More bailouts won?t cure Atlantic City?s financial woes
By Seth Grossman, Political Columnist
(Reprinted from the November 18, 2009 Current-Gazette Newspapers of Atlantic and Cape May Counties – http://www.shorenewstoday.com/news.php?id=5745)
?Capitalism without bankruptcy is like Christianity without hell.?
? Frank Borman, test pilot, astronaut, former CEO of Eastern Airlines, 1982.
Our daily newspaper says Atlantic City is in ?crisis.? ?Casino executives, government leaders, and other key officials? are all invited to a big ?summit meeting? Nov. 24 to ?rescue Atlantic City?s economy.?
What is this all about? Today?s casino ?crisis? started with the Original Sin ? the New Jersey casino laws of 1978 ? 31 years ago. New Jersey?s casino laws deny liberty to everyone in the industry. This was supposed to ?rebuild? Atlantic City and ?keep the mafia out.? But when government destroys liberty, it soon destroys prosperity as well.
The 1978 law forced every casino to have 500 rooms. Why couldn?t local people like Bob and Abe Schiff or the owners of the Irish Pub, Teplitzky?s, Club Harlem, etc. build 10 smaller casino hotels with 50 rooms each?
Because Resorts International already owned the only hotel with 500 rooms ? and its powerful attorney/politician, Democrat Pat McGahn, wanted his client to have a one-year monopoly. Also, the unions didn?t want any small projects that might go nonunion.
The 1978 casino law forced casinos and their employees to be licensed and regulated by not one, but two state agencies ? a Casino Control Commission and a Division of Gaming Enforcement. The 500 rooms made every casino project so big that a third review by the Department of Environmental Protection was needed. There was a fourth government review by local zoning agencies. Casinos not only paid their own expenses, but all costs of every agency that reviewed them. This was far too expensive for any local people.
The 1978 casino law stripped all casino executives of their constitutional rights to support or even speak for or against candidates for state or local office. This put them at the mercy of every petty politician in New Jersey. Every now and then, the politicians crucify a casino executive to show off their power. The most recent example was when they yanked the Tropicana license.
To save their big investments, casino owners pay for protection. They pay with big fees to powerful law firms, sweet deals for powerful unions, and generous gifts to the favorite charities of politicians.
The 1978 casino law skims 1.25 percent of gross casino winnings for a political slush fund known as the Casino Reinvestment Development Authority, or CRDA. Gangster Bugsy Siegel skimmed the same percentage from his Nevada casinos in the 1940s for the same purpose.
Because casinos paid 80 percent of the taxes of Atlantic City but had no political clout, the local government and public schools became bloated and corrupt.
That?s why casino money never rebuilt Atlantic City as promised. Most of the money went to a handful of executives, politicians, government officials, lawyer-power brokers, suppliers, vendors, contractors and union leaders.
But now Atlantic City has competition from other states. About half the casinos are in bankruptcy or foreclosure or close to it. The proposed Revel Casino, which just got $56 million from Atlantic City taxpayers, now wants a $150 million bailout from county and city taxpayers.
The Revel is the wrong project, in the wrong place, at the wrong time. The cost is more than $2,600,000,000 ? or $684,210 for each of its 3,800 rooms. In a free market, the Revel is as stupid as a lead balloon ? or a $15 million baseball stadium. But there is no free market in New Jersey.
Revel?s attorney is local power broker Lloyd Levenson. To see how much money Levenson and his Cooper Levenson law firm dish out to Democratic and Republican politicians around the state, go to http://www.elec.state.nj.us/ELECRepo…pleSearch.aspx.
Revel?s big financial backer is Morgan Stanley, a Wall Street failure that got bailed out with $5 billion from Communist China in 2007, and $10 billion from the U.S. Treasury in 2008 (which borrowed much of that money from China).
During his losing election campaign, Democratic Gov. Jon Corzine bragged that he kept high-paid union members working on the Revel project ? when it made no economic sense.
Should county taxpayers bail out the Revel? Only liberty, not bailouts, can bring prosperity to Atlantic City. Liberty includes the freedom to fail and be accountable for one?s actions ? including bad choices.
If Revel?s investors can?t afford their project, let it go bankrupt. Let the unions, not the taxpayers, make concessions. Let a new group buy the unfinished work for pennies on the dollar, then change the casino laws to bring some real American liberty to the industry.
Somers Point attorney Seth Grossman appears live on WVLT 92.1 FM, heard throughout South Jersey 8 to 9 a.m. every Saturday. For information see www.libertyandprosperity.org, email firstname.lastname@example.org or call (609) 927-7333. Breakfast discussion groups are held 9:30 to 10:30 a.m. every Saturday at the Athena Diner, 1515 New Road, Northfield.