Win a Lottery Jackpot? Not Much Chance of That

N.Y. Times, Aug. 9, 2013

By Tara Siegel Bernard

When those exceedingly lucky people come forward to claim this week’s Powerball lottery jackpot, which swelled to $448 million on Wednesday, it’s hard not to think: Somebody is winning these things, right? It could be me.

This is exactly the sort of logic that, over the last year, led millions of people to spend $5.9 billion of their hard-earned dollars on Powerball alone. They spent nearly $69 billion on all lottery games in 2012, according to two lottery trade groups.

It is also precisely the kind of mental trap the Powerball people want you to fall in; they tweaked the game rules last year, doubling the price of tickets to $2 to raise more revenue and create more eye-catching jackpots.

And the state agencies running the games advertise heavily that it could be you making off with millions of dollars.

The odds of winning, however, remain infinitesimal: Powerball players, for instance, have a 1 in 175 million chance of winning. You have roughly the same chance of getting hit by lightning on your birthday.

Even though some people may be able to intellectually grasp what that means, the Multi-State Lottery Association can predict with clocklike certainty that on Saturday night, with a jackpot worth about $40 million, 13 million to 15 million people will buy tickets. Those ticket buyers are all thinking they have a shot of defying the odds.

That is why the lottery is called a tax on people who don’t understand math. Lower-income individuals who play but don’t win are hurt the most because they’re wasting a greater share of their income on the games. That’s also why the lottery is often called a regressive tax on the poor.

Sure, last year the games returned $19.41 billion to the states that sponsored them, according to the North American Association of State and Provincial Lotteries, which represents 52 lottery groups. But that’s not why anyone plays them.

What’s the big motivation to volunteer to pay this tax? Psychologists say it has more to do with our all-too-human propensity to run with the dreamlike possibilities it creates in our minds.

“For emotionally significant events, the size of the probability simply doesn’t matter,” said Daniel Kahneman, the Nobel-prize winning psychologist. “What matters is the possibility of winning. People are excited by the image in their mind. The excitement grows with the size of the prize, but it doesn’t diminish with the size of the probability.”

So ticket buyers allow themselves some momentary escapism since it costs only $2, thinking about what they would do with all that money. And they’ll ignore all of the well-known horrors and pitfalls that many lottery winners encounter, whether it’s a severe depression or blowing through all of the money in a form of self-sabotage that ends with them living in a trailer down by the river. This phenomenon of feeling anxious and undeserving, among other things, is what some experts call “sudden wealth syndrome.” It may afflict people who benefit from all sorts of success or windfalls, whether from the sale of a valuable business, signing an N.F.L. contract or inheriting a huge sum from a maiden aunt.

“Money that is much more than you’re used to sounds unlimited,” said Susan Bradley, a financial planner and founder of the Sudden Money Institute, who has worked with several lottery winners. “If you don’t have someone to help you, yes, you can go through extraordinarily large amounts of money, and, even worse, you can be in debt. It can really happen.”

Plugging some numbers into this dream provides some perspective. Winners wanting to be able to safely spend $1 million a year for 55 years (adjusted for inflation) would need about $36 million, after taxes, to invest, according to calculations by Northern Trust. (Those numbers also factor in annual taxes and investment expenses.) They would need to set aside nearly $15 million in high-quality bonds to know they would always have 15 years of spending in stable investments. To cover the remaining 40 years, they would need to put another $21 million in a diversified stock portfolio.

So in thinking about it, it’s not even worth playing unless the jackpot is more than $75 million, because the state and federal government take about half in taxes.

Part of that fantasy is that winners would start buying fast cars and big homes, not to mention stuff for all of your family members along with their children’s education. It’s easy to see how they could run through the money, as hard as that may seem to believe with $36 million in hand. Of course, if you want to live even larger — more homes, more cars, more ex-spouses, servants, accountants, lawyers, other lawyers to watch the lawyers — you’ll need far more. Probably more like $100 million, after taxes.

“If they make it to the fifth year with enough money to securely handle their life going forward and all of their relationships are intact, they are probably going to make it long term,” Ms. Bradley said.

So let’s get back to the probability of all of this ever even happening.

Buying more tickets improves your odds, but not by much. So if you want the fantasy, just buy one. Buying more doesn’t make the fantasy any richer.

It would take centuries of ticket buying before you even make a dent. If you purchased roughly 126,000 tickets a month for the next 80 years, for example, you could improve your odds to 50 percent, explained Gary A. Lorden, emeritus professor of math at California Institute of Technology (who, for the record, has bought a single ticket three times over the last decade; he split the last one with his grandson).

“The difference is like moving from a big house to a small house to make it less likely a meteor will strike your roof,” he said.

Good luck with that.

© 2013 New York Times

N.Y. Times, Aug. 9, 2013

By David Firestone

Earlier this year, Eric Cantor, the House majority leader, announced plans to rebrand the Republican Party, improving “health, happiness and prosperity for more Americans and their families.” In case you took any of that seriously, take a good look at the food stamp proposal Mr. Cantor unveiled a few days ago, one of the more brutal actions Republicans have taken against the poor since they took over the House in 2011.

In June, the Republican plan to cut food stamps by $2 billion a year led to the failure of the farm bill — because House conservatives wanted even bigger cuts. House leaders then revived the bill to provide $196 billion to big agriculture, dropping the food stamp program entirely and promising to bring it back “later.”

Later has arrived, and the plan is worse than ever. Mr. Cantor wants to cut $4 billion a year, double the earlier cut, by removing up to 4 million people from the food stamp program. His method of kicking all those people off is particularly diabolical, considering the Republican refusal to stimulate the economy: he wants to punish those unable to find a job. Anyone who is unemployed and not raising children will be limited to three months of food stamps every three years.

This requirement has been on the books since 1996, but it was routinely waived by most states during and after the recession, as high unemployment caused widespread suffering. Mr. Cantor wants to eliminate those waivers, with no exceptions. Under Mr. Cantor’s plan, it won’t matter how hard people are looking for work, or how high unemployment might be in their state.

Mr. Cantor’s plan would slash benefits for many of the poorest people in the United States, according to the Center on Budget and Policy Priorities. Their average annual income is $2,500; many are desperate for work but cannot find any. Joblessness may have been reduced in the last two years but it is still far too high, particularly among those with the least skills.

“As a result of the proposed cuts, many of these individuals would fall deeper into destitution,” according to an analysis by the center issued on Wednesday. “Some would likely experience hunger as well as homelessness; money spent on food isn’t available to pay the rent, and with income this low, it can be very difficult to do both.”

As David Rogers explained in Politico this morning, the 1996 proposal to take away food stamps from the jobless assumed that most states would offer workfare programs in exchange for the benefits. But Washington never provided enough money to allow states to create those programs. Only five states offered workfare or job training programs last year.

The House Republicans’ pointless and heartless demands for more austerity are holding back economic growth. Now they want to strip government relief for those who are left behind.

N.Y. Times, Aug. 9, 2013

By Andrew Rosenthal

Despite all the politicians who call themselves straight talkers, there is little that makes official Washington queasier than straight talk. And so it was today when Senator Harry Reid, the Majority Leader, dared to suggest that there might just be a racial tinge to the Republicans’ wild-eyed outrage over just about everything President Obama says and their implacable opposition to just about everything he does or wants to do.

“It’s been obvious that they’re doing everything they can to make him fail,” Mr. Reid said in an interview on KNPR Radio. “And I hope, I hope — and I say this seriously — I hope that’s based on substance and not the fact that he’s African American.”

The Nevada senator recalled: “My counterpart, Mitch McConnell, said at the beginning of the presidency of Barack Obama that he had one goal — and that is to defeat Obama and make sure he wasn’t re-elected. And that’s how they legislate in the Senate. It was really bad. And we’re now seven months into this second term of the president’s and they haven’t changed much.”

The G.O.P.’s reaction was predictably furious. Brad Dayspring, spokesman for the National Republican Senatorial Campaign Committee, said on Twitter that Mr. Reid’s comments were “offensive and insane.”

But Mr. Reid was just putting into words what many, many people have felt. Including me.

Note to Twitter: I am not saying every Republican is a racist. That would be flat wrong, just as it would be wrong to say that no Democrats are racists. Opposing Mr. Obama’s policies does not automatically make anyone racist.

What I am saying is that I suspect — apparently along with Mr. Reid — that a white president with the exact same plans and ideas would not have encountered the same kind of fierce opposition.

Certainly a white president wouldn’t have had to deal with the “birther” movement. And while that conspiracy theory didn’t originate in the House or the Senate, Republican lawmakers have fanned the flames. Many have refused to denounce it. Others have actually encouraged it. I wrote a few days ago about Rep. Ted Yoho, Republican of Florida, who said he’d consider supporting an investigation into the validity of the president’s birth certificate.

There is no way other than racism to explain “birtherism.” The whole point is to make Mr. Obama the menacing “other,” to remind everyone that he is African American.

Nor is it “insane” to detect a racial undercurrent to the incredible disrespect that’s been shown to this president over the years. Remember when the president addressed Congress in 2009, and Rep. Joe Wilson yelled “you lie!” Then-House Majority Leader Steny Hoyer said “I have never in my 29 years heard an outburst of that nature with reference to a president of the United States, speaking as a guest of the House and Senate.” Would that have happened to a white president?

There is no doubt that Mr. Reid is going to get hammered for this remark. It did not fit into the usual definition of a “gaffe,” but it certainly fit the spirit of what the political journalist Michael Kinsley had in mind when he said “A gaffe is when a politician tells the truth.”

© 2013 New York Times