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Dec 17, 2002 5:02 AM

   We are all living Lewis Carroll’s dream, and all of us are Alice in Wonderland.

   Henry Kissinger and Cardinal Law resign, as they should, but Trent Lott, foot lodged firmly in mouth, an apologist for segregation who helps run the country, does not.

   We prepare to go to war because George Bush thinks Iraq has weapons of mass destruction, but we allow North Korea, which has nuclear arms, to deliver scud missiles to Yemen, where terrorists abound, having already bombed an American ship and killed American sailors.

   The whole Alice cast is assembled in Washington: the March Hare, Tweedledee and Tweedledum, the Cheshire Cat, and of course the Mad Hatter. The Mock Turtle, too, with his different branches of arithmetic — Ambition, Distraction, Uglification and Derision.

   Living in this upside-down world, it was amusing to hear the leaders of racing rattling around discussing the industry’s problems in Tucson last week.

   It is one thing to listen to talk about the problems of betting in Las Vegas, which is built on gambling and glitz.

   It is quite another to hear the fury in an outpost of the old west, where nearby Tombstone sells Boot Hill and the gunfight at the OK Corral and the legend of Wyatt Earp as tourist attractions.

   But Tucson was where the talk was last week, and racing leaders discussed account wagering, Internet betting, what life will be like living with giants like Magna and Churchill Downs and whether the little guy can survive. Whether Chris Harn and his crooked fraternity brothers have ruined the sport and how long they are going to spend in the slammer, and — most important of all — who is going to get slots at tracks and who isn’t.

   That preoccupation was tempered by the realization that while slots are booming purses upwards for those who have them, fewer and fewer people are going to racetracks, even at the tracks fortunate enough to have slots.

   That point was hammered home in a presentation by Nick Eaves, the senior vice president for marketing and business of Woodbine Entertainment Group, based in Toronto. Woodbine racetrack is the epitome of racing and gaming, a masterpiece of a racino. It is huge, it is lavish, it is beautiful, it is all that anything in Vegas is, except that it has a racetrack, and a major one. The purses paid to horsemen are so high, thanks to the slots that are housed in a magnificent first level casino, that it draws American talent, despite the Canadian dollar being worth only 63 cents. Of course, owners also only have to pay only 63 cents in American money, instead of a real dollar, to have their horses trained.

   More important is the fact that despite all that, on-track attendance continues to slide there, and it was American betting money — $122 million of it last year bet by Americans on Woodbine’s thoroughbred racing alone — that kept Woodbine in black ink on its running horse operation.

   What this says is that the issue of slots at tracks still has not played itself out. Everyone who runs a racetrack wants slots, because Ontario and Delaware and West Virginia and Iowa, which have them, are enjoying prosperity. But in all of those jurisdictions legislatures had the wisdom to mandate a generous share of slot revenues to horse racing purses. Those subsidies have worked well for the racing industry.

   In Tucson last week, a warning was issued, that those who giveth also taketh away, and that as huge budget deficits engulf states and provinces everywhere, the legislators who wrote the slot subsidy guarantees — or their successors — can reach back into the pot and redistribute the spoils.

   That would change the dynamic of slots attracks, but an even bigger threat looms in Washington. If credit cards are barred entirely for gambling transactions, with no exceptions or exemptions, account wagering and interstate simulcasting will be in dire peril.

   If that happens, the American racing industry as now constructed is in jeopardy, and an American sporting tradition and gambling enterprise that has survived all challenges for two centuries will be fighting for its life in our Alice-in-Wonderland upside-down world.