambling, two is innumeracy.

The Texas Lottery was sold to the state in the 1990s as a way to help pay for public schools. In 2022, lottery revenues put less than $2 billion into the Foundation School Fund—a drop in the ocean of public-school spending in Texas, amounting to about 2.9 percent of expenditures. Less than 1 percent of lottery revenues support veterans’ programs and other state initiatives. All of the revenues put into public-school spending since that form of state-sanctioned gambling began in the 1990s amounts to about one semester’s worth of expenditures. But lotteries, like other forms of state-sanctioned gambling, reliably fail to deliver the promised economic benefits. 

So, what is Texas contemplating? More gambling, of course. 

Two bills working their way through the legislature would radically expand gambling in Texas: One bill would permit casinos in Texas, and the other would expand access to online sports betting. Both of the bills have bipartisan support but are Republican-authored: the sports-betting bill by Rep. Jeff Leach of Plano and the casino bill by Rep. John Kuempel of Seguin. They have powerful backers: Billionaire Mavericks owner and reality-television figure Mark Cuban wants to build a new sports stadium with a casino in Dallas; Tilman Fertitta, a different Texas billionaire sports-team owner and reality-television figure and current casino owner—he owns the Golden Nugget in Las Vegas—backs expanded gambling, too. Other owners of sports teams, including Jerry Jones of the Dallas Cowboys, are on the gambling bandwagon. 

That represents a change of heart for professional sports. For years, Las Vegas could not get an NFL franchise in the city, in no small part because the NFL did not want to be within 10 miles of anything associated with gambling. Now Vegas has the Raiders (not to mention the WNBA’s Vegas Aces, a team whose name suggests a distinctly non-prudish attitude toward gambling), but gambling promises to open up vast new revenue streams. In 2021, the NFL got directly into gambling in a big way by means of partnerships with Caesars Entertainment, DraftKings, and FanDuel. It later partnered up with corporate bookies FOX Bet, BetMGM, PointsBet, and WynnBET. Of course, NFL teams are bigfoots in the business world, but in football-mad Texas, Jerry Jones is as much of a cultural figure as a business titan. 

While the economic literature on the subject is somewhat mixed, there is a great deal of scholarship finding that casino gambling provides economic benefits that are, at best, modest, that those purported benefits are in many cases nonexistent, and, at times, that the economic impact runs into the negative. Everybody thinks they are going to get Las Vegas, but they end up with Atlantic City or something even more disappointing. A University of Chicago study found “no change in overall per capita income” from gambling legalization in the cases it studied; some scholars have suggested that the negative externalities associated with gambling have left Atlantic City on net economically worse off than it would have been with no gambling industry at all; Dan Keating, the project manager for the Wynn Philadelphia casino, put it plainly: “No one should plan on a casino to bring about urban renewal.” The promised jobs and promised easy tax revenue rarely live up to advocates’ promises.

Les Bernal, an activist whose organization, Stop Predatory Gambling, opposes state-sanctioned commercial gaming, puts it this way: “The data has always been clear that this is a massive public-policy failure. In more simple terms, the economic impact of commercialized gambling is the equivalent of taking a hundred-dollar bill, throwing it into the street, and then paying somebody minimum wage to pick it up.” Gambling is what the economist Paul Samuelson referred to as a “sterile transfer”—money out of one pocket into a different pocket, creating no real value. Samuelson in fact addressed the issue directly in his standard textbook, Economics: “There is a substantial economic case to be made against gambling. … It involves simply the sterile transfers of money or goods between individuals, creating no new money or goods. Although it creates no output, gambling does nevertheless absorb time and resources. When pursued beyond the limits of recreation … gambling subtracts from the national income.” Bernal warns the libertarian-minded that the kind of gambling being contemplated in Texas is the opposite of a free-market outcome: It is a particularly ugly and regressive form of state capitalism, a series of cartels in which the government is the senior partner. 

“You pay even if you don’t play,” Bernal says. That is because casinos are associated with a reduced local standard of living, while non-gamblers end up paying for increased social services, higher law-enforcement costs, and other negative externalities associated with gambling. 

State-cartel gambling is not a very fruitful model for economic development. It is, on the other hand, an exceedingly efficient mechanism for transferring money from desperate poor people to such figures as Mark Cuban and Tilman Fertitta. 

One of the arguments made for legalizing gambling in Texas and other states that do not already have it is that without legalization, Texas will lose out to places that do have gambling. The foolishness of that argument can be readily seen from a trip to Atlantic City—or just up the road from Dallas in Ardmore, Okla. 

If that’s what winning looks like, Texas should be happy to lose out. 

Kevin D. Williamson is national correspondent at The Dispatch and is based in Virginia. Prior to joining the company in 2022, he spent 15 years as a writer and editor at National Review, worked as the theater critic at the New Criterion, and had a long career in local newspapers. He is also a writer in residence at the Competitive Enterprise Institute. When Kevin is not reporting on the world outside Washington for his Wanderland newsletter, you can find him at the rifle range or reading a book about literally almost anything other than politics.