Monday, October 27, 2014

Atlantic City as a warning to all those who still refuse to learn

When I returned from overseas as a teenager, to get back into the American education system, I attended a prep school in New Jersey in the late 1970's. There was some ballot measure being put before the electorate at that time related to gambling in Atlantic City. I recall a conversation with a Professor Jackson in which he identified the benefits of such an action. These included an influx of investment, the rehabilitation of existing urban infrastructure, a catalyst for sustained economic growth and other blandishments.

But Professor Jackson was an honest man and he was more concerned about the downside than the possible, but not guaranteed, upsides: corruption, regulatory capture, escalating demands for additional subsidies, throwing good money after bad, failure once the subsidies went away, probability of not delivering on the commitments being made by developers, etc.

It looks like Professor Jackson was prescient those nearly forty years ago according to this sad post mortem, Detroit With a Boardwalk: Why Atlantic City is dying by George Anastasia.
Today, the city itself is in critical condition and the words of the former mayor could serve as its obituary. Greed has done Atlantic City in.

Four of its 12 casinos have closed in the last year, including the Revel, the newest and glitziest, despite a $260 million, taxpayer-funded gift courtesy of Gov. Chris Christie. A fifth, the Trump Taj Mahal, is on the brink. The gaming industry—proponents never call it gambling—has lost nearly 8,000 jobs since the beginning of the year and its revenue, which hit a high of $5.2 billion in 2006, is down nearly 50 percent. Add to that the city’s $65 million budget shortfall, pending layoffs of as many as 300 city workers and a tax base in free fall.

Sure, the still-sluggish U.S. economy is a factor. The loss of the East Coast gambling monopoly that Atlantic City enjoyed for nearly 20 years is another. Poor planning, lack of foresight and the failure to expand the city’s attractions beyond casinos are part of the mix. Even acts of God played a role: Though the city wasn’t devastated in 2012 by Hurricane Sandy the way other Jersey Shore towns were, tourism plunged in the immediate aftermath at a time when the city could least afford it.

But there is something else at play, something in the city’s DNA that is painfully obvious to anyone who’s lived or worked there.

Even during its halcyon days, Atlantic City was an enterprise built around blue smoke and mirrors.
Read the whole thing. All the ills Professor Jackson forecast are on display: corruption, regulatory capture, escalating special pleading, etc.

But it is not just Atlantic City, though they are probably one of the type specimens. Everyone, including voters, wants something for nothing. Politicians are there to figure out how to appear to provide something for nothing and how to hide the real costs. It is always about stealing from the future (bonds that won't be easily repaid), stealing from the present (displacing some residents to benefit others), regulatory capture and rent seeking and just plain old fashioned fraud and corruption.

The history of such projects is almost uniformly dismal with just enough occasional successes to keep politicians coming back for more. Hope springs eternal for those seeking to relieve the productive citizenry of their earnings through coercive confiscation and taxation.

The city in which I live is rife with significant municipal projects characterized by shaky finances and dubious prospects: hundreds of millions being spent on a rails-to-trails conversion that is already coming apart at the financial seams, a wasteful downtown streetcar of some hundreds of millions for a 1.8 mile run in an area where few people visit, and a football stadium subsidized by citizen's taxes, being built at the same time that the baseball franchise has fled the metropolis owing to financial exploitation by the city's politicians.

We keep proving that these white elephant projects don't deliver on their promises, but putting all that taxpayer money in a municipal "development fund" bucket is just too tempting to stop.

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