Why Not A National Lottery?
I was asked a question yesterday I haven't been asked in a long time: Why doesn't the federal government start a national lottery for deficit reduction purposes?
Where do I start?
In effect, there already is a national lottery. Powerball and Mega Millions are both games sold in multiple states with potentially very large prizes. And the latest report (which I suspect is what prompted the yesterday's question) indicates that the multi-state games may soon be expanding.
A new federal lottery would compete with both the individual state and multi-state games and federal revenues would likely be increased at the expense of state income. The governors would strongly object and would pressure their federal delegations to vote against any legislation creating a national lottery (Trust me on this. Over the past 20 years I have been in multiple meetings where this has been discussed by people in a position to make the threat a reality).
To get the necessary support for the lottery authorization, the federal government would have to offer states some type of revenue sharing, that is, some substantial percentage of the revenue collected as a result of federal lottery ticket sales would be paid to the states. That formula would be a nightmare and the issues extremely hard to settle. Should the federal revenue only be shared with states that have their own lottery and which would be presumed to lose sales because of the federal incursion? Would states that don't have lotteries demand that they also be included? Would sharing the revenue with all 50 states plus districts and territories so reduce the revenues going to the federal government that it wouldn't be worth the effort?
There is also the question of the size of the prize the federal government would have to offer to get people to play its game. Powerball and Mega Million prizes sometimes are in the hundreds of millions of dollars, so the federal government presumably would have to offer something more. A billion? An aircraft carrier? A lifetime exemption from paying income tax?
And what about the odds the federal government would have to or be allowed to offer? Wouldn't the states demand that the odds of a federal game be no better than what they offer in their state?
There would also be opposition to a national lottery from some religious groups, Las Vegas and Atlantic City, other casinos around the country, and anti-gambling organizations. Even though buying a ticket would be voluntary, it would also be characterized as a regressive tax on the poor because they tend to play lotteries more than higher-income groups.
Bottom line...It's not worth the effort and isn't going to happen any time soon.
Scratch tickets are better
Interesting idea, but if you look at where state lotteries are making most of their revenues, you will find it is in 'instant games', like scratch tickets and 'Lucky Seven' bingo cards. Powerball has big prizes, but the revenue is not that large, especially for small states.
So the Celtics scratch ticket at the top of the post has more potential to reduce the federal deficit.
what about as a vehicle for savings
do you think the chances of ever having a system like britain's premium bonds are as small as those of a national lottery? obviously, it's no longer addressing the national deficit as directly (but the interest rate the gov't pays is negligible), but it would increase national savings rates. turning lottery buying from consumption into savings could be a promising development, but it faces the same political obstacles you've identified.
The kleptocracy love the
The kleptocracy love the concept of state-sanctioned lotteries because it serves their interests in two ways:
1) It's a form of regressive taxation , since the poor and uneducated disproportionately participate. More taxes on the poor means less on the rich. Hooray !!
2)It provides a means of capturing political support for lower top marginal rates , ending the "death" tax , etc. , since a number of those same people will think their future lottery winnings will be impacted by those taxes , not considering the vanishingly small probability of that actually happening. Hooray , again !!
What the kleptocracy don't understand , but may soon , is that their position at the top of the pyramid is contingent on having a base to that pyramid. That base is in the process of crumbling because of the very policies they enacted to secure their position at the top.
It's ironic , but no less sad for the irony.
Why not just have the federal
Why not just have the federal government sell the public -- mostly those at the lower socioeconomic end -- "magic beans". It would be voluntary, and it would be about the same quality investment as a lottery (whether viewed in purely financial terms or that plus the "fun" of hoping each day for some gain that never comes). What could possibly be unethical about that?
Some reasons why not to have a national lottery
1) If it's a "revenue raiser" it offers unfairly poor odds (backed by very deceptive advertising when following the state model, certainly here in NYS) -- and considering who plays the lottery, it is a regressive tax on the poor. As the old saying goes, "a tax on ignorance".
2) For progressives who berate growing income inequality and especially the "unmerited" income of the richest, it seems odd to make it national policy to hand out multimillion-dollar fortunes for buying a ticket. (Well, for progressives #1 seems an odd policy too.)
3) What does it say about the responsibility of policy makers to have to base a budget on gimmicks like this?
4) From a story about what's happened to some to lottery winners...
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"Winning the lottery isn't always what it's cracked up to be," says Evelyn Adams, who won the New Jersey lottery not just once, but twice (1985, 1986), to the tune of $5.4 million. Today the money is all gone and Adams lives in a trailer...
Suzanne Mullins won $4.2 million in the Virginia lottery in 1993. Now she's deeply in debt to a company that lent her money using the winnings as collateral ... she'd agreed to pay back the loan with her yearly checks ... When the rules changed allowing her to collect her winnings in a lump sum, she cashed in the remaining amount [without repaying the loan]...
William "Bud" Post won $16.2 million in the Pennsylvania lottery in 1988 but now lives on his Social Security. "I wish it never happened. It was totally a nightmare," says Post...
His brother was arrested for hiring a hit man to kill him, hoping to inherit a share of the winnings ... A former girlfriend successfully sued him for a share of his winnings ... Post even spent time in jail for firing a gun over the head of a bill collector.
Within a year, he was $1 million in debt ... He eventually declared bankruptcy. Now he lives quietly on $450 a month and food stamps...
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It's really best to get one's money in a way that teaches one how to keep it.
I once heard Pat Moynihan ask: "Why is Social Security a success and welfare a failure when they are both cash transfer programs?"
His answer: To earn Social Security benefits one first had to work for decades, which taught one how to keep a job, balance one's checkbook, have a personal budget, value one's savings, and respect the larger social order.
Welfare insulated recipients from the need to work and learn all those lessons.
As policy, handing out money for nothing is just bad. For the recipients too. The govt does far, far too much of this already, to interest groups of all kinds.