Lottery

Powerball Frenzy is Just a Distraction

Money is fungible and lotteries simply supplant other funding

|

The run up to last Wednesday's Powerball drawing garnered more media attention than the Donald Trump campaign, with hopeful ticket buyers in the multi-state lottery vying for a prize that hit an astounding $1.5 billion. But despite the good news for a handful of winners—and the convenience store owners who sold the winning tickets—lottery fever means little to most people and offers little boost to the economy.

The last time I bought a lottery ticket was in the early 1980s, when I lived in a dicey neighborhood in Washington, D.C. The line outside the convenience store where the tickets were sold was filled with down-on-their-luck folks. It's obvious that lotteries offer horrific odds, even by modern gambling standards. It's all about dreams—and tax revenues. And some criticize it as a regressive, albeit voluntary, tax on those not too worried about the odds.

Powerball ticket buyers have a one in 292 million chance of winning. As Forbes pointed out, one is far more likely to be declared a saint by the Roman Catholic Church, become an astronaut or be hit by a meteor than hit a jackpot. Those scratchers and other tickets have better odds than the Powerball but, obviously, a much smaller payout. Yet state lotteries spend millions annually convincing people that they are just a ticket away from wealth and happiness.

Lotteries certainly aren't the only businesses that promote such buncombe. But as government-run enterprises, it's no surprise the biggest winners are government agencies, as many critics have noted. Powerball winners will pay more than half of their earnings in various taxes. The losing ticket buyers fund the lottery systems and state budgets. It's all supposed to be a good thing because, well, this is a voluntary tax to boost funding for public education.

In California, the public school system gets a little more than $1 billion a year from lottery proceeds, which is a tad over 1 percent of the budget. Research suggests lottery revenues supplant existing spending. Money is fungible, so the education element mainly is a public-relations ploy to help people feel good about the dollars they spend on tickets.

"The popularity of lotteries and legalized gambling is based in part on their claim to painlessly provide additional revenue to needed state functions," according to a study by Donald Miller and Patrick Pierce of St. Mary's College in Colorado. "The most popular purpose to which these revenues have been devoted is education. However, we have demonstrated that these are false promises for education. States are likely to decrease their growth of spending for education upon operating a lottery designated for that purpose."

Ironically, even advocates for more school spending, such as labor and education groups, are troubled by the misperception that lotteries provide so much education funding. "(T)he misperception about the lottery and education funding may play a role in shaping the 2016 campaign by Democrats, labor and healthcare groups to help schools and other services by extending soon-to-expire income tax rates on the most wealthy," reported the Los Angeles Times.

Unfortunately, the lottery bonanza only reinforces the current debate about schooling, which focuses almost solely on funding issues—and largely ignores reform matters that could arguably do far more to improve educational results.

The poor odds and dubious spending claims by lottery proponents seem to get a pass. After all, California legislators have used similar arguments to ban online poker operations and clamp down on fantasy sports enterprises, but not for the lottery. Conservative writer Michelle Malkin made a good point when she argued that not only does the government crack down on competitive gambling enterprises, but the feds closely monitor corporate advertising practices—while protecting state-run lotteries that promote dubious claims targeted to lower-income consumers. She wonders why they get a pass at allegedly "predatory behavior."

California officials have pointed to scandals in those other gambling industries to justify bans or limits. Yet Powerball has faced its own scandal. "Powerball sales have soared despite a scandal that rocked the organization that runs the game—a five-year-old investigation into jackpot fixing in one state that grew to include at least four others," reported the Seattle Times. If past scandals impugn online gambling, they should impugn these state-run lotteries, also.

My biggest problem with Powerball is it creates the impression that wealth primarily is created by luck rather than—as is usually, but not always the case—by starting businesses, investing carefully, spending a lifetime of hard work and careful planning. I have no moral problem with gambling, but at best it's a diversion, at worst a vice. There probably are bigger news events that ought to capture the public's imagination.

For instance, the Powerball drawing seemed to grab more attention than the ongoing stock-market plunge. This probably is harmless fun that provides vast riches to a tiny number of people and bolsters state coffers with voluntary revenue. But I wish Californians were spending more time discussing ways to jump start the economy.

NEXT: 'Stalemate' Over Porn Condom Law in Los Angeles

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. I’ve made $76,000 so far this year working online and I’m a full time student.I’m using an online business opportunity I heard about and I’ve made such great money.It’s really user friendly and I’m just so happy that I found out about it.

    Open This LinkFor More InFormation..

    ??????? http://www.Jobstribune.com

  2. And no matter who wins the lottery, it’s a wealth transfer to the 0.01%. #RichGetRicher. /prog

  3. Fungible, another word unknown to politicians, along with bsic economics. I first became aware of their ignorance when, as a kid, I read news of foreign aid (some shithole) which was for food and medicine only, specifically not for military equipment. I could not figure out how they could prevent the receiving government from using the internal money they would have spent on food, now unnecessary, from being spent on military equipment. I was way too young to understand the intentional duplicity of politicians, so I just assumed it was some grownup thing that I would learn about later.

    1. “Money is fungible”?

      Don’t tell that to the morons who say government payments to Planned Parenthood don’t go to funding abortion.

      1. And don’t tell it to the morons who say that tax breaks for churches and government spending on “faith based programs” doesn’t go to funding religion.

  4. I’ve made $76,000 so far this year working online and I’m a full time student.I’m using an online business opportunity I heard about and I’ve made such great money.It’s really user friendly and I’m just so happy that I found out about it.

    Open This LinkFor More InFormation..

    ??????? http://www.Jobstribune.com

  5. In turn, my biggest problem with your concluding paragraph is that it creates the impression that the stock market plunge is a matter of serious concern. As the late great Benjamin Graham observed, in the short term the stock market is a voting machine, but in the long term it’s a weighing machine. Fluctuations in the “voting” can be caused by all sorts of things unrelated to real long-term business value but mostly related to emotion and perception, like interest rate predictions, consumer confidence, election results and inflation fears. Long-term– which is how anyone should invest– it means nothing.

    1. The idea that short term investing is based on “emotion and perception” while long term investing is somehow “rational” is bullshit. The shortest term investment, algorithmic trading, is both completely devoid of “emotion and perception” and highly profitable. Investing is rational iff it yields an expected positive return.

      Long term investment is a good idea for most people, not because it’s any more rational than short term investment, but because every investment decision costs time and money, and most investors don’t get enough return in order to make short term investment worthwhile.

  6. You’re biggest concern is that lotteries suggest luck plays an important part in wealth? I’d think that lottery revenues supplanting existing spending is a pretty big concern. Do lotteries ever result in a lowering of taxes, or simply a shift in the spending of tax revenues? And finally, where does the money that people use to buy lottery tickets come from? What are they not spending the money on so that they can buy lottery tickets instead?

    I

  7. Google pay 97$ per hour my last pay check was $8500 working 1o hours a week online. My younger brother friend has been averaging 12k for months now and he works about 22 hours a week. I cant believe how easy it was once I tried it out.
    This is wha- I do…… ?????? http://www.richi8.com

  8. Lotteries certainly aren’t the only businesses that promote such buncombe.

    Lotteries are in the entertainment and imagination business, not in the make-people-rich business.

  9. Lotteries are a “voluntary tax?” What kind of gibberish is that?

  10. my classmate’s mother-in-law makes $78 hourly on the computer . She has been out of work for 6 months but last month her check was $17581 just working on the computer for a few hours. view website

    ???????========[] http://www.Jobstribune.com

  11. If lottery money were spent effectively on education, the population would become savvy enough to realize that a lottery ticket is a horrible purchase.

    1. i think some people get a real rush just from the possibility of “winning”. it’s not a stupid investment if you enjoy “playing” that “game”, i guess.

Please to post comments

Comments are closed.