When news of a U.S. Treasury Department study finding “no connection” between gambling and bankruptcy was first leaked last summer to The Wall Street Journal, it prompted longtime gambling opponent Rev. Tom Grey to respond by saying: “I don’t believe it.” What Rev. Grey didn’t believe—but what has been confirmed by this recent examination of existing literature on gambling and bankruptcy, profiles of the current status of gambling and bankruptcy in the United States, and new empirical research—is that contrary to his and other opponents’ tired claims, gambling is not responsible for all the world’s social ills. The following are some of the conclusions from the Treasury Department report, “A Study of the Interaction of Gambling and Bankruptcy,” which has been shared with members of Congress but, at press time, had not yet been made public:
- “Using state-level data, we find no connection between state bankruptcy rates and either the extent of or introduction of casino gambling. This result is supported by county-level analysis that shows no statistically significant casino effect (proximity to a casino) with regard to county bankruptcy rates.”
- Although the study cites high-risk gamblers as more inclined to declare bankruptcy, it declares the link a weak one. “… [T]he low prevalence of this type of gambling suggests that it has a relatively minor impact on the overall bankruptcy rate.”
- An empirical analysis of bankruptcy data “suggest[s] that gambling has no measurable effect on statewide bankruptcy rates [in Nevada, New Jersey or Mississippi].”
- While most available studies have pointed to a connection between gambling and bankruptcy, “none has ‘proven’ that gambling causes bankruptcy.”
In its review of available literature, the Treasury Department also found many shortcomings in the methodology of a 1997 study by SMR Research, which grabbed headlines with claims of a connection between bankruptcy and gambling:
- “… the fact that the number of gambling facilities is correlated with high bankruptcy rates does not mean that there is causation—the influence of other factors was not taken into account. Moreover, these communities may have had higher bankruptcy rates prior to the introduction of gambling.”
- “No attempt was made to compare bankruptcy rates prior to the introduction of gambling or to investigate the impact of other socio-economic factors.”
The Treasury Department study suggests that one of the plausible explanations for higher bankruptcy rates in counties with casinos is the fact that distressed counties are more likely to allow casino development. For example, casinos in recent years have been introduced to spur economic development in places like Tunica, Miss.; Gary, Ind.; and East St. Louis, Ill. This study confirms what the American Gaming Association always has maintained: that national statistics and other facts fly in the face of critics’ contentions suggesting a link between gambling and bankruptcy. For example:
- The majority of states with the highest bankruptcy rates are those with no casino gaming.
- Of the top 10 states with the largest growth in bankruptcy filings, only Mississippi has casino gaming, a state that historically has been economically depressed—likely a higher predictor of bankruptcy than a nearby casino.
- Of the 24 counties in the United States with the highest bankruptcy filing rates, none have casino gaming.
In addition, a 1996 USA Today survey of 522 bankruptcy filers found that 63 percent cited credit card bills and 50 percent cited job loss or pay cuts as the main reason for bankruptcy. Only 2 percent cited gambling as a major factor.
The irony of the Treasury Department study is that it was requested by one of the biggest foes of gaming in the U.S. Congress, U.S. Rep. Frank Wolf (R-Va.). After securing $250,000 in taxpayer money to fund his ongoing “witch hunt” against the gaming industry, it’s rather curious that a study not in line with his way of thinking has yet to be officially released.
The Treasury Department’s report is the second government study this year that failed to find a link between gambling and bankruptcy. The National Gambling Impact Study Commission, which released its final report in June, commissioned the bulk of its research from the National Opinion Research Center at the University of Chicago (NORC). In its report to the commission, NORC concluded: “… the casino effect is not statistically significant for any of the bankruptcy or crime outcome measures or for the infant mortality measure (which is as close to a common measure of child welfare as can be obtained).”
The National Gambling Impact Study Commission, it should be noted, also was the brainchild of gaming opponents in Congress, including Rep. Wolf, at a cost to American taxpayers of $5 million.
In what seems to be a pattern, Rep. Wolf this year designated additional funding to other government agencies, duplicating the work of the commission—despite the fact that the majority of the commissioners were personally opposed to gambling. On top of the Treasury Department’s bankruptcy study, Rep. Wolf requested two audits of the gaming industry from the General Accounting Office (GAO)—one examining the social and economic impacts and the other on campaign finance.
It’s rather curious that, after conducting a “pilot study” in Atlantic City for its audit of the social and economic impact of gambling, the GAO—which Congress oversees and funds—altered its plans to visit Las Vegas and instead opted to visit South Carolina, a state that operates gaming in an unregulated environment that is unlike anywhere else in the nation and that nobody in the commercial casino industry condones. Interestingly, when Rep. Wolf originally put in his request with GAO, he asked for an audit of only the negative impacts of gaming. From what we understand, preliminary findings from Atlantic City were positive, so it was reasoned that an examination of Las Vegas—the nation’s No. 1 market for casino gaming—would be a waste of taxpayers’ money because it would only generate more positive findings.
Casino gaming already has proven its value to the communities it serves in what is now three government studies in a single year—at a cost to U.S. taxpayers of more than $5.25 million. It’s clearly time for Rep. Wolf to stop tilting at windmills and wasting American taxpayers’ money to fund his personal crusade against gambling.