We have all been there before. We are standing in line at a convince store, and when we put down our candy bar down on the counter we notice the lottery tickets. Every once and while we all buy one to see if we can get lucky to make some fast cash. I mean it’s only a dollar or two at most right? Well, millions of Americans do the same thing all the time and that one-dollar adds up fast. In 2012, the whole lottery system (scratch tickets, Powerball, Mega Millions, etc.) brought in $65.5 billion dollars (CNN.) One would think that that amount of spending has to have a positive impact on the economy. It does, and does not for a few reasons.
Every year since 1965, the lottery sales have increased. Even during the financial crisis of 2008 (CNN.) 25% of the money lotteries accumulate goes to the state governments each year. In 2012 that was $16 billion. That only makes up about 2-3% of the governments total budget (CNN.) That doesn’t seem like a huge amount compared to the $65.5 lotteries bring in overall, but that money would be hard to get through taxes. The amount the lottery brings in is actually crucial to the government and in the long run provides us with public goods.
The retailers end up getting about 6% of the cut, which comes out to about $12 for every 100 tickets they sell (CNN.) Also when there is big money to be won in the Mega Millions or Powerball it brings much more business to the stores. However, that last point is actually a double edge sword. Although retailers get a cut it is hard to say if they are making or losing money. More costumers come in to buy lottery tickets and end up spending less on other products with better marginal gains for the retailer.
Another downside of the lottery is that research suggests poor and uneducated people buy a majority of the lottery tickets. 20% of the population buys the majority of tickets (Thompson.) In a different article by Derek Thompson, he provides the shocking statistic that households earning less than $13,000 spend 9% of their income on lottery tickets (Thompson 2.) This is theorized to be a product of impoverished people being more prone to unstable lives such as dropping out of school, drug use, and crime. Impoverished people are more likely to look toward a quick way out due to their situations and are willing to drop a couple bucks to win millions (Thompson.) The problem is those dollars add up.
Overall the Lottery brings in lots of valuable money to the government. Without it would be hard time coming with the $16. It’s sales increase each year and it is a quick way to make some cash. On the flipside it is frightening to think about how the lottery could be just another factor in the growing economic disparity in our country. It could also not be stimulating economic growth or helping businesses if costumers end up only buying lottery tickets and spending less over all. The pro’s and con’s of the Lottery go hand in hand.
“Does Powerball Lottery Sales Really Boost the Economy?” CNN Money. CNN, 27 Nov. 2012. Web. 14 Apr. 2015.
Thompson 2, Derek. “The Economics of the Lottery Ticket.” The Atlantic. Atlantic Media Company, 01 Feb. 2011. Web. 15 Apr. 2015.
Thompson, Derek. “Amazing: The Poorest Households Spend 9% of Their Income on Lottery Tickets.” The Atlantic. Atlantic Media Company, 31 Mar. 2012. Web. 15 Apr. 2015.