January 24, 2023

Lottery Tickets: Passports to Poverty

Truth-in-advertising rules propagated by the FTC do not apply to state lotteries.

By Mark W. Fowler

My more-having would be as a sauce
To make me hunger more; that I should forge
Quarrels unjust against the good and loyal,
Destroying them for wealth.

—William Shakespeare, Macbeth, Act IV, Scene III

As you wait in line at a convenience store to pay for your purchase, you may find yourself perusing the scratch-off games at the counter. As you do so, bear in mind one curious little known but salient fact: Truth-in-advertising rules propagated by the Federal Trade Commission do not apply to state lotteries.

Apart from facilitating the welfare of the people, the government at all levels should be involved in strengthening the moral fiber of the community. Likewise, it should refrain from worsening the plight of the poor. In the case of state lotteries, it fails miserably at both. Consider two people: One bets $10 every week for five years on scratch-off games. At the end of this time, he will be very lucky to have won back 10% of that, or about $260. Lotteries make money by encouraging people to play longer, thereby losing more money. Slot machines are designed to play to the point of extinction — that point at which you run out of money. On the other hand, if a prudent person invests that same amount of money in an account paying 5%, he would have over $2,700. Not a fortune, to be sure, but many times better than what the lottery would have provided.

It is true, of course, that occasionally some win much more. But that is rare; lotteries are designed to make money, not lose money. The public interest group Stop Predatory Gambling argues that over the next eight years, gamblers will transfer over $1 trillion to government-sanctioned gambling entities of which half — $500 billion — will come from state lotteries.

While it is true that lottery play is voluntary, and often approved by popular vote, the fact remains that most players belong to low-income, low-education groups. And these gamblers are lured by the idea of getting rich quickly, with minimal effort. When you buy an orange, a pizza, or a pair of shoes, you get something tangible. But lotteries offer you something different and more ethereal — the dream of what you could do in the unlikely event you win. Inasmuch as I travel quite a bit, I often stop for a cold drink at convenience stores. I have seen people of apparently very modest means buying scratch-off tickets. I wonder how many are at the end of the road financially, desperately gambling their last few dollars in the hope that they will win enough to pay for infant formula, medicine, food, or rent.

In 2015, researchers at the Maine Department of Health found that of 4,600 lottery tickets paying out $1,000, over 3,600 were owned by individuals receiving public assistance. Those winners collected over $22 million, but it is mathematically certain they gambled far more than they won. Lottery advertisements focus on large (but rare) payouts that encourage more play. They increase advertising at those times of the month when citizens receive government subsidy payments. And they focus advertising and sales in low-income neighborhoods. As a consequence, many poor people see the lottery as a pathway to financial success. Millions are at risk. Over 60% of American households have less than $1,000 in savings. Increases in bankruptcy filings and ease of access to games of chance are likely related, but the data is scarce. What is behind the reluctance of states to evaluate whether the lottery is a good idea? Money. Billions of dollars of money.

In Tennessee, the lottery is used to finance education and specifically HOPE scholarships. If these were financed by cake sales, one could scarcely object. It is not. It is financed off of the backs of people who are poor, representing yet another transfer of wealth from the poor to the rich. If Exxon were charging more for gas in poor urban areas to subsidize gasoline for the rich living in suburbs, there would be a hue and cry from one end of the nation to another. But let the states do it, and the silence of liberals is astonishing.

This support for education is touted as a good thing. Its proponents say it’s voluntary; it benefits millions of students and eases the burdens on taxpayers. The cost they never count is the pain of gambling addiction (just as real as addiction to sex, drugs, and alcohol); the disruption to marriages; the diversion of gaming money from legitimate expenses; and the effect on commerce when cars are repossessed and homes are foreclosed. Moreover, it doesn’t count the loss of wealth to those who can least afford it. In a nation where many live paycheck to paycheck, small regular contributions to savings can mean a world of difference over a lifetime. Thrift is much more beneficial than gambling. Saving is a better mechanism for financial security than the lottery.

Libertarians argue that in a free society, adults should be free to do as they please. When fully informed of the risks and benefits, perhaps this is so. It could be argued that sanctioned gambling addresses demand that would otherwise be met in a black market and provides a more orderly manner of gambling. That is a value judgment difficult to weigh. On the other hand, perhaps we have a duty to shepherd the vulnerable away from temptation. Perhaps if we had truth in advertising we would say: “The lottery is a waste of time. You aren’t likely to win, and quite likely to lose. Save your money for a rainy day.”

Dr. Mark Fowler is a board-certified physician and former attorney. He can be reached at [email protected].

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