Moreover, I question whether the consumer spending generated is new or just diverted from existing gambling, entertainment, and other activities. It's clear from tax revenues that gambling in Pennsylvania has hurt Atlantic City. And surrounding states such as Ohio, Maryland, and Delaware have started their own forays into gambling, which will slow the growth of revenues in Pennsylvania and further damage the industry in New Jersey.
The Garden State, for its part, will take the longest to recover from the downturn and the devastation of Sandy. Atlantic City will likely lose conventions, trade shows, conferences, and concerts. More importantly, small-business owners deciding not to rebuild shops on boardwalks and elsewhere will mean less employment and less spending.
A key to the state's success will be rebuilding its beach infrastructure. Boardwalks and beaches have been and will continue to be crucial to New Jersey's tourism draw. Municipal governments will therefore play an important role in defining the state's future.
The region's governments should keep their budgets austere and conservative as they look for ways to cover their ever-increasing pension and health-care costs. Unfunded liabilities pose the biggest long-term financial threat to municipalities and their property owners.
As state-level spending continues to decrease, the area's small, urban communities will continue to struggle. The region's numerous municipal governments have not seriously pursued mergers, but they could save money by combining services related to tax collection and public works. Finding opportunities to privatize or share services could relieve some of the budgetary strains at the local level.
To grow and recover, the area needs to draw on its strengths and history. The Delaware Valley is rich in urban and suburban clusters of universities, art, culture, tourism, and sports. Gambling will continue to be a short-term solution for government budgets, with long-term costs to society. Historical strengths are the best sources of economic sustainability and vitality in any year, not just 2013.
David Fiorenza teaches economics at the Villanova School of Business. He can be reached at david.fiorenza@villanova.edu.
