Harry Reid and prostitution: Are brothels bad for Nevada's economy?

Commentary about business and finance.
Feb. 24 2011 6:06 PM

Stimulus Spending

Harry Reid says prostitution is bad for Nevada's economy. Is he right?

(Continued from Page 1)

Geoff Arnold, the owner of two brothels and the head of the Nevada Brothel Owners' Association, cites the example of tiny Wells, Nev., to show brothels' importance in the economically depressed northern part of the state. "There are only 500 families in that town," he says. "The two brothels pay more in fees than every other business combined."

OK, so maybe brothels are important on a local level. But Reid's anecdote suggests something else: That the brothel business in Nevada, no matter how small, drives big business away. Is that true?

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Certainly, there are some reports, like Reid's, of companies choosing not to set up shop next to painted-pink ranches, or even in the state at all. But those reports remain anecdotal, and conflicting. Las Vegas' mayor said the topic does not often come up when he speaks to businesses about moving to the state. Arnold says polls routinely show the majority of Nevadan business owners and residents support the status quo. "The Northern Nevada Development Authority says it has never heard of a business turn that part of Nevada down because of the brothels," he says, a point supported by the authority itself.

Brents also says she doubts the impact is big. "Throughout history, for the last 30 or 40 years, state officials have felt various degrees of embarrassment about the existence of the brothels," she says. "The casino industry has a love-hate relationship with them too." That's not because they tarnish the reputation of Vegas as a tourist destination—but because "it tarnishes the image of gaming as clean." Ultimately, she says, there is little to back Reid's assertion, true or not.

What is most remarkable about Reid's position may be that he expressed it at all. Many of Nevada's legislators and members of Congress leave the question of prostitution alone, deferring to local authorities when pressed for an opinion. Those who do speak out often do so for the other side: In 2009, state Sen. Bob Coffin, a Democrat who represents Las Vegas, proposed imposing a $5 charge per act, which would have raised about $2 million per year for the cash-strapped state. "I'd be happy to listen to arguments for legalization anytime," he said at the time. "In the meantime, I know we have to get some money from the world's oldest profession." (The bill, aimed at both illegal and legal prostitutes, failed in committee.) Las Vegas Mayor Oscar Goodman has also suggested changing state laws, even setting up a red-light district in Vegas.

There is, however, one kernel of truth in Reid's argument. Over the past 40 years, the state's economic growth has been driven by vice, with floods of tourists coming to gamble, drink, and partake in all-you-can-stand buffets. The recession has shown the fragility of an economy dependent on the business cycle: Allowing even more sin probably won't help the state much when the next downturn comes around. But maybe diversifying its economy will.

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