Friday, January 25, 2008

Indian Casinos - Support Expansion?

On February 5th Californians will vote on four propositions (94-97) amending Indian Gaming Compacts with four southern California tribes permitting them to increase their number of slot machines from roughly 2,000 to 5,000 in two cases and up to 7,500 in the two others, in return for uncertain increased payments to the state. The amendments also call for them to adhere to stricter environmental protections and to sharing revenue with non-gaming tribes.

Among others, Governor Schwarzenegger supports the propositions largely because he is confident the amended compacts will provide substantially increased payments to the state which California badly needs at this time. Is this a no-brainer and should these amendments obviously be supported? I don't think so, though California can definitely use more revenue .

The primary reasons for the federal government's support for permitting officially recognized Indian tribes to build and operate casinos on tribal land were to help members escape very wide-spread poverty and to enable the government to gradually reduce government subsidy payments. This support, reflected in policy initiatives by the Reagan Administration in the 1980's and two U. S. Supreme Court rulings, resulted in enactment by Congress of the Indian Gaming (not gambling!) Regulatory Act in 1988. It was so badly written, filled with loopholes, and conflicting interpretations that, many years later, armies of high-priced attorneys were still debating the definition of a slot machine. According to many critics, the Act created a system tailor-made for abuse. From the perspective of the country as a whole, our experience with the casinos has for the most part been very mixed and disappointing overall.

In 2001 there were 290 Indian casinos in 28 states with total revenues of $12.7 billion, with Time magazine estimating that collective net profit of $5 billion. According to the Bureau of Indian Affairs, there were as many as 562 federally recognized tribal governments in the U. S. in 2003, many having only a handful of members. Revenue from gaming is so lop-sided that Indian casinos in just five states with nearly 50% of the 1.8 million Native American population (Montana , Nevada, North Dakota, Oklahoma, and South Dakota) account for just 3% of casino proceeds! On the other hand, casinos in California, Florida and Connecticut with 3% of the population collect as much as 44% of all revenue!

A substantial amount of the profits are going to the tribal leaders of a small number of tribes, such as the 635 member Mashantucket Pequot in Connecticut, owner of the large Foxwoods casino, and 1,309 member Mohegan also in Connecticut, owner of the also large Mohegan Sun casino, as well as their non-Indian financial backers. Most of the casinos are barely breaking even, because they are relatively small, are located on reservations in isolated areas, and likely are not managed as well as they could be. Their members are therefore not receiving very significant benefits. That's also true with many of the casinos in California, though the casinos covered by the four propositions to be voted on are, as I understand it, doing very well as are their members.

Notwithstanding all the revenue and profits being earned, the thousands of jobs created, and ongoing support of the Congress, the Administration and most of our state governments, the unemployment rate for our Native Americans is a shocking 49% and those employed, but still living below the poverty line, is an equally shocking 33%! It would certainly appear that the revenue-sharing provisions that are part of most of the Indian compacts are not working as intended. One of the reasons is that oversight and enforcement is weak.

These are some of the reasons why I am not convinced that simply expanding a small number of successful casinos makes any sense, without seriously looking into, and effectively dealing with, the many reported abuses and important disparities, and especially the major social problems still facing the bulk of the Indian population. I am also concerned about marketing-savy expanded casinos inducing Californians to increase their gambling activities, taking significant risks, at a time when too many of our residents are financially very vulnerable and probably cannot afford it. They, and maybe even the state, would be better off if they instead used their gambling moneys to increase retirement or college education savings, or spent the money for home improvement or other priority personal needs to tax-paying companies.

Californians should therefore not support the four propositions and lobby instead with our politicians to comprehensively review the major issues facing our Native American population to decide what's appropriate. Importantly, this should include consideration for eliminating the current income tax-exemption for the casinos. That should in fact help to replace some of the revenues given up by voting down the four ill-conceived propositions.

Wednesday, January 23, 2008

Bad Economy - Who's to Blame?

Almost everyone knows the U. S. economy is in bad shape and a lot of people here and abroad are feeling the pain. The evidence is seemingly everywhere.

Real estate markets are chaotic with substantially falling prices and for the most part supply far exceeding demand. Mortgage investors have lost billions of dollars in recent months. Capital spending is slowing down. Many of our largest companies are reporting greatly reduced earnings or sizable losses, especially in the financial sector, like Citigroup and Merrill Lynch, due in large part to too many customers having debt they can't satisfactorily service, a big rise in mortgage foreclosures, and having to make substantial write-downs to the value of their loan and investment assets. All of this is leading to tens of thousands of layoffs and an increase in the national unemployment rate, which averaged 4.6% for all of 2007, but rose to 5.0% last December, and most likely will rise further in the months ahead.

Personal and business bankruptcies are on the rise. Making individual investors more nervous, the stock prices of the majority of our largest and most popular companies are down between 17% and 25% since early October 2007, when the Dow-Jones Industrial Average reached its all-time high. Not surprisingly, consumer confidence, a key to our economy's performance, is very shaky, and recession fears are mounting. To deal with these serious factors, President Bush and the Congress is beginning to urgently look at a sizable economic stimulus package to put more money in the hands of tax payers, and the Federal Reserve (the Fed) just cut the much watched benchmark federal funds rate by an unusually large 3/4% from 4 1/4% to 3 3/4% to ease borrowing costs and provide some badly needed confidence in the financial markets.

So who or what is to blame for the economy's current bad shape? Many scholarly articles and no doubt also several books will be written about this, but one can place legitimate blame on a number of groups of people and organizations. First, one can blame lending and regulatory institutions who encouraged lax credit standards, overly aggressive marketing of loan products, and inadequate disclosure and advice to unwary borrowers. One can also blame their senior management and boards for imprudent policies and poor oversight. Second, one can blame individual borrowers for excessive spending, taking on too much imprudent debt, and generally poor household financial management. Third, one can also place some blame on the Administration and the Congress for not seeing this coming and taking remedial action much earlier. There are many others as well one can point to, such as accounting firms, investment bankers, rating agencies, and real estate appraisers.

It also comes down to excessive consumer materialism and lender greed, with poor judgment all the way around. It will take a long challenging time for a full recovery. Hopefully many good lessons have been learned by all involved.

Thursday, January 10, 2008

Welcoming the Troops Home

As a veteran of the U. S. Army and a concerned naturalized citizen, I was pleased to publish a posting on my blog titled "Supporting the Troops" on 11/11/07. This current posting was prompted by a suggestion of a good friend of mine, Rosendo Castillo, a Vietnam War veteran, and originated with well deserved recognition by ABC News of a Texan who started what he called the "Welcome Home a Hero" program.

Bert Brady, a 69 year old veteran, was well aware of the fact that our troops who fought in the Korean and Vietnam wars did not get a warm reception when they came home in the 1950's and 1970's, respectively. For the most part the returning troops were either ignored or, especially in the case of those who fought in Vietnam, were actually received in many cases with hostility, in part because much of the media and many citizens were strongly against the war, and in part because a very small number of the troops did not serve with the honor we would expect.

Brady started the "Welcome Home" program for the troops returning from the Iraq and Afghanistan wars with the goal of making these soldiers feel more appreciated and proud of their service, notwithstanding the substantial public controversy over our military and political involvement in those two countries, especially Iraq. In 2006, as I understand it, Brady traveled to the Dallas/Fort Worth Airport on 300 different days to greet returning troops, and organizing many others to join him, including many other veterans of the Korean and Vietnam wars, also many Boy Scouts and Girl Scouts, and a sizable number of other senior citizens. For these initiatives ABC News named Brady their "Person of the Week" and put together a short moving video piece appearing on You Tube which clearly shows how appreciative the troops were.

I think this is great and Brady should be commended. As concerned citizens we must remember to differentiate between the government decisions many understandably disagree with that get the country involved in serious military conflicts abroad, and the service of our troops who are obliged to follow orders initiated by our governmental leaders. Welcoming home our troops by civilian volunteers, and without spending any taxpayer moneys, is something no one can legitimately criticize and everyone should applaud. Good job, Mr. Brady!

Saturday, January 5, 2008

Iowa Caucuses

The just concluded Iowa caucuses are another strange and antiquated part of our U. S. presidential election system. Congratulations to the two winners, Barack Obama and Mike Huckabee. Since 1972 the caucuses have been recognized as the first step in the presidential nomination process for both Democrats and Republicans, although their results have never been a very accurate predictor of which candidate will win the nomination.

From 1984 to 1996 the winners in Iowa did not go on to win their parties' nomination, although they did in 2000 and 2004, the latter, of course, when George W. Bush and John Kerry won.

It is strange that traditionally the Iowa caucuses are perceived as so important to the national prospects of the presidential candidates After all, Iowa is one of the smallest states with only 7 electoral votes and only 3 million population, less than 1% of the U. S. population. Only 359,000 Iowa voters showed up at the caucuses or neighborhood meetings to vote for their favorite candidates, just about 12% of the state's population. Many didn't show up because they were working, were impeded by poor wintry weather, or were traveling in other states and couldn't vote because absentee ballots are not allowed. Half a dozen California cities have a greater population than the number who voted in Iowa.

Yet the caucus winners have apparently gained a lot of political momentum as they resume campaigning in New Hampshire for the nation's first primary election on Tuesday. Political analysts have claimed that nomination prospects for third place Hillary Clinton and second place Mitt Romney have been materially hurt, and the widely respected and experienced U. S. senators Joe Biden and Christopher Dodd have apparently already dropped out of the race due to poor caucus placings. Like many other aspects of our presidential election system, it's not easy to make sense of it all.

Presidential Elections

The antiquated and very questionable U. S. presidential election system moves on with the Iowa caucuses having concluded this past week and the first primary taking place in New Hampshire next Tuesday. It is hard to completely understand why the Congress and past and current administrations have not done more to initiate much needed reforms, and why the media and the American people in general have more or less largely accepted the status quo.

There are a great many weaknesses with our current system. We still have the archaic Electoral College, initially put into use in the early 1800's, to select our president and vice president. We were reminded of the College's inadequacy in 2000 when Al Gore lost the presidency to George W. Bush by a small number of electoral votes, though he received a greater number of popular votes. Fortunately, a seeming majority of our politicians, led by Senator Dianne Feinstein, now finally recognize that we should either eliminate the College or make substantive changes to how we use it. I think it's high time to eliminate it and simply have our election results based on popular vote.

The election cycle is far too long, running about eighteen months these days for the majority of serious candidates. Six to twelve months should more than suffice. With the cycle as long as it is now, there are a number of problems. Key among these are that candidates have much less time to carry out their other professional obligations, especially those many who are serving as state governor or U. S. senator. Additionally,voters can't focus on the candidates and important issues that long and the majority lose most of their interest in the campaigns; and the campaigns cost much more than they need to or should, with the relative consequences of that fact, including large and time-consuming fundraising needs and consequent undesirable influence of sizable campaign contributions by lobbyists and other special interests.

In 2004 there was reportedly spent a total of $1.5 billion on the election. John Kerry and George Bush spent about $235 million each. This is ridiculous! Although this level of spending might give a temporary small boost to the economy, it provides too much opportunity for undue influence by major campaign contributors and helps limit the interest of potential candidates in even considering running for office.

Campaign finance laws and regulations are unnecessarily complex and a lot of the campaign spending goes to high-priced attorneys to help politicians and their advisors understand what is legal and what is not. This is stupid!

Turnout of voters is disappointingly low, averaging about 55% since 1960, compared to roughly 80% or more in democracies in other developed nations. In 2004 the turnout was a little more respectable at 60%, but that was the highest since 1968 and as many as 77 million eligible citizens didn't show up to vote! Bush won in 2004 by just 3.6 million votes, less than 5% of those who didn't show up. We need to seriously figure out why so many don't vote and do something to change this! I strongly suspect a lot of it can be attributed to general apathy, distrust of most politicians, and a high level of unhappiness with Congress as evidenced by the very low approval ratings in recent opinion polls. It's also due to eligible voter concerns with the other issues raised above.

It is relatively certain needed reforms won't be initiated this year in the middle of the election cycle. However, the new presidential administration and the Congress should work together to come up with relevant and effective initiatives in 2009. There will be vigorous resistance to any substantive reforms, because political influence will be impacted, spending will be reduced affecting beneficiaries, and campaign jobs likely will be lost. However, the country will be better off. A relative no brainer!