Economics

Scratch and Win

What lottery ticket sales reveal about the American welfare system

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In California, in Arizona, all across the U.S., in fact, people are feeling extremely lucky and optimistic. And also more desperate than ever. In other words, it's business as usual for humanity, and good times for America's lotteries. Forty three states, along with Puerto Rico, the Virgin Islands, and the District of Columbia, conduct lotteries now, and according to the Chicago Sun-Times, 17 out of the 41 lotteries that ended their fiscal year on June 30 established sales records in 2010. In addition, 28 of those states topped their earnings from the previous year.

The Sun-Times was quick to cast these stats as evidence of hard times. "Despite a struggling economy—or perhaps because of it—lottery ticket sales have surged across the country, including in Illinois." Three years earlier, The New York Times published a similar story. "Many state lotteries across the country are experiencing record sales, driven in part…by people…who are trying to turn a lottery ticket into a ticket out of hard times," it read. "Of the 42 states with lotteries, at least 29 reported increased sales in their most recent fiscal year. And of those 29, at least 22, including New York, New Jersey and Connecticut, set sales records."

If times are still tough in 2014, expect more of the same, because state lotteries break records even more frequently than MLB home run hitters did in the steroid years. In August, the Maryland Lottery announced that it had broken its all-time sales record for the 14th year in a row. Illinois has a nine-year streak going; Minnesota has a four-year streak on the line. Overall, U.S. lottery sales hit $58 billion in Fiscal Year 2010, up from $35.3 billion in Fiscal Year 2000.

Sales keep rising in large part because new states keep introducing the lottery, because states that have had the lottery for years introduce new ways to play and add retail outlets, and because people enjoy investing a few bucks in the far-fetched but irresistible dream of paying the government millions and millions in taxes.

Nonetheless, record sales are invariably characterized as indications of lost hope, financial desperation, another data point signaling the widening gap between the rich and poor. In America's least fortunate zip codes, the residents turn to scratchers for salvation. According to a 2009 article from an Illinois newspaper called the West Suburban Journal, the two neighborhoods with the highest unemployment rates also had the highest lottery ticket sales per capita. The article also features lengthy quotes from a convenience store clerk who says that some regulars spend $20, $40, $60 a day on tickets. In a 2010 article entitled "Hope and Hard Luck," a public policy organization called NC Policy Watch finds that ticket sales are briskest in North Carolina's  poorest counties and reports on one hard-luck case who estimates that he's spending $30 a day, or $11,000 a year, on Pick 3 tickets.

But if these stories paint a picture of economic desperation, they simultaneously suggest America's status as the unprecedented land of plenty too. In the midst of a recession, in its poorest neighborhoods, there are people who have enough resources to invest $20 to $60 a day in lottery tickets? I'll have a little of that recession, please!

While such individuals are no doubt outliers, and possibly mythical, harder evidence suggests that even in places under great economic strain, people aren't  yet so desperate that they're willing to sacrifice a $300 Mega Millions pipe dream for more utilitarian purchases, like eggs or Coca Cola. In North Carolina's Lenoir County, where NC Policy Watch reports that "23.5 percent of the population lives under the poverty line and nearly one in 10 people are out of work," per capita sales of lottery tickets in Fiscal Year 2010 were $423.92.

Much of that $423.92 per capita was returned in prizes, some was applied to the costs of running a lottery, and the rest was retained by state of North Carolina as what lottery officials call "profits" and everyone else calls "implicit taxes." Thanks in part to their monopoly status, lotteries are free to tax all who play them at extraordinarily high rates, and these rates are even more burdensome to poor players, whose ticket purchases comprise a higher percentage of their income than do those of more affluent players. In North Carolina, the implicit lottery tax rate was 43.5 percent in Fiscal Year 2010, meaning the state ended up collecting $184.40 per capita in taxes from some of its poorest citizens through the sale of lottery tickets.

At the same time, the federal government may be making those implicit taxes somewhat easier to absorb. In Fiscal Year 2000, U.S. lottery sales totaled $35.3 billion. In Fiscal Year 2010, that number had risen to $58 billion. During the same time period, annual expenditures for the Supplemental Nutrition Program, or food stamps, rose from $17 billion to $68.3 billion. Could the net increase in $51 billion food stamp dollars to spend be related to the $23 billion net increase in lottery ticket purchases?

You can't use food stamps to buy lottery tickets, but if your food stamp allotment subsidizes at least a portion of your grocery bill, you may be able to supplement your scratchers budget with a few bucks that might have otherwise gone to stocking up on Top Ramen. In 2009, while contemplating legislation that would have prohibited anyone receiving federal or state assistance from winning more than $600 in the state lottery, Tennessee officials conducted a review that found that "half of the people who receive food stamps from the state—294,805 ?individuals—buy lottery tickets." The bill didn't pass, but in 2010, Tennessee residents received both a record level of food stamp benefits and spent a record amount of lottery tickets.

Or to put it another way: Rather than indicating rising levels of desperation and homelessness, record-breaking lottery sales may be a sign that the nation's various social welfare programs are more robust than they're often acknowledged to be. Since the year 2000, inflation-adjusted income per capita has actually risen 5.7 percent, or roughly $2200, primarily because of an increase in non-taxable benefits provided by the government—aka Medicare, Medicaid, welfare, etc. Blessed with this tiny windfall, we set our sights on the kind of jackpots only Mega Millions can provide.

Contributing Editor Greg Beato writes from San Francisco.

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  1. If ballots had a scratch off element, there’d be 100% participation.

    1. 0% percent after they figure out that all the choices are losers.

    2. If ballots had a scratch off element, there’d be 100% participation.

      Do we really want the kind of people who buy lots of lottery tickets to be doing a lot of voting?

      1. No it should be a choice. You either get to vote OR you get 10 free quick picks.

        1. The odds of winning the lottery are way better than the odds of having a decent president.

          1. That’s because we dont get to choose who becomes president, we get to choose who doesn’t become president.

      2. We know what’s better for them than they do themselves, and what’s better for them is shitting on them as much as possible because they suck and are dirty.

        Voting should only be the right of those of us who hate poor people.

        1. Well, everyone being free is the best option. But if the only choices are disenfranchising the poor or letting the people who can’t even run their own lives successfully get a say in how everyone else lives, I’m going with option A.

        2. I’m always tempted, when a lib/regressive throws out the “we care more about the poor than you” canard, to ask them if they actually know a poor person. Cause I swear to the gods that it makes me feel like I live in a different reality than them.

          I say this as someone who grew up in poverty, got my ass out of it but still have family and old aquaintances who remain mired in it. My vast experience with “the poor” has led me to the inescapable conclusion that 90-95 out of 100 poor people are poor (in the U.S. anyway) because of behaviors and choices made by them. It’s that simple.

          Just one of a hundred examples I could give to support my position: My Dad is friends with a woman whose 37 year old son lives at home and somehow qualified for disability payments some years ago. Apparently he has mental issues but he seems to function well enough to have had jobs in the past. He hasn’t worked in years, stays up all night playing video games, sleeps all day and occasionally collects junk to sell to make a little cash so he can rent more video games. When his $647 a month check arrives, I shit you not, he gets in his mom’s car goes to the local quickie mart and buys $647 in scratch off tickets. The rest of his needs – food, housing, cable tv, phone, etc. are supplied by his dumbass mother who barely makes enough money to support herself.

          This anecdote and a hundred others I’ve personally experienced have convinced me that, for the most part, the vast majority of aid that goes to “the poor” ends up being just a subsidy for bad habits whether those be smoking, gambling, drinking, drugs or a mixture of some or all of the above.

          1. So your exhaustive studies of *one* case has led you to a sweeping conclusion? Another Cato institute fellowship!

            1. But don’t mind me bringing up one extreme hard-luck case to support *my* sweeping conclusion. That’s just how we Media Matters leftards roll!

              1. He said he had hundreds of examples, but you’re right, all the anecdotal evidence on either side doesn’t amount to a whole lot. Still, this guy (37) seems like he’d be a great fictional character, although not inspirational.

              2. I have absolutely zero power to implement any policy towards poor people. I’m just explaining my life’s experience growing up poor and knowing tons of poor people. As Art states I said hundreds of cases I could share. And all that experience, and yes I know anecdotal evidence is weak, has shown me that in America, in most cases decisions people made and continue to make are the most important factors influencing their poverty. And I have yet to see one change their decision making no matter how much aid they may be given. Hell, the aid seems more to cement the poor decision making. Just saying.

                1. fucking fat cat living it up at his moms.

            2. Actually, it’s a study of three. His, mine, and Ben Franklin’s: “I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. In my youth I traveled much, and I observed in different countries, that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”
              Any one else notice the same pattern?

            3. Sorry Hate Potion, but you are way off base. I have dozens of examples like Crawdads. I grew up in the deep south and I have known many people that most on this site would call poor. Almost ALL of them are there because of decisions they made at some point in their life. Decisions like dropping out of school, alcoholism, drug use, unmarried women with several children, etc.

              Don’t comment on things you know nothing about. It makes you look like a fool.

            4. You can add my hundreds of anecdotal cases to his, documented in my eight years of volunteer work; and my +1 on growing up poor and being surrounded by poor white trash who made sure, through assorted dumbassedry, that they’d be poor forever.

          2. This is exactly why charity should be handled on the local, private level, rather than at the federal level. The federal government can only make broad rules about who qualifies for aid. The local church group knows exactly who really needs help and who is just a lazy dumbass.

            1. Exactly! Remember when the left and government worked so hard to eliminate the idea of “undeserving poor”? Why is that such a difficult concept?

      3. They already do.

        What we really want is purchase of lottery tickets to be grounds for never being able to hold a public office.

    1. No, this is more properly known as The Idiot Tax.

      1. It’s really sad. I know a family, who took what money they had, and bought lottery tickets, trying to win enough to pay their mortgage payment before they lost their home.
        Interesting that our gubbermint makes gambling illegal unless ‘they’, are in charge of it and reap the enormous revenues.
        Where in the Constitution is gambling illegal?

        1. It’s one of those things left to the states in the Tenth; and it’s the states deciding not only the legality or illegality of various forms of gambling, but also who gets the revenues from them. So check your own state’s constitution for the details.

      2. and here i thought “they” don’t have any “skin” in the game…

  2. and because people enjoy investing a few bucks in the far-fetched but irresistible dream of paying the government millions and millions in taxes.

    This made me chuckle (especially since, as a Canadian, lottery winnings are tax exempt).

  3. I’d say cancel the food stamps and keep the lottery. They’d learn to do math that way.

    1. cept the lottery is for folks that cant do math

      1. That’s the point.

      2. cept the lottery is for folks that cant do math

        Kind of like full price college.

        1. reminds me of Elizabeth Warren and her extensive knowledge on the workings of Capitalism…

  4. In the midst of a recession, in its poorest neighborhoods, there are people who have enough resources to invest $20 to $60 a day in lottery tickets?

    Yep, the War on Drugs is a wonderful thing.

  5. I think we should do a reverse lottery with the government. If it correctly picks a set of numbers with one-in-fifty-six-million odds, then the citizen issuing the ticket has to pay income taxes that year. Otherwise, no income tax.

    1. So, on average six (6) citizens would be paying income tax each year? That level of revenue wouldn’t even support the reverse-lottery-taxation system you’re proposing!

      I like how you think!

      1. We can reduce the odds if the government behaves itself. However, note that the determination of the odds and frequency of participation is at the sole discretion of the taxpayer.

        I’m setting mine at eleven billionity.

        1. Shouldn’t that be eleventy billion, ProL?

          1. It’s my lottery, and I set the odds. Thanks to your criticism, I’m increasing it to two googolplex.

  6. They only pay out about half of what they take in and yet gambling is immoral or something. These people would be better off playing almost any game at a casino than that.

    1. The lottery is ok because its “profit” goes to help teh childrenz and stuff.

      1. Yep, it’s essentially the reverse robin hood tax: taxing poor black and hispanic families to educate well-to-do suburban white folk.

        1. Golly, it’s just terrible how they twist the arms of those stupid, um, ethnic people, and force them to buy lottery tickets.

          The well-to-do suburban white folk are the only ones who give a soft shit about their kids’ education. How do you think they became well-to-do? The lottery?

          1. Well, the left is often making the case that whose who are well to do won life’s lottery.

            1. @NoVAHockey, lemmy FIFY: what they’re attempting to do is make the case that the well-to-do should give their stuff to the not-well-to-do, using the imaginary and proofless evidence “you people won life’s lottery” as the basis of their argument.

          2. Don’t get me wrong, I’m not exonerating the people who buy the tickets or claiming they’re forced to, just highlighting the realities of the system. If po’ folk wanna play a lottery, they should be permitted, but ideally it would be a privately run system that produces far better odds of winning instead of confiscating half the proceeds for teh edumacashionz.

            1. Why is the government involved in gambling? Someone explain that to me?

              1. “Hey, these mafia guys are making a ton of money by running numbers rackets. Let’s make it illegal, and then take a 50% vig. These chumps don’t know how to really fuck their consumers the way we do.”

              2. I’ll give you odds that the answer has something to do with money

              3. They’re the only ones we can trust to do it without exploi?hahahahaha!

                Sorry, sorry, let me try again in a minute.

              4. Why is the government involved in gambling? Someone explain that to me?

                Because it’s an easy way to pry a few more dollars out of people, which if it tried to do by increased taxation would cause riots in the streets?

            2. If the government is going to exist, I’d rather it get its funds from a voluntary system such as a lottery than from a mandated tax.

              1. I’d be fine with that as long as it’s not a monopoly like the lottery is.

              2. Trouble is, as many states have found to their sorrow, there are only so many idiots willing to play no matter how manipulative your advertising gets. (Moreover, since the state is the one making the rules about truth in advertising, this advertising can get very manipulative indeed.) In fact, that’s one of the better arguments against having a lottery at all: if it’s such a wonderful way of raising cash, why hasn’t it already replaced all other forms of taxation?

                Granted, there is something to be said, in a Malthusian “survival of the fittest” sort of way, for letting idiots self-identify and self-destruct. If that’s the social outcome you’re seeking, however, you’d do better just to legalize snorting crack and be done with it.

                1. over here, over here, anytime, anytime…

  7. You can’t use food stamps to buy lottery tickets…

    Well, you can if you sell the cards for cash.

    BTW, did you know that most food stamp recipients have no earned income? 51.1% of household-heads who are receiving food stamps aren’t in the labor force and aren’t even looking.

    Welfare recipients=assholes, AFAIC. Every time one of these parasites buys a lottery ticket, the ticket machine should give them an 800-volt shock.

    1. BTW, did you know that most food stamp recipients have no earned income? 51.1% of household-heads who are receiving food stamps aren’t in the labor force and aren’t even looking.

      “It’s free!! Swipe yo’ EBT!!! It’s free!! Swipe yo’ EBT!!!”

      1. When life is hard,
        I pick up that card
        With a smiley face!

        Nice guy! Mr. Nice guy!

    2. Yeah that was pretty retarded. People can buy/sell heroin on the black market but somehow are incapable of selling food stamps?

    3. To be fair, the percentage on social security accounts for a good piece of that number.

      Retirees would naturally be out of the labor force.

      1. Well, I don’t know about “naturally”. Unlike what I hear about when social security was established, most of them are still physically capable of working, at least part-time. Though it’s probably not worth pressing the issue at the present level of unemployment.

      2. “naturally be out of the labor force”
        really? and somehow their food, shelter, and energy costs haven’t gone up?

  8. just think about how many people on food stamps also drink and smoke. i know of plenty of people who have EBT cards and they will trade $100 food for $50 in cash. there shouldnt be oneone going hungry it is all a scam

    1. I did some research once upon a time on government privacy, using the new (at the time) EBT card program. The whole point of the program was to reduce the stigma of being on welfare.

      You know what? Bring back the stigma.

      1. Because not only should we morally taunt people for being poor, we should make it as hard as possible for them to become un-poor by stigmatizing them. What entitles you to play everyone’s strict daddy?

        1. Tony wins the “missing the point” prize! I’ve been doing community service lately due to a misdemeanor, hanging out with “poor, deprived” black guys bragging about their car theft skills, when they’re not texting on their i-phone. Then when we take a break I see them using their EBT at the 7-11. I had become semi-PC through the years. My recent experiences have taught me that stereotypes develop for a reason.

          1. A chain gang being a totally unbiased selection pool.

            1. What pool would you prefer? And it’s far from a chain-gang. It’s the county wasting tax dollars driving 14 people around in a van doing hardly anything, with the county’s driver finding places to park where we won’t be seen so we can sit for a couple of hours and not do anything. Love that government efficiency.

              1. Are you wearing an orange vest and picking up roadside litter? Because I did that, man. I did that.

                1. No orange vest, but I’ve done the litter thing.

                2. I’m disturbed at the idea of The Art being exposed to careless drivers.

          2. Did your misdemeanor involve Jack and Coke by any chance?

            1. Wouldn’t you know it?

        2. See my above comment. Tell my why the dude I describe should not be taunted? How immoral is a system which takes from Peter to give to Paul who goes right out and spends every dime provided to support him on scratch off lottery tickets? Or a large chunk of said money on cigarettes or liquor or drugs? That’s what it becomes in fact for a great many on the dole, a subsidy to cover their bad habits – the very habits that made them poor in the first place.

          As to your last question, “What entitles you to play everyone’s strict daddy?” I would say the moment I’m forced to provide money for their support.

          1. When you think in stereotypes instead of data, you’re bound to have some unnecessary and counter-productive grievances.

            You can morally condemn people for whatever you like. That doesn’t mean law should do it. How will taking away even subsistence money to the poor be good for you in any way?

            1. How will taking away his money to provide subsistence money to the poor be “good for him”?

            2. I propose that everyone like Tony who demands that we sacrifice for wastrels should be the first to be sacrificed. In your case, Tony, that means that you must immediately be stripped of all your money and goods, including (especially) the computer on which you are advocating for more government spending on you and your fellow welfare state parasites.

            3. Who described a stereotype? I sure as hell didn’t. I detailed a real, in the flesh loser. Data obfuscates as much as it reveals, people aren’t data.

              In the case I outlined exactly how would you guarantee substaining that dude who takes every dime provided him to buy lottery tickets? Seriously, without being in a totalitarian system?

              1. dear tony, where do you think laws were originally derived from?
                morals (religion) or touchy feely liberalism?

            4. “When you think in stereotypes instead of data…”

              Are you insinuating you represent the latter?

              1. I believe I’m saying you guys take symptoms of a problem and then turn them into moral deficiencies to blame people and justify making life harder for them.

                1. There are women who are having babies just to get more gov’t checks. My wife saw this when she worked for the state disability determination dept, and a black friend said he knows people who do this. Guess how those kids turn out?

                2. @Tony,

                  Please use your next post to explain why it’s wrong to judge people based on observed patterns in their behavior. Note that your answer cannot be based on sentiment, themes/references from the Bible, or any other mythologies.

                  Humans have a special gift: we can collect and recall data from long-term observation of our surroundings, and draw conclusions from that data that allow us to protect ourselves from harm or loss.

                  Judgement of others is not only a valuable, built-in tool for self-preservation (and self-improvement, if the judged ever decide to straighten up and fly right), but it’s pretty damned amusing at times.

        3. What entitles you to play everyone’s strict daddy?

          Oh, I don’t know – maybe it’s because we’re the ones footing the bill for it?

        4. Like any other daddy who’s doling out the money to a wayward child, I’m going to take an interest in the way it’s spent.

          1. Of course, I wasn’t suggesting a “W” be tattooed on every welfare recipient’s head. My point, as most here I think understood, was that we shouldn’t have gone out of our way to make accepting welfare an okay lifestyle. People should want to support themselves, and welfare–if we must have it–should be a temporary state. It shouldn’t be made an attractive option.

            My wife takes my daughter to play at the mall on occasion, and has several times spoken to mothers who openly talk about their federal “benefits.” If I’m living off someone else, I’m embarrassed. Nowadays, people don’t think there’s anything wrong with getting and staying on government assistance. It should be an unfortunate, temporary necessity, not a lifestyle.

            My real beef is that I think it’s undermined the strong work ethic that has characterized America for so many years.

            1. gettin’ one over on “the man”…

              1. I actually respect that point of view, but there are better ways of doing that, because some representatives of the Man want to keep you right where you are.

            2. I agree with you, but it shouldn’t be unattractive because of a stigma associated with being poor, it should be unattractive because it doesn’t afford a very good lifestyle. If you stigmatize poor people you make it that much harder for them to find a job.

              In theory I find the idea of the “work ethic” questionable–it’s straight from the Christians and I don’t like religion making law. But if you’re worried about people getting undue rewards for not working hard enough, why on earth would you target the poor first? Lots of poor people work much, much harder than lots of rich people.

              1. I don’t want poor people to be stigmatized for merely being poor. I’ve known some wonderful people who didn’t have much money.

        5. Once more, Tony proves he is an idiot.

  9. Most people like the escapism of dreaming about a different life. A lottery ticket costs about as much as a New York Times. A rich person buys a New York Times so he can spend an hour pretending he is in the same class as the poor. A poor person buys a lottery ticket so he can spend an hour pretending he is in the same class as the rich.

    1. I hadn’t thought about this until you mentioned it. Now I’ll have to say a lottery ticket is the second-to-last thing I’ll spend my money on.

  10. Scratch and win? I prefer scratch and sniff.

    Nothing like the old STINKY FINGER!

  11. My understanding on food stamps was that you couldn’t really get them unless you had kids (or a disability).

    In any event, turning food stamps into cash has long been a market in inner city neighborhoods. Even with the swipe cards it’s able to be gotten around.

    I believe this to actually be a good thing (at least ‘good’ once you commit to having food stamps in the first place). Many poor families rely on this market as a source of very cheap food by purchasing the stamps at a significant discount from others who want cash instead.

    The whole situation highlights the problem with people who rail against the “free market.” It’s no different than railing against gravity; markets will continue to exist as long as some people value items at different levels than others.

  12. When lottery profits go to education (which presumably includes teaching math), it seems like there’s a conflict of interest or a perverse incentive … or something.

    1. Well, it’s a way to get lousy parents to contribute to their kids’ education, I guess. An active interest would be better, but hey.

      1. Not to say that everyone who plays the lottery is a lousy parent, but I’m sure there are plenty.

  13. Yeah, these stupid lottery players. They could take that money and put it into a saving account and earn compound interest. Interest rates are really awesome now-a-days I hear. How much do you need to open a Schwab account?

    1. Sorry Troy, your sarcasm won’t fly. Regardless of the interest rate, I can assure you that if you make a weekly or monthly deposit to a saving acoount, at the end of the year you will have a little money saved.
      If you buy lottery tickets instead, you won’t have anything to show for it.

      1. I have read in various places that the numbers game was/is actually used as a kind of savings mechanism by some people living in the ghetto. Sometimes they didn’t have access to a bank (for either physical or social reasons), and if they kept cash at home it would probably get stolen (likely as not by someone living in the household), and nobody in the community but the numbers man could or would extend you credit. Given that, gambling can serve as a kind of perverse “bank”: you put your money in, and sometimes you get to withdraw. If you don’t win anything, so what, you were already poor. If you do win, you go out and get stuff you were dreaming about. You never get out as much as you put in, but that’s just seen as kind of the cost of doing business.

  14. Boy those poor folks sure have it good. How about you live like they do for one day? You insipid idiot.

    1. They’re now in the third generation of being dependent on gov’t, of never having seen an adult go to work. They supplement their gov’t checks with crime. I’ve seen their children carrying my neighbor’s property to their car. Read your local newspaper and see who’s committing the crimes.

  15. Thanks – very nice article.

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  17. I say this as someone who grew up in poverty, got my ass out of it but still have family and old aquaintances who remain mired in it. My vast experience with “the poor” has led me to the inescapable conclusion that 90-95 out of 100 poor people are poor (in the U.S. anyway) because of behaviors and choices made by them. It’s that simple.

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