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Unlike the Auto Industry, No Bailout Anticipated for Casinos

by Hillary LaClair, Senior Editor
December 8, 2008

           Online casino may not be feeling the effects of the global economic crisis, but the same cannot be said for their counterparts. While the automobile industry in Detroit may be considered for a government bailout, gaming resorts are not so lucky. Casino stocks are plummeting, resorts are closing and jobs lost by the day.

            The loss of the U.S. automobile industry in Detroit may soon spawn the next Great Depression, some opine. With the loss of jobs and the failing U.S. economy, there are fewer car sales says the Center for Automotive Research, a Michigan-based organization.

            According to the Las Vegas Sun, “The same could be said of gaming and Las Vegas, which, like Detroit, has been hard hit by the downturn. Casino layoffs and reduced work hours are affecting nearly every sector of the local economy, including forcing the state, with 50 percent of general fund tax revenue coming from casinos, the cut one-third of its budget.”

            The current economic state of the U.S. has reached farther than just the automobile and casino industry, extending to budget cuts in education. New York recently suffered an $800 million reduction in school aid, as part of a plan to slash $2 billion from this year’s state budget.

            Unlike schools, however, the automobile and casino industry had a “bigger-is-better” mentality before the economy crashed, contributing to their downfall. While carmakers produced more and more SUVs to meet American demand, casino developers in Las Vegas borrowed money from Wall Street to create larger, more elaborate properties for the strip.

            According to the Center for Automotive Research, 352,241 Americans were employed in the automobile industry in September. An estimated 3 million jobs will be lost should the industry fail completely, with 973,969 more jobs lost in supplier and other related work fields. A 50 percent reduction in operations would cost at least 2.5 million jobs and $50 billion in tax revenue, according to the Research Center.

            Similarly, the U.S. casino industry employed more than 706,000 in 2007, and gaming manufacturers employed more than 28,000. The American Gaming Association has not released figures on the multiplier effect of the industry, although Applied Finance estimated tribal gambling accounts for 732,000 jobs and $29.4 billion in wages. Michigan’s auto industry is responsible for 22 percent of the state’s workforce, compared to the casino industry which is responsible for 26 percent of Nevada’s state workforce.

The difference here is that there will be no legislators begging for a bail out of the casino industry, despite the effect its loss could have on the economy. The American Gaming Association believes that this may make the online casino industry seem more appealing to the upcoming administration, as it still thrives, even in the U.S. The country stands to gain some billions in tax revenue in the event of its legalization. While the AGA has said that it does not wish to endorse internet gambling, it has lobbied for legislation that will require a study of the effects of the online gambling industry.