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Balancing the budget on the backs of the poor

By Scott Tibbs, November 10, 2001

When conservative legislators move to limit spending on government social programs, many people accuse them of attempting to "balance the budget on the backs of the poor". While there is debate over whether limiting spending on government programs is good or not, cutting or reducing the rate of growth in those programs does not actually take money from the poor. But there is one government program that actually does take money from the poor, and at a rate that should be of concern, and that is the Hoosier Lottery.

On October 28, the Indianapolis Star reported the results of a study that showed that people who can least afford it spend a disproportionate amount of their income on the lottery. The Star found that the poor spent proportionally six times more on the lottery than the wealthy. Supporters of the lottery argue that it is just entertainment and the money spent on it is disposable income, but the Star's numbers show that just isn't the case.

What this shows is that many poor people spend more than they can afford chasing an impossible dream. The odds of winning the jackpot on the Powerball game that Indiana participates in are one in 80 million, and the odds of hitting the jackpot in the daily Lucky Five Game are 1 in 376,992. In fact, the New York Times reported on August 29th that lotteries have discovered that reducing the odds of winning have actually increased ticket sales. Because wins are few and far between, jackpots can swell to well over $100 million, which spur many people to gamble heavily in order to win the big prize. For example, Powerball reached nearly $300 million in late August. Every time this happens, news stories surface about how some people spend hundreds of dollars on lottery tickets, people who can least afford it.

States know that a quick fix for financial trouble appeals to people, especially the poor. Syndicated columnist Michelle Malkin wrote that state lottery officials buy the most advertising space at the beginning of the month, intentionally coinciding with the arrival of government benefit checks like Social Security. Clearly, if any other business (especially politically incorrect ones like the tobacco industry) were caught using a similar marketing ploy heads would roll.

Why don't people invest the money instead of gambling it on the lottery? The Star quoted one woman as saying "Personally, nowadays, I would seriously be afraid to put money in stocks." This would almost be humorous if it weren't so sad. If people invested the money spent chasing the lottery dream, they would see a virtually guaranteed win. The stock market may be slow right now, but over the long term the market has significantly and consistently increased in value. In 1993, the stock market was struggling to reach 2000, and now it is over 10,000. The few dollars at a time that are spent on lottery tickets add up over time, and even if put into a low-yield safe investment will almost certainly result in a nice return.

Meanwhile, the government benefits from this "voluntary tax" on the poor. Indiana rakes in a substantial amount of money from the Hoosier Lottery and Powerball, which is then used to fund pork-barrel projects from the Build Indiana Fund that help legislators get re-elected. One could say that in addition to balancing the budget on the backs of the poor, state legislators are also financing heir re-election campaigns with money from the poor as well.

Legislators in Indianapolis should take studies like the one published in the Star seriously, and look at ways they can alleviate the problem they caused. Hoosiers can only hope that greed for other people's money, collected voluntarily or not, will not deter our elected representatives from taking a hard look at this matter.