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Schwarzenegger’s Real Test of Strength

By Rachel Marsden

Speaking at the Republican National Convention, California Governor Arnold Schwarzenegger praised, in the same breath, former President Richard Nixon and the concept of American free enterprise. Both mentions took a lot of guts. The former because it was the first time anyone speaking at a Republican convention since Watergate had uttered Nixon’s name, and the latter because Schwarzenegger’s position on an important issue in his own state flies in the face of free enterprise.

On November 2, 2004, the people of California will vote on Proposition 68. The measure will ensure that the 64 native tribes who operate 53 casinos and have a total monopoly on gaming will start paying 25% of their net win revenues to the state. To date, natives haven’t had to pay a penny in tax on their casino profits. Instead, they’ve been using the money to buy off politicians in order to keep themselves in the way to which they’ve become accustomed. This kind of influence peddling has turned native tribes into political kingmakers. For example, they donated $2 million last year to Schwarzenegger’s recall opponent, Cruz Bustamante.

If Proposition 68 passes, and even a single one of the casino-operating tribes fails to bide by it, then the natives will automatically lose their monopoly on slot machines. Non-native businesses currently operating five racetracks and eleven card clubs in the state will be allowed to get their hands on the slot machines and use them as a means to increase their bottom line. These folks will have to pay 30% of their profits to the state and an additional 3% to local governments. Of course, this would be best scenario for the state because it’s the formula that maximizes cash flow into government coffers.

Schwarzenegger ascended to the governorship as the result of a rare recall election in which people couldn’t drop-kick his predecessor (Gov. Gray Davis) out of Sacramento fast enough. Davis turned the state into a mess by running up the debt and pandering to special interest groups.

You would think that Schwarzenegger would want to use the Proposition 68 debate to prove that he really is all about debt-reduction and free enterprise, and that he wouldn’t dare pander to special interests. Instead, Schwarzenegger has come out swinging against Proposition 68, and has even used $150,000 from his own “California Recovery Team” committee war chest to supplement the natives’ own millions.

Schwarzenegger ought to be encouraging the proposition, given that if it passes, it would mean that money would pour into state coffers--either from the natives, or from non-native interests in the case where the natives refuse to abide by the law and default on their monopoly. It’s a win-win situation. But Schwarzenegger is trying everything he can trying to rob the state of this desperately needed cash: He’s going around prior to the public vote on the proposition trying to negotiate deals with individual tribes. So far, he has succeeded with only five of them. Five out of sixty-four. Ninety percent of the other tribes are still paying zip-all to the state. Obviously Schwarzenegger must figure that California doesn’t need the money that badly.

And so much for the spirit of “free enterprise” for which Schwarzenegger says he admired Nixon. By opposing Proposition 68, Schwarzenegger is advocating in favour of protectionism. If the natives do default and refuse to pay their fair share of taxes under Proposition 68, then they’d have to compete with other gaming venues for customers and revenue. It might be a bummer for the natives, but free competition has always meant better deals for customers.

Native casino interests have been pouring money into a negative advertising campaign to fight the proposition, which begs the question: If they had any intention of paying the tax anyway and not planning to default on their obligations under Proposition 68, then why are they so worried?

The ads may as well just say, “When you gamble, kittens die and Baby Jesus cries.” It would be about as legitimate as the fear-mongering, ridiculous arguments they’re already making.

The ads state that putting slot machines in non-native casinos would mean more crime and increased traffic congestion. They suggest that the non-native slot machines would be located “near 200 schools”. Wow, a whopping 200 schools clustered around 11 card clubs and 5 racetracks? Please. And installing a few slot machines inside pre-existing facilities will lead to traffic gridlock in urban California? Come on. That’s like saying that because some guy smokes three cigarettes a day on his coffee breaks, he’s contributing to global warming.

The notion that crime is associated with people pulling levers and watching little graphics of lemons, grapes and cherries spinning around while lights and whistles go off is sheer lunacy. I mean, think about it for a second. What rampant, horrible crimes are really, truly committed in and around casinos? To give you an idea of how desperate people are to make the association, a local paper in my hometown of Vancouver, BC, recently did a feature on the ‘perils’ of a gaming lifestyle. The most heinous ‘gambling-related crime’ they could identify was one involving a man convicted of beating and strangling his wife to death after he was “provoked” by her wild gambling sprees and her demands to be paid for sex. Just a little bit of a stretch here to blame all of this on a casino.

In another example, a man runs around committing robberies in order to get gambling money. Yes, it’s sad that some people are addicted to blowing their money on slot machines, but slot machines don’t make people destitute. It’s like telling an overeater that he can’t go to McDonald’s anymore; it’s not going to stop him from inhaling the contents of his own refrigerator.

People who are so obsessed with gambling that they just can’t control themselves will find another way to indulge in their habit--namely by using one of the many gambling websites available on the Internet. A junkie is going to get his fix anywhere. At least if slot machines are taxable, the state can use the revenues to fund anti-addiction programs to benefit these people.

There’s only one feasible, logical reason why Governor Terminator would deny state coffers much-needed revenue by opposing Proposition 68 so publicly: because to slam the door on the kind of potential campaign money that natives could offer him isn’t such an easy thing to do. Just ask Gray Davis. Earlier this year, the Las Vegas Sun reported that “Schwarzenegger campaign advisers said [he] had not ruled out accepting contributions from the same groups whose money he turned down during his recall campaign against former Gov. Gray Davis.” In the story, Schwarzenegger’s chief political fundraiser, Marty Wilson, was quoted assaying, “We are always evaluating and re-evaluating our campaign contributions.” Indeed they did during the recall campaign when Schwarzenegger initially said that he wouldn’t accept any campaign contributions at all, but later ended up taking in millions.

Perhaps it’s time for voters to ‘evaluate’ Schwarzenegger’s position on Proposition 68, and ‘re-evaluate’ their own stand.




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