Lotteries, payday lending, and the swindling of America’s poor
Lotteries, payday lending, and the swindling of America’s poor By Michael Gerson
In that portion of the presidential field that does not view self-government as a stage for self-promotion, prejudice and blithering ignorance, one of the more encouraging trends is an increasing seriousness about the issue of poverty.
Events in Ferguson, Mo., and Baltimore have focused the public mind, just as the consequential publication of Robert Putnam’s “Our Kids” has served to inform and deepen the policy debate. The question is posed: Can the United States go on as it has been with a good portion of its working class almost entirely isolated from the promise of our country?
It is a yes or no question. A “yes” involves the acceptance of a rigid, self-perpetuating class system in a country with democratic and egalitarian pretentions — a system upheld and enforced by heavy-handed policing, routine incarceration and social and educational segregation.
A “no” is just the start of a very difficult task. The mixed legacy ofthe Great Society — helping the elderly get health care, it turns out, is easier than creating opportunity in economically and socially decimated communities — has left the national dialogue on poverty ideologically polarized. And many policy proposals in this field seem puny in comparison to the Everest of need.
But there is one set of related policy ideas that would dramatically help the poor and should not be ideologically divisive. How about a renewed effort to help the poor by refusing to cheat them?
The lottery is a particularly awful example of political corruption. Here government is raising revenue by selling the Powerball dream of wealth without work. Studies in a number of states have shown that lottery ticket sales are concentrated in poor communities, that poor people spend a larger portion of their income on tickets and that the poor are more likely to view the lottery as an investment. “This could be your ticket out,” promised one typical billboard in a distressed Chicago neighborhood.
Think on this a moment. In a place where government has utterly failed to provide adequate education and public services, government is using advertising to exploit the desperation of poor people in order to raise revenue that funds other people’s public services. This is often called a “regressive” form of taxation. The word does not adequately capture the cruelty and crookedness of selling a lie to vulnerable people in order to bilk them. Offering the chance of one in a 100 million is the equivalent of a lie. Lotteries depend on the deceptive encouragement of mythical thinking and fantasies of escape.
Another form of financial predation against the poor — this one in the private sector — is payday lending. If you live in one of the 36 states that allow the practice, you have probably seen the storefronts in depressed neighborhoods. There are now more of them in the United States than there are McDonald’s franchises. In theory, payday lenders offer small loans of a few hundred dollars without credit checks to cover emergency cash flow needs. In practice, lenders make their money on repeat borrowers who get behind in their payments and roll them over into larger loans often with triple-digit interest rates.
The result is a downward spiral of debt in which borrowers pay back many times their loan amount — often seized directly from their bank accounts. This is what used to be called loan-sharking and usury. It is now a $46 billion industry, with considerable political clout, selling a financial product to the poor that encourages debt servitude.
Business and government in many states have entered a full partnership on payday gambling — moving gaming out of destination resorts and into malls and riverboats, closer to middle- and working-class gamblers. State governments raise money by taxing revenue generated by slot machines that are really sophisticated computers, designed to encourage players to enter the “zone” and play “to extinction.” Compulsive behavior is the intended goal of the software program, and thus the intended goal of state legislators who would rather encourage addiction than ask the broader public for taxes.
The United States is bursting at the seams with populist energy. Here is a cause that should appeal to activists prone to camping in parks or to wearing tricorn hats: Let’s get government out of the business of treating citizens as marks and dupes. And let’s confront everyone — in business and government — who benefits from defrauding the poor.