Someone in Los Angeles County had what promises to be a very good week:
“One ticket sold in California matched all the winning numbers drawn on Saturday for the Powerball jackpot that soared to an estimated $448.7 million on a surge of last-minute buying, lottery officials said.”
If the person holding this ticket wants a one-time, lump-sum payout, he or she will receive just over $279 million.
Of course it’s worth acknowledging that if you are born in the United States of America you’ve already partly won the lottery of life. Despite the gloom and doom rhetoric of cable news, we live in a country where, as a rule, we make significant efforts to educate the poorest among us, hold open and free elections, provide a social safety net, and maintain a healthy economy. Opportunity abounds for those who are willing to work hard and practice virtues such as thrift.
So why, every week, do millions of people continue to play the biggest money-draining activity imaginable—state and national lotteries? And why are the people who have the least disposable income spending the most (more than 60% of lottery ticket purchasers are among the bottom quarter of income earners)?
Lotteries were instituted for a simple reason—to increase revenue for the government without having to raise taxes. That might seem like a good idea in theory, especially if you’re a fiscal conservative who wants to see taxes kept low. But what happens in practice, as the state of California shows, is that elected officials feel even more entitled to over-spend when they see the government’s coffers filling up. And tax rates increase anyway.
So we’ve got a government-sanctioned activity that is meant to generate revenue for the government without having to raise tax rates. But tax rates keep going up. The government continues to spend money it doesn’t have. And the people footing the bill are the poorest among us. As well, the social welfare programs for those poorest among us are the biggest expenditures for our cost-unconscious government.
And what about the “lucky” people who actually win the lottery? Their stories aren’t the heartwarming rags-to-riches cliché that Hollywood loves to dramatize.
“So many of them wind up unhappy or wind up broke. People have had terrible things happen,” said Don McNay, 56, a financial consultant to lottery winners and the author of Life Lessons from the Lottery. “People commit suicide. People run though their money. Easy comes, easy goes. They go through divorce or people die.”
“It’s just upheaval that they’re not ready for,” McNay told Time on Tuesday. “It’s the curse of the lottery because it made their lives worse instead of improving them.”
About 70 percent of people who suddenly receive a windfall of cash will lose it within a few years, according to the National Endowment for Financial Education.
I’ve never seen these statistics offered up in a commercial for the lottery. Have you?
We’ve got warning labels on everything from pizza boxes to mop buckets in this country, but when it comes to the lottery, we allow the government to entice desperate people to spend money they don’t have by promising them a better life if they win.
Things like thrift and frugality get a bad wrap, but they are the building blocks of any successful business or life. As G.K. Chesterton observed, “Thrift is poetic because it is creative; waste is un-poetic because it is waste.”
Instead of encouraging people to throw away their money on the lottery, why aren’t we offering classes on how to balance a checkbook, stick to a budget, and make sound investments towards retirement? Why don’t we put the same amount of resources we invest in advertising Lotto tickets into offering low-income Americans access to better financial education so they can make more informed decisions about their futures? It’s easier to dangle the possibility of millions in front of struggling people than it is to offer them the tough but necessary advice many of them most need. But it’s also morally questionable to keep doing so.
Here’s a start: Stop playing the lottery. Start a savings account instead.