WHEN INCOME REDISTRIBUTION IS OK: THE LOTTERY, PART 1

Here in Georgia, many college students (especially, but not exclusively, at public schools) receive something called the HOPE scholarship. It was created in 1993 by then-Governor and eventual Senator Zell Miller, the Joe Lieberman of the South. The program is uncomplicated, being both entirely merit-based and entirely funded from the Georgia Lottery. High school students qualify by getting a GPA over 3.0 or scoring above the 85th percentile on the SAT or ACT. The program was sold to an enthusiastic voter base as a way to help those unfortunate kids who happen to be academically successful but poor. Predictably, it hasn't quite worked out that way.

We know two things. One is that higher income areas and families are the ones that can afford expensive ACT/SAT prep courses. This coincides with the de facto segregation of the public school system and the tax base. The other is that the Lottery is disproportionately played by the dirt poor, and especially poor blacks (see extensive analysis of the economics and demographics of lotteries here or here). In politics and public relations, the state never fails to trot out some examples of the kind of student the program ostensibly aims to help: poor, and usually black or Hispanic, with appropriately hardscrabble biographies. Hiding behind these anecdotes are the hard data, which reveal that the vast majority of HOPE recipients are students who would be in college anyway.

There are a few red flags here. First, if suburbanites with above-median incomes are big fans of a program aimed at helping minorities and the poor, it's a safe bet that it's not actually helping minorities and the poor. Second, when such programs are limited in geographic scope to Georgia, Kentucky, Tennessee, Florida, and South Carolina, it is a safe bet that a) it's a terrible idea and b) its primary beneficiaries are going to be upper-middle class homeowners and/or businesses.

The reward structure of the HOPE program is misguided enough on its own; funding it with lottery money is downright malicious. Look at where lottery programs advertise, and more importantly how. Georgia uses slogans like "Today Could Be the Day!" to sell hope at liquor stores and gas stations in run-down neighborhoods, and they're not unique in that regard. Michigan has used the slogan "The Rich: Join Them!" just in case its residents don't grasp subtlety. New Yorkers are told, "All You Need is a Dollar and a Dream!" while Chicago advertisements play on the geography of wealth and poverty ("How to get from Washington Blvd. to Easy Street!") and outright deception ("This could be your ticket out.") Several years ago our nation's capital scraped the bottom of the barrel by using a photo of Martin Luther King with the tagline: "His vision lives on. Honor the dream – play DC Lottery."

Even a casual familiarity with the statistics and the marketing of lotteries reveal that they are and always have been a lower class phenomenon. Not content to use the money extracted from the urban poor for "property tax relief", red states are leading the way in simply giving the money to the children of the wealthy and near-wealthy. Income redistribution is a hallmark of creeping socialism – that is, when the poor benefit from it. It turns out that using the government to move money from one person to another is A-OK when the money flows up the socioeconomic ladder.

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33 Responses to “WHEN INCOME REDISTRIBUTION IS OK: THE LOTTERY, PART 1”

  1. cromartie Says:

    Here's what I don't know, and would like you to prove with some hard evidence: the demographics of HOPE scholarship recipients.

    While your point is likely to be correct, and certainly the demographics of the poor tax known as the lottery, this would prove your point conclusively. Does any exist to be evaluated?

  2. stonguse Says:

    When the lottery is outlawed, only outlaws can waste their last dollar on a scratch ticket.

  3. Ben Says:

    cromartie,

    Here's a good link (a google quickview of a book chapter) for mainlining a bunch of HOPE scholarship number crunching:

    https://docs.google.com/viewer?a=v&q=cache:_CFua00mUXcJ:inpathways.net/cornwell_mustard.pdf+hope+scholarship+family+income+correlation&hl=en&gl=us&pid=bl&srcid=ADGEESjdZ7Cv5kKI1wFZAm-6lxtFZJm8BIcJDuoXAYsmUeV8eBu6PTyUJbqXm77e2fgaX293qBZjOzhfZw_dYpOPc24A9y7L85bvxWwMNB-w5ypwy59fK_9HZjSbo8VAeLltIweP7xdH&sig=AHIEtbQhMp7YES5y_7cFm787tXPk7xcmcg

    Lots of good stuff. Fast and dirty summary: if you're rich and white, you're alright. If you're black and poor, there's the door.

    The same authors did a study a few years ago trying to see if the scholarships are going to kids who would have gone to college regardless, and found that in counties above the 75th percentile in income, HOPE scholarships and car sales were positively correlated. A relationship that did not hold for poorer counties. (I won't link to try and avoid the spam filter but the paper's easily found and called Merit-based College Scholarships and Car Sales).

    All this academic rigor isn't really necessary to know who the program benefits, though. The original bill founding the scholarship capped the family income for eligible recipients at $66,000. The next year the cap was increased to $100,000. The following year they raised it again – by removing the cap. A cash grab that public doesn't have to be backed up by numbers.

  4. Middle Seaman Says:

    "Income redistribution is a hallmark of creeping socialism … when the poor benefit from it. … [U]sing the government to move money from one person to another is A-OK when the money flows up the socioeconomic ladder."

    That about sums up the whole story. In the developed world, with a few exceptions, capitalism has evolved into a method to enrich the rich by taking the money from all others.

  5. gregary Says:

    The post reminds me of a "60 Minutes" segment on gambling addiction (link below). How could a governor (Rendell) fail to understand the predatory nature of gambling? Willful ignorance, mere stupidity or casino kickbacks?

    http://www.cbsnews.com/video/watch/?id=7228424n

    I remember once going to a casino somewhere in Northern CA (well north of SF) with a friend. Even though I was a bit groggy at the time (it was 3 am when we got there), I'll never forget how the gamblers, , mindlessly pulled those levers. It was quite the haunting tableau: transfixed figures alight before slot machines.

  6. wetcasements Says:

    poor tax

  7. Jimcat Says:

    The 60 Minutes segment is well worth watching just to see Governor Rendell finally saying "You don't get it! You're simpletons! You're idiots!" What he's saying is pretty clear: people are going to gamble, and we want a cut of it. What he's implying is also clear: we know what it's doing to people and we don't care, as long as we get the money.

  8. Major Kong Says:

    There's a saying in poker – "If you can't spot the sucker at the table, it's probably you".

  9. Seth Says:

    Chapter 37: In Which Ed Discovers the Basics of Neoliberal Economics

  10. buckyblue Says:

    By part 1, i'm assuming that part part dos is coming tomorrow.

    Was in Florida for Spring Break this past week when the lottery was up to some unbelievable number. Got gas at a run down gas station in not the best part of town. The line was out the door with poor black and hispanic people hoping that this meant their number was coming in.

  11. anotherbozo Says:

    All the messenger and delivery boys, apron-wearing kitchen helpers and even derelicts lined up at newsstands the day before an especially large lottery drawing in New York City speaks for itself. If they were buying Mother Jones or The Nation instead this would be a different country.

  12. c u n d gulag Says:

    Also too, in any lottery, the government pays too much money to too few people.

    Is it necessary for the Supra-dupra-bestestest Lottery payout to be $200+ million when someone hits all of the numbers, and very little if another hits 5, or 4, or 3?

    Why don't people bitch about that? Why not distribute the money a little more?
    YEAH – I know! So, please don't tell me.

    I read an article over 25 years ago, right after NY State was starting its lottery, that before state governments took over the lottery rackets, the Irish, Black, and Italian mobs, ran them, and had much better odds, more people winning, and a better distribution of winnings.

    I say, if we have to have lotteries, take them back from the state governments, and hand them back to the mobsters!

    Based on recent evidence, who would you trust more, – a politician, or a mobster? One is a well-dressed, sociopathic, soulless, money and power-mad cretin who'll do anything to attain what he/she wants, and the other is just a mobster.

  13. Tim H. Says:

    Work a shift at a job that might be the most degrading experience you can have with your clothes on, and just try to ignore the lottery, even when you know the odds.

  14. Da Moose Says:

    When I lived in Atlanta, my home and place of work were in the southern area of the city, in the black community. Every day, as I'd walk to MARTA, I'd see the streets littered with scratch-offs. There were so many, it felt like I was walking in the aftermath of a ticker tape parade. That was in 1998. At the time, I was amazed to learn that a large percentage of those proceeds went to scholarship funds for white kids. I added that to the long list of reasons why I still consider the South to be the most backward, dysfunctional, passive-aggressive, cruel place on the planet.

  15. cromartie Says:

    All this academic rigor isn't really necessary to know who the program benefits, though. The original bill founding the scholarship capped the family income for eligible recipients at $66,000. The next year the cap was increased to $100,000. The following year they raised it again – by removing the cap. A cash grab that public doesn't have to be backed up by numbers.

    This brings it home nicely. Thank you, Ben.

  16. lfv Says:

    I spent some time at UF, where something like 90%+ of the students are receiving the Florida equivalent, Bright Futures. Going along with a post here a few weeks ago, there were an inordinate number of very, very nice vehicles being driven around by undergraduates. I always just assumed they were linked; wealthy parents saved money for daughter's tuition, daughter gets a free ride thanks to the state lotto, daughter gets a Land Rover.

  17. Jimcat Says:

    Even when you know all the effects of the lottery, it's pretty hard to get people to oppose it when you're bribing them with college scholarships.

    Let's say for the sake of argument that I'm a suburban dad with a couple of bright kids. I want them to attend college, and I'm aware of how extortionate the tuitions are getting. Now along comes a bill that says "If your kids do well in school, we'll pay their tuition. All you have to do is support more gambling."

    I'm a smart and well-informed person and I know darned well that it's mostly poor people who pay for the lottery. But with the prospect of being relieved of the crushing burden of college costs, it's really hard for me to find any reason not to let them buy their tickets and make my life better.

    Just as, you know, a hypothetical situation using a generic person and not actually me.

  18. Chicagojon Says:

    Good master's thesis here "Who Plays? Who Pays?: A Chicago Case Study of Racism, the Lottery, and Education" by Kasey Henricks at Loyola University Chicago": http://ecommons.luc.edu/cgi/viewcontent.cgi?article=1487&context=luc_theses

    Of note is the page 7 breakdown of 2009 IL revenues: 58% to winners, 30% to common school fund, 7% retail/vendor commissions, & 5% to other expenses. 58% return. Ouch. Play a slot machine in IL and you're likely to get a 96~99% return. Of course the 30% to the school fund is the issue. We know the lottery money comes disproportionately from the poor, so where is the school fund money spent? Also disproportionately on the poor? (spoiler: hell no).

    @cromarte
    Here's a reference in the thesis above to a GA study in 2002. Some googling should get you there fairly easily:
    "In Georgia, McCrary and Pavlak (2002) found residents earning less spend proportionally more of their incomes on lottery tickets than 14 those with higher incomes. Also, they conclude lottery-funded programs such as higher education HOPE scholarships disproportionately benefit those who would attend college with or without financial assistance."

  19. jeneria Says:

    LSU is the same with its TOPS program, except that it is constantly running out of money and having to be rescued by benefactors. It is merit-based and not need based so you have kids going to college for free and driving brand new BMW and Lexus SUVs while living in gated communities in three story townhomes that mommy and daddy bought for them with the money that they would have had to use for tuition. Of course, these special snowflakes hardly maintain the minimums to keep funded, so LSU has all sorts of second chances and such built in.

    What really pisses me off is that people want to be able to qualify for TOPS and combine it with their GI Bills and actually make a profit. I have nothing against the military, but it seems you should have to choose one or the other, not get both when there are so many who really need the money.

  20. JohnR Says:

    Man, that's just brilliant! I am really impressed by the sheer elegance of that solution. The only thing that could be more straightforward would be if taxes kept being raised on anyone with a salary of less than $75,000/yr, and reduced incrementally at increasing salary levels up to 0% at $1,000,000/yr. When the privileged poor are finally paying their fair share (I estimate a tax rate of 100% at $20,000/yr and less), only then will this country finally be be truly fair and equal.

  21. Radical Scientist Says:

    I grew up in Ga at the dawn of the HOPE scholarship, and am one of the few recipients whose options were 'get a scholarship or don't go to college.' Anecdotally, there are a few things that make this whole thing an even larger clusterfuck:

    While some proponents of the lottery (which was created to fund HOPE and public preschool) argued for it as a way to help broke-but-talented kids escape poverty, other public figures were more honest, pointing out that prior to HOPE, most of Ga's highest-ranked students went out of state for college and stayed there. For a lot of folks, it was always about preventing a white, middle-class brain drain from this shithole of a state. The assumption was that free tuition could talk the already-college-bound into sticking around in-state, and that by doing so, they were more likely to settle down here and become our next generation of 'job creators.'

    The income cap was raised, and then eliminated, when initial lottery revenues exceeded expectations. Now that the shine has worn off and sales are down, the state has begun cutting the benefits. Rather than re-institute the income cap, they've capped the per-student benefit–the next round of proposed cuts would leave students at the biggest public college with a 50% discount on their tuition. Which is fine (although less than ideal, of course) for students who are going to college either way, and will either get family support or take out loans to make up the difference. But with tuition skyrocketing by thousands a year as the state legislature cuts college funding, we've just pretty much priced out the original 'intended' scholarship recipient: the kid whose family can't pay even a faction of college costs, and for whom loans are a ticket to early bankruptcy. My parents refused to co-sign student loans, knowing they'd never be able to help me pay them back, and my odds of making enough money right out of undergrad to meet the payments were…slim. If I were 18 now, HOPE wouldn't cut it. I'd either be applying for full rides somewhere else, or getting a job right out of HS and trying to save up enough to go to college later.

    Lastly, there's the gaping differences between local school districts. The wealthy suburbs of Atlanta expect that kids will go to college, so they offer better tutoring for the slow, a more impressive roster of AP classes for the bright, and grade inflation across the board. Georgia's poorer school districts, (like mine) have >60% dropout rate, offer way less in the way of admissions-impressing advanced classes and extracurricular activities, and IME, will fail your ass without thinking of the damage to your future if you don't impress the underpaid, overworked, sometimes-pretty-racist teachers. I had one that would openly encourage his (~coincidentally~ all black) problem students to drop out of highschool, routinely reminding them where to find withdrawal forms and when their 16th birthday meant they could quit without parental permission.

    I also had some amazing teachers, who turned down offers from better-paying suburban districts and patiently updated our decades-old history & science books. But they were working in a failed system. Suburban kids had a kiln, our art class required students to BYO paper. By 2001, there was still no internet on campus, but we did get metal detectors and random drug sweeps. The biology class didn't even dissect the pickled grasshopppers we had instead of frogs, because we needed them for next year. Drama club was limited to plays in the public domain, and we had to get our own costumes from the thrift store. It was not an atmosphere of promise or opportunity. The state, and the lottery, made no attempt to change things. They just gave the rich white kids whose parents would contest their grades for them a prize after graduation, to go with their new car.

  22. Neal Deesit Says:

    Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill)

  23. craigk Says:

    Arkansas has something kinda like it, except the only requirements are that you hold a 2.75 GPA and are a fulltime student. It's only $4500 a year and will probably be nonexistent by 2017 or so.

  24. craigk Says:

    Oh, and a 19 on the ACT.

  25. John Says:

    Now I know that this is anecdotal evidence at best, but I don't think that it's entirely fair to characterize HOPE, wholly and completely, as an enterprise devoted to preying on the poor for the benefit for the rich. It definitely has a lot of problems, I'm not contesting that, and it very easily appears unsavory… but it's not *all* bad.

    I grew up in Rockdale county, which is about 20 minutes outside of the Atlanta perimeter via interstate. Now Rockdale was a verifiable shithole of a county, who's only claim to extra-county fame was the number of syphilis cases its students contracted (See also: "The Lost Children of Rockdale"), and whose schools were very nearly to the point of resembling trailer parks in the late 90s and early 00s, with all of the trailers parked onto the properties to house the students that the schools simply could not support. Suffice it to say, this was NOT an upscale county.

    Yet despite that, somebody got some folks together, and set up a magnate school in the Rockdale county high school — a magnate school that serviced not only RCHS, but two additional neighboring high schools. There were no dedicated buildings or even trailers for this magnate school, rather it was simply housed inside the normal classrooms of the school, with its attendants mixing with the general school population for classes that were not related to math and science (the school was, in many ways, a sort of preparatory for Georgia Tech, considering that the college helped found it). The only requirements to get into the magnate school were passing a series of academic achievement examinations, and it serviced all kinds of minorities as well as the white kids.

    That is to say, not *all* of Georgia's school system is laid against the poor and minorities. It's just one example, but there were most definitely people trying to help solve the problem, with the full blessings of the local government.

    On a related note, having grown up in that place and now living in a substantially more upscale part of the state — the lottery advertisements in upscale, Northern-Perimeter Atlanta gas stations are just the same as the ones down in podunk county.

    Georgia definitely has a lot of problems… I'm just not sure they're *quite* as bad as you think they are.

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  27. Joseph Nobles Says:

    How DO you get rid of back fat? Up the sensitivity of the spam filter, I'd bet.

    Imagine a lottery whose proceeds went not to higher education, but to fund struggling public K-12 schools. Ha, who'm I kidding? Any such change would be finagled into the pockets of charter schools as soon as we weren't looking.

  28. Peggy Says:

    Joseph Nobles, charter schools ARE public K-12 schools, just FYI. And many of us are struggling! My school has the same SES as the district it's in and receives the same per-pupil funding, but no monies for transportation or buildings (we have to make it work out of per-pupil). And we serve the exact same high-needs population: my students are poor and my students are looking at education as their way out. (We are a good enough school that we *do* try to steer them away from the lottery.)

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