Economy & Budget

Let states legalize online gambling to stimulate the economy

The Joint Select Committee on Deficit Reduction—the Super Committee—is soon expected to present its proposals to cut the deficit by $1.5 trillion. There is speculation that its recommendations could include legislation to legalize, regulate, and tax Internet gambling in the United States. If they do, Congress and the administration should take up the recommendation.
According to some estimates, legalized online gambling could contribute up to $150 billion to the American economy. Therefore, it is a highly attractive prospect that has garnered increased media and legislative attention in recent years with several bills introduced in Congress and about half a dozen states considering legalization on an intrastate basis. And the best way for Congress to stimulate states’ economies while respecting state sovereignty is to repeal the Unlawful Internet Gambling Enforcement Act (UIGEA), and instead allow states to legalize and regulate online wagering how they see fit.   A state-based system would promote regulatory competition, strengthen states’ independence and self-sufficiency, and result in far more economic stimulation and job creation than a federally regulated market.
There is no valid reason or right for any government, whether state or federal, to bar its citizens from voluntarily engaging in an activity that does not violate the rights of other citizens. The question over the morality of gambling was resolved long ago. More than 70 million Americans gamble each year and nearly 90 percent say that they have gambled at least once in their lifetime. Every state, apart from Hawaii and Utah, has some form of legalized gambling and all but seven States operate lotteries. Yet, some lawmakers have blocked Congressional attempts to legalize and regulate online betting at the federal level. This has left the legality of such activities up for debate.
As demonstrated by the Department of Justice’s recent crackdown on Internet gambling websites, bans do not work.  The open nature of the Internet makes a prohibition on such activity virtually impossible and enforcement is on dubious legal grounds when the websites are owned and operated in foreign nations. Bans simply force consumers to operate outside of the law without the protection of the American government.
It is unlikely that Congress could pass a federal regulatory scheme that sufficiently pleases all states. It is likely that the only way online gambling will become a legal and thriving industry in the U.S. is to have each state determine how licensing and regulation can best serve its residents. Such a system will raise revenue more efficiently and enable the creation of a greater number of jobs than a federal system.  A state-based system would allow for competition, innovation, and alteration based on the demands of each state’s constituents. If one state regulated online gambling poorly, businesses could seek greener pastures in neighboring states.  Most states already have some form of legalized gambling, and therefore already have the necessary regulating bodies to oversee licensing and regulation of a legal online gambling industry. Federal laws already exist regarding personal income taxes, so online gambling, if officially legalized, could be taxed like any other economic activity. This additional revenue would allow states to get their own fiscal houses in order without requiring the help of federal dollars, thus saving the American public from financing more bailouts.
Americans ought to have the right to do with their own money as they please in the privacy of their own homes. Current US law puts such activity in a legal gray area.  Congress needs to shed some light by making the legality of online gambling unambiguously legal. The best action federal lawmakers can take to achieve that is to repeal UIGEA and allow states to legalize and regulate Internet gambling in the way that best serves their residents.

Michelle Minton is the Director of the Insurance Studies project at the Competitive Enterprise Institute.


The gang that couldn’t shoot straight

Some voices won’t let go of the thought of imposing punitive new taxes on domestic oil and gas producers. Despite failing to gain enough support for these types of proposals multiple times over the past few years, some in Washington, including the President, simply refuse to give up. Just last month, Senate Democrats had to pull the energy tax provisions from their “jobs” bill because they could not get enough votes among their own members. When a letter was sent to the deficit reduction Super Committee this week advocating the idea, only 37 of the most liberal Democrats in the House and 14 in the Senate were willing to lend their names to it.
Probably the most absurd statement made in their letter was that “a slight increase in costs for domestic producers will not increase the price Americans pay for gas.” Of course, a $21 national energy tax that makes domestic production more expensive and puts American oil companies at a disadvantage to foreign oil companies would hurt consumers.
A tax hike of just $5 billion would increase energy production costs, resulting in lower domestic output, increased import levels and yes, more pain for consumers at the gas pump. Ironically, if this Gang That Couldn’t Shoot Straight received just a fourth of the hike they’re demanding, the government would realize a $128 billion loss in revenues, according to a study by energy research and consulting firm Wood Mackenzie. That’s right, their plan would increase the federal deficit.


Federal budget must prioritize opportunities, not arrests, for our young people.

When I was working as a doctor in Boston City Hospital’s Emergency Room, I spent way too much of my time treating wounds and injuries from violence. I saw far too many young people who would have been much better served sitting in a high school classroom than sitting bleeding in the ER.

One day I had enough; I wanted to stop stitching people up and sending them out to a world of more violence and figure out how to stop the violence in the first place. Thanks to federal support through the Centers for Disease Control and Prevention, I began working with communities across the country to implement a different approach to preventing violence: one based on giving young people opportunities and skills, instead of putting them in jail.

But these efforts are in jeopardy.  The Senate Appropriations Committee’s proposed 2012 budget bill zeroed out all funding for the CDC’s youth violence prevention activities. Though the House’s draft version currently leaves the funding intact, the future of this critical funding is deeply uncertain.
Elimination of this $19.7 million in funding will have a devastating impact on efforts to prevent violence across the country. It will compromise decades of work—including my own—that are showing real results.


The lessons of prohibition

Television viewers are being treated to another fascinating documentary from filmmaker Ken Burns, which focuses on one of the worst public policy decisions of the last century: Prohibition. The series illustrates how the 18th amendment – in outlawing the manufacture, sale and transportation of alcohol beverages – led to serious, unintended negative consequences.
Under Prohibition, crime rates soared. Gangsters and thugs became celebrities.  It was the exact opposite result of what Prohibition backers intended.
Prohibition taught us about the negative consequences of an ill-thought out policy. And Burns’ documentary could not be better timed, as our lawmakers continue to consider policies that could have unintended consequences that harm jobs, consumers and the economy.


Trade can bridge the partisan divide

We hear a lot about the deeply divided electorate, about the gap between the priorities of red state and blue state America.  While partisan differences have sharpened over the years, the truth is that the American people – conservative or liberal, Democrat or Republican – are unified when it comes to what our leaders in Washington should be focused on.  A September CBS/New York Times poll found that 59 percent of respondents said that the most important problem facing the country today was the economy.  To put that number in perspective, the next highest answer given was “Budget Deficit/National Debt” that clocked in at just 8 percent. 

It is clear that the electorate wants Washington to find a way to turn this economy around, and to the average voter there is no more important barometer to the economic health of the nation than the unemployment rate.  With the unemployment rate over 9 percent, it is clear that what has been tried in Washington simply is not working.

The corollary to the deeply divided America is the deeply divided Capitol Hill.  Certainly it is true that a number of factors, from campaign finance reform to redistricting to the rise of interest groups, have polarized Washington, yet there are still issues that can and should transcend the partisan divide. 


All hands on deck to preserve the JAGM program

When Washington, D.C. spins into a frenzy over defense cuts, even good programs can be ditched in a panic. Sadly, at times like this joint programs and supposed “extras” like new missiles are particularly vulnerable.
That’s the case with the Joint Air-to-Ground Missile program, known as JAGM. JAGM does not have a zippy name or a big marketing campaign behind it. Basically, it’s a replacement for three famous but aging missile types: the Hellfire, the Air-Launched TOW and the Maverick. Despite incremental improvements over the years, there’s no getting around the fact that all three of those missiles are 1960s-era designs at the end of their service lives.
Enter JAGM, a nearly $1 billion dollar initiative to develop a single missile that all branches of the military can share. Because it’s a joint program it has to make it through triple the budget reviews to survive. Fear is spreading that the Navy or Army will pull out, try to stick the other service with the whole bill, and end up collapsing the JAGM program like a house of cards.
That would be a mistake, because JAGM comes with important new capabilities that the warfighter has long been asking for. And it does so at lesser cost to the taxpayer than the legacy missiles it replaces.


A patient in need

Our economy is like a sick patient, languishing in the hospital. The patient is sick in part because of doctor (Federal Reserve) failure. And yet, we continue to depend on the doctor to treat the patient. The truth is that the doctor’s treatment options are limited and those options will not effectively heal the patient. The patient needs to be rushed to a different unit, with different doctors who will initiate a new treatment strategy, one that does not rely on the Fed for its economic salvation.
This seems to have finally been recognized in Washington, with members of both political parties pivoting to the issue of “jobs, jobs, jobs,” and Fed Chairman Ben Bernanke admitting that “most of the economic policies that support robust growth in the long run are outside the province of the central bank.” And while we can debate the relative merits and demerits of President Barack Obama’s job plan, one thing is clear: It is incumbent on Congress and the President to restore the economy. But the current political logjam means that we may continue to depend on Fed action, even though it is increasingly apparent that the Fed is not as omnipotent and infallible as some previously thought.


Trade deals negotiated in ignorance?

If the Senate learned right before a ratification vote that America’s chief arms control negotiator knew little about arms control, any treaty this official concluded would be dead on arrival.  Ditto for a peace treaty produced by a diplomat demonstrably short of knowledge about the adversary.  Why, then, do both the House and Senate seem so gung ho about three trade agreements handled by a U.S. Trade Representative who recently revealed major misconceptions about both America’s international commerce and its domestic economy?

Anyone doubting that this description applies to Ron Kirk should read an interview that President Obama’s chief trade envoy gave to Tim Robertson of the California Fair Trade Coalition in late August.  Even allowing for impromptu nature of the exchange, several of Kirk’s answers to Robertson’s questions about the pending trade deals with Colombia, South Korea, and Panama, make painfully clear that America’s trade policy point man is largely unaware what kinds of products the United States imports and, at least as important, what kinds Americans make.  Consequently, it’s hard to imagine him knowing whether the provisions he agreed to in these deals and trade-offs he accepted will help or harm America’s faltering economy – the acid test of U.S. trade policy.

Like President Obama and the rest of his team, Kirk has usually treated imports as if they didn’t exist.  Even though America’s purchases from abroad subtract from gross domestic product and therefore reduce employment, Kirk’s assessment of trade policies and their effects has focused almost solely on their potential to increase exports.   


Misleading job claims cloud defense spending debate

Secretary of Defense Leon Panetta, Boeing Corporation Vice-President James Albaugh, and House Armed Services Committee Chair Howard P. “Buck” McKeon have something in common: they are all arguing that scaling back the Pentagon’s spending plans will cost large numbers of jobs. Specifically, they suggest that if the budget “super committee” fails and automatic cuts in defense spending are triggered, unemployment could rise by as much as one percent.

Secretary Panetta has been making these claims in calls to members of Congress, and McKeon’s committee staff has made similar assertions in a memo whose findings will be submitted to the super committee.

These claims are misleading and irresponsible. They inject an economic fear factor into the defense budget debate that stands in the way of clear thinking about what level of spending is needed to protect the country and our interests.


America needs a balanced budget

Sixteen years ago, Congress failed to pass a balanced budget amendment by a single Senate vote. At that time, the national debt was approximately $5 trillion. That solitary vote resulted in our nation adding almost $10 trillion to the debt in the years since.

For those who were confident that Washington could show self-restraint without legal force, this has been an extremely expensive lesson. Both Republicans and Democrats alike are guilty for the hefty tab on our national credit card. Unfortunately, it is one that our children and our grandchildren will be forced to pay.