THE BACK PAGE
Is anyone else confused? … On the one hand, the scenario for a meaningful economic recovery is finally coming into view. There are few more credible commentators on the U.S. economy than Mark Zandi of Moody’s, who last month penned a report called “Headwinds Fade, Tailwinds Build”.
In it, he notes the following about 2011:
• Housing will finally bottom out, with average home prices creeping back up from the 30 percent-off level sustained since 2008.
• Households have shed $900 billion in debt in the last two years. Debt-service levels are returning to their lowest since 2000.
• New originations for credit cards, auto and consumer finance loans are registering their first year-to-year increase since 2007.
• Corporate balance sheets, boosted by deleveraging, cost-cutting and record profits, boast more short-term liquidity than at any time since 1950.
• The additional stimulus of last month’s tax deal, which included an unexpected payroll tax deduction, is another plus.
• The combination of the above factors is expected to lead to more hiring for the first time in more than two years.
And yet the scale of problems to unwind was, and is, so vast that a recovery that would otherwise bring back fond memories of post-war bliss figures to be more along the dreary “new normal” lines that 99 percent of the country has grown accustomed to.
Let’s start with the state of the states, which is alternately disappointing and demoralizing. State governments face total debts of $130 billion in 2011 and an estimated $140 billion in 2012, according to the non-partisan Center on Budget and Policy Priorities.
This is no news to the gaming industry, which has been following the case of Illinois with interest. The Land of Lincoln is running a shortfall to the tune of $13 billion, predicted by some to rise to $15 billion by mid-year, or more than half the state’s total budget of $26 billion. One shovel the state is reaching for in order to dig out of the ditch is more gaming tax revenue. Actually, it’s more like an earth-mover. The state Senate passed a bill last month that would add slots to six racetracks and create five new casinos, including one in Chicago.
Lawmakers are hoping the expansion will raise up to $1.4 billion a year for the state (some estimates are much lower), but opposition is coming not just from the usual anti-gamers but from within the industry itself.
“We’re not opposed to new casinos, it’s just the number of new casinos and gaming positions under this plan,” Tom Swoik, executive director of the Illinois Casino Gaming Association, told StatehouseNewsOnline.com. “It’s too much. Under this plan Illinois would have more gaming than Missouri, Iowa and Indiana combined.”
Timothy Rand, president of the Casino Queen in East St. Louis in the south of the state, testified in opposition to the measure before the House Executive Committee, noting that his revenues are off about 35 percent since the imposition of the state’s smoking ban in 2008. The racetrack slots portion of the bill would only make things worse, he said.
There has been some conjecture that the smoking ban would be traded off in return for industry support, but the bill’s primary legislative sponsor has denied this. Whatever the case, the situation speaks to the growing limits of what casinos can do for states desperate to raise revenue without touching the third rail of personal and/or property tax hikes. Pennsylvania is experiencing the same thing, where increasingly it appears that downtown Philadelphia is best left with one casino instead of the two originally envisioned and concerns about oversupply in the northeast portion of the state led Mt. Airy Casino Resort to pull 150 machines from its floor last month.
Which leads us to another source of insecurity that figures to weigh on the wings of the incipient recovery.
Much of the fiscal problem at the state level centers on unfunded pension liabilities. As 10,000 Boomers per day started turning 65 on January 1 they are confronted with (sometimes alarmist) stories about the future health of Social Security and Medicare. The mood is one of overriding caution. A generation that was supposed to arrive at retirement with record levels of wealth has been bruised, along with the nation. No surprise then that the legislation the gaming industry would really like to see move forward - online casino as opposed to land-based ones - is the one that would give them access to younger, more optimistic, customers.