The Dark Side of Lottery Spending


Lotteries are a popular way to raise money, but they also have a dark side that has come to light in the wake of recent scandals. In the US, lottery proceeds have fueled an upward spiral in state spending, as governments look to make up for budget shortfalls resulting from declining tax revenues. In some cases, the pressures to spend are so intense that the government’s budgetary bottom line takes precedence over other considerations, such as reducing inequality or addressing environmental problems. In this era of anti-tax sentiment, state governments are tempted to turn to the lottery as a “budgetary miracle,” writes Cohen.

The concept behind a lottery is simple enough: for a small price, people can fantasize about winning a fortune. Many critics, however, argue that the money spent on lottery tickets could be better used in other ways. Indeed, lottery players as a group contribute billions in revenue to government coffers that could be used for education, health care, or retirement savings. And, as numerous studies have shown, people living on low incomes are disproportionately likely to play the lottery.

For those who are unable to save money for the future, lottery jackpots can offer them a glimpse of what might have been if they had saved for their own retirement. But, for those who play the lottery regularly, it can become a costly habit that drains household budgets. As many as a quarter of all lottery ticket sales go to retailers, who collect commissions on each purchase. In some cases, these commissions can be higher than the value of the prize itself.

In the early colonies, lotteries were a common way to finance European settlement in America—a role that helped to fund the establishment of Harvard and Yale. They continued to flourish in the American colonies, despite Protestant proscriptions against gambling. But the lottery’s popularity began to wane in the late twentieth century, as the nation’s tax revolt intensified: states cut property taxes and introduced sales and income taxes; a growing number of residents left their jobs to work for themselves; job security eroded and the national promise that hard work would bring wealth and prosperity shifted into an ever-widening economic chasm.

The evolution of the state lotteries has been piecemeal and incremental, with authority divided between the legislative and executive branches and then further fragmented into departments. As a result, no state has a coherent gambling policy, and public officials are faced with the tricky question of prioritizing goals that compete with one another. In addition, as lottery revenues rise, they tend to attract new forms of gambling, and the overall system can quickly grow into an unmanageable, and often harmful, monster. Lottery officials are not above availing themselves of the psychology of addiction; all aspects of the operation—the ad campaigns, the look of the tickets, the math behind it—are designed to keep players coming back for more. It’s a strategy that might be more familiar to tobacco and video-game manufacturers than to state governments.