Our Problems. Their Profits. | When the Fix Costs Too Much | Sequel Sunday

Last week on Common Sense, Chad asked whether government can ever actually get smaller.

This week, a single receipt from California turns that question upside down.

When electric vehicles reduce smog inspections, what happens to the fees that funded them? When lottery revenue is promised to schools, what happens when the institution becomes more important than the promise? What do tobacco settlements, prison contracts, and legalized sports betting all have in common?

This episode follows the money—not the headlines.

Instead of asking whether government solves problems, Chad investigates what happens when those solutions begin threatening government revenue.

You'll never look at public policy the same way again.

In This Episode

•  California's smog fees and EV incentives 
•  Why gas taxes are disappearing 
•  The lottery promise that quietly changed 
•  Tobacco settlement bonds and shrinking smoking rates 
•  Prison occupancy guarantees 
•  Ferguson's dependence on fines and fees 
•  Sports betting, Kalshi, and the next generation of government revenue 
•  Ronald Reagan's warning about permanent government 

📞 Call or Text the Show: 252-CHAD-LAW

🌐 Website: ChadParkerLaw.com

📚 Read Chad's books:

• The Price of Progress
• The Velvet Monopoly
• The Cost of Certainty

⭐ If you enjoyed today's episode, please follow the podcast, leave a rating, and share it with someone who appreciates thoughtful political conversations.

00:00 Last Week's Question Was Wrong
03:28 California's Clean Air Success Story
12:07 When Success Creates a Budget Problem
21:41 The Fee That Wouldn't Disappear
31:12 The Lottery Promise That Changed
43:36 When Revenue Replaces the Mission
54:58 Tobacco Bonds and Betting Against Success
01:07:42 Prison Quotas, Ferguson, and Budget Incentives
01:21:56 Sports Betting, Kalshi, and the Next Revenue Stream
01:37:14 The Difference Between Problems and Revenue
01:46:35 Reagan's Warning About Permanent Government
01:51:12 Closing Thoughts & Reagan Reminder

#CommonSense #Government #Politics #PublicPolicy #California #EV #Taxes #Lottery #SportsBetting #Bureaucracy

Transcript

SPEAKER_00 0:00

Last Wednesday on this program we asked a question. Can government ever actually get smaller? We talked about doge. We talked about the bureaucracy. We spent a good while on why every agency in the country seems to come with one setting and one setting only, and that setting is grow. And I'll be honest with you, I felt good about that episode. Shut the laptop, went to bed, figured we'd cracked something. Then I found a piece of paper out of California that I've not been able to put down since. Here's what it says. California charges you a fee because gas cars pollute. Fine, reasonable. That's why the fee exists. That's the whole justification for it. Except some of that money now goes towards helping people buy electric cars, the ones that don't pollute at all, the ones that make the fee unnecessary. You following me? The fee is paying to kill the fee. And my first reaction was probably the same one you just had. Classic California moving on with my day. But I pulled the thread anyways, and it ran to Oregon, it ran to Texas, it ran through a courthouse in Missouri, and it ended up on a betting app that might be sitting on your kid's phone while you're watching this. Which is about when I realized we asked the wrong question last week. It was never can government get smaller. The question is what happens when government wins? I do not have an answer for you yet. What I've got is the paperwork, and I'm telling you right now, once you see this first one, you will not be able to stop seeing it. So stay with me. But first this. Folks, if common sense has become part of your weekly routine, ChadparkerLaw.com is your home base. Every week you'll find something new, whether it's my latest books, a new editorial, the gaily news, the free common sense conservative manifesto, or everything else we're building together. And if you've got a question, an idea for an episode, or you think I completely missed the mark, call or text me at 252 Chad Law. Some of the best conversations on this show start with your messages. We'll get into the episode right after this.

SPEAKER_01 2:05

When you need common sense, come see Chad Law. The boldest pundit you ever saw. It's true, truth. It's hard, and the talk is real. Reality rules, and that's the appeal. Spread truth. That's this card. Who needs a boss when you do common stance when comes to chat? He lays down the law when the eyes get bad. I may think you're dense. Come where it's real.

SPEAKER_00 2:38

With common sense. I'm Chad Law, the last gay conservative, America's binary brother, the common sense extremist living in radical reality, broadcasting truth on the only rainbow that matters, the red, white, and blue rainbow. And America, this is common sense. The show where we read the fine print so you don't have to, where we bring receipts instead of outrage, where politics is just the starting point for something much bigger. This is the shelter for the politically homeless, where reality gets a vote, results matter, truth matters, common sense matters, so welcome home, America. So here's how we're doing this tonight. We follow the money, one piece of paper at a time, in the order I found them, and I'm not going to tell you what any of it means until you've seen all of it. All I want is for you to keep one question in the back pocket the whole way down. It's the one I couldn't shake at two in the morning last night. What happens to the budget when the problem actually gets solved? Let's go back to California. 1943, Los Angeles. Something happens that summer that nobody in the city can explain. The sky turns this yellow brown color, people's eyes start burning, and I want you to understand how disorienting this was because we're in the middle of a war, and there were people in Los Angeles who genuinely believed the Japanese had hit them with some kind of chemical weapon. That's how thick it was. That's how little anyone understood what they were looking at. That is not a bad air quality day situation. This is you cannot see the building across the street and your lungs hurt. And for years nobody could figure out where it was coming from. They blamed a chemical plant. Then they blamed people burning trash in their backyards. They were guessing, and they kept guessing wrong. Until a scientist at Caltech named Ari Hagen Smith finally cracked it. Dutch guy, and here's the detail I love about this story. He was a gardener. He got into this whole thing because something was damaging his plants and he wanted to know what. Man was out there defending his tomatoes and accidentally solved the biggest public health mystery in America. And what he figured out was that it was the cars. Exhaust coming out of the tailpipes, hydrocarbons, nitrogen oxides, and then famous California sunshine cooks it. The inversion layer traps it and you get small. The same sunshine that made Los Angeles paradise was baking the poison. Now understand what I'm telling you. This was a real problem. Not a manufactured problem like we see today. Not one of these deals where an agency needs a crisis to justify the payroll. This is kids with asthma. Days where they told people to stay home. So they went after it. Los Angeles stands up an air pollution district in 1947, and it isn't enough because cars don't stop at the county line, and the whole state is filling up with them, which pushes it to the state level. 1967, the California legislator passes the Mulford Carl Act. And the governor who signed it August of 67 is Ronald Reagan. Hold on to that. We're coming back to it at the end of the show, and I don't want you to forget it. Reagan signs the bill. That bill creates the California Air Resources Board, also known as CARB. And now here's the part I'm not going to rush past because if I rush past this, nothing else I say tonight is worth listening to. It worked. I mean it genuinely worked. This is one of those where you don't get to do that easy cynical thing. That board is the reason the catalytic converter ended up in your car, that little device and your exhaust that scrubs out the bad stuff. California wrote the first nitrogen oxide standards in the country. And over the next thirty, forty years, the air above Los Angeles got better in a way you can measure. Not perfect. LA still has rough days, but you put 1970 Los Angeles next to today, and it's not a close comparison. There are mornings now where you can see the mountains from the freeway. In 1975, that was not something you could count on. So sit in that for a second because it's rare. Somebody found a real problem, built an institution to go fix it, and the institution mostly delivered. That, by all accounts, is a government success story, and I'm not taking it away from anyone, and neither should you. Okay. Now here's where I started pulling the thread. Part of how you keep your cars clean is you check them. The smog check. Every couple of years you take your car in, they make sure it isn't spewing, you get your certificate, you renew your registration in a mildly annoying afternoon. That's the system working exactly the way it's supposed to. So what kind of car does it need a smog check? An electric one. No tailpipe, nothing to inspect. In California, a fully electric car is exempt from the whole thing. And that is not a loophole. That's the trophy. That is the entire point of 60 years of work going all the way back to a Dutch man worried about his tomatoes. The goal was always cleaner cars, and ideally cars that don't pollute at all, and here it is. The EV is the ribbon at the finish line, right? Which brings me to the question I started asking, and I want to be careful how I ask it, because I'm not accusing anyone of anything here. I'm just following the money. If the win is fewer polluting cars, and fewer polluting cars means fewer smog checks, and smog checks come with fees attached to them, what happens to those fees? So I went looking. First thing I found in California, if your car is new enough that it doesn't need a smog check yet, you don't get to just walk away. You pay something called a smog abatement fee. 20 bucks or so instead of the inspection. Notice what already happened there. The fee has floated loose from the actual checking of the actual smog. You're not paying because someone tested your car, you're paying because you own a car. All right. Small money. So, of course, I keep pulling. Where does it go? A chunk flows into the state's clean air funds, and this is the one that made me put my coffee down. Some of that money, collected in the name of fighting car pollution, now helps pay for the rebates that put people in electric cars. This month, the governor's office rolled out a $600 million program handing instant rebates to first-time EV buyers. Go read how it's funded. It's right there in the announcement. Cap and trade dollars and smog abatement fees. So let me make sure I have this straight. The fee you pay because gas cars pollute is helping to buy the electric cars that make the fee pointless. The fee is funding its own retirement party and nobody told the fee. Now I told you we were following this, so let's follow it because the smog fee is pocket change. The real money is the gas tax. In California, roughly 80% of what fixes the roads comes from the gas tax, the potholes, the bridges, the asphalt, what you pay at the pump by the gallon. Somewhere around eight or nine billion dollars a year just to keep the roads from falling apart, which they already do. Not the point tonight. Now watch what success does to that. Cleaner cars burn less gas. Electric cars burn none at all. So they buy less gas, or zero gas, and they pay less gas tax or none. And this isn't me speculating. The state's own budget analysts ran the numbers. Their guy, not mine. If California actually hits its clean car goals, gas tax revenue could fall by $5 billion a year by 2035. Five billion. That's a 64% drop because it worked. So there's now a multimillion dollar crater in the road budget, and it's being dug on purpose by the exact policy everybody was applauding. What comes next? Come on, you already know. The fee finds a new address. The state already charges electric car owners extra at registration. They call it a road improvement fee, about $118 a year, on the logic that you're using the road without buying the gas. And they're testing the big one, which is a road charge, a per mile fee. They ran a real money pilot from the summer of 2024 into early 2025, and the final report goes to the legislator this December. Simple logic. If we can't tax the gallons, we'll tax the miles. Now stop. Because I can hear the objection coming and it's a good one, so I'm gonna make it for you before you have to yell at me. Roads need money. That's true. The asphalt doesn't care what's under your hood, and a two-ton electric vehicle grinds up a road the same as a two-ton gas car, probably worse because those batteries are heavy. So if the gas tax is drying up, government has a real problem on its hands. Somebody has to pay for the roads. And honestly, a mileage charge might be fairer than a gas tax. The person driving 50 miles a day pays more than the person driving five. I can defend that. Kind of. So if you clicked on this expecting me to tell you that road charges are some kind of plot, wrong show. That's not what I'm questioning at all. It's not even the point of the show. Here's what I am questioning, and it's the only thing I care about right now. In sixty years of buy the clean car, buy the clean car, buy the clean car, did anyone ever turn around and say, and by the way, the day this works, we're gonna have to come get that money from you somewhere else? Did the sales pitch ever include the part where winning comes with a new bill? Because I went looking for that sentence, and of course I could not find it. And before you file this under again, well, that's California, which is the easy exit. I'm not gonna let you take it. I've got one more thing to show you. This is everywhere. About 40 states now put an extra fee on electric vehicles to make up for the gas tax. And it's not a red thing and it's not a blue thing, which is what got my attention in the first place. Texas, $400 up front, $200 a year after that. Tennessee, Georgia, Alabama, Wyoming, West Virginia, all around $200 a year. And up here where I live, Oreg drivers have been able to opt into paying by the mile for over a decade. There's a federal version floating around right now, too, and $130 per year. So it's red states, blue states, and the federal government. Everyone looks at the same disappearing gallons and reach for the same thing, which is your registration. So that's the first one. Real problem, real fix, and it worked. And the second it started working, the money didn't throw a party, it moved. I mean, it's a little like throwing your kid a graduation blowout for finally finishing school and then mailing them senior dues every year for life. Congratulations, you did it. Please continue paying for the version where you hadn't. Now that was strange enough on its own. One fee doing a magic trick in one corner of the state's budget. And I found another one. And this one has nothing to do with a car. This one starts in 1984. And to understand why it happened, you have to remember what California schools felt like in the early eighties. Money was tight. Prop thirteen had capped property taxes a few years before. Districts were getting squeezed, and everywhere you turned it was the same conversation. The schools need money and nobody wants another tax. Real problem again. I kept running into that, by the way, and it stopped being a coincidence somewhere around the third one. Every single one of these things starts with something that was actually wrong. So somebody has an idea. What if we don't raise taxes at all? What if instead people just hand us money voluntarily in exchange for a small chance at being rich? The California Lottery. And here's what I want you to hear because it's the whole segment. They did not sell it as gambling. They sold it as schools. Prop 37, November 6, 1984, the California State Lottery Act, and the pitch was clean and simple and honestly pretty honest. You buy a ticket, a big chunk goes to the classroom, no new taxes, fun for you, good for kids. 58% of California voters said yes. That's not squeaking by, that is a mandate. People wanted this lottery. And they weren't voting on a feeling either, because there were numbers written into the deal. At least 34% of revenue had to go to public education. About half went back out as prizes. And running the operation, the salaries, the advertising, the overhead, that got capped at 16%. 34 cents on the dollar to the schools. That was the agreement. There's one more word in that law I need you to hang on to. The lottery was supposed to supplement education funding. Supplement. Extra on top of in addition to. It was never supposed to replace what the state was already spending. It's the sprinkles. It was never the cupcake. Games start selling October of '85, and people go nuts for it. Lines out the door, and the money's real. Billions of dollars over the years into California schools. One recent year alone, the lottery handed the education system about $1.7 billion. So let me stop right there and say the honest thing before someone accuses me of ducking it. That money is real. It's not fake, it's not a scam, it's not imaginary money. There are classrooms in that state that got things they would have never gotten otherwise. Nobody up here is telling you the lottery gives schools nothing because that's a lie and you'd catch me in it. Schools deserve funding. I'm not going to pretend otherwise, and that is not what I'm questioning. What I'm questioning is the same thing I asked about the smog fees. Is the deal you're in today the deal you voted for? So we go to the paperwork. Start with the number that surprised me and understand I read a lot of budgets. All of that lottery money, the billions, the whole operation, adds up to about 1% of what California spends on public schools. One percent. Now to be fair, that is not a broken promise. It was always designed to be supplemental. That's what the word supplemental means. But be honest with me, is that what you thought it was? Because when they pull people on this, most folks are convinced the lottery is a load-bearing wall in the school system. That the whole thing would be in trouble without it. Sprinkles. Everybody thinks it's the cupcake. So what do I do? Keep pulling. Now we're at 2009. California is in the teeth of the Great Recession, the budget's a disaster, and the lottery itself is underperforming. Californians just weren't buying as many tickets per person as people in a lot of other states. So a proposal goes on the ballot to modernize the lottery. Bigger jackpots, more marketing, loosen it up. And the voters said no. Not close either. They just knocked down the reform. Fine. That's the system working. Voters got asked about changing their lottery and they passed on it. Next year, 2010, the legislator passes AB 142. And AB 142 does the thing, lifts the cap so more than half the money can go to prizes, which means bigger jackpots, which is exactly what sells tickets. And to make room for that, it takes out the 34%. The floor. The number of people wrote down in 1984, gone. What replaces it isn't a percentage at all. It's a goal. From that point on, the lottery just has to run the games in a way that maximizes total dollars going to education. Now hold on, because there's an argument for that, and it isn't a stupid one, so let me put it on the table properly. Logic goes like this a bigger jackpot sells a lot more tickets. A lot more tickets is a lot more money. And 24% of an enormous pile beats 34% of a small pile. Grow the pile, and the school's actual dollars go up. That's real. Bigger pile. I would have sat still for that argument. But again, look at the sequence one more time. Voters get asked to loosen up the lottery, voters say no. The following year, the legislator loosens up the lottery. Nobody did anything illegal here. The legislator had that authority. That's how the lottery works. So I'm asking a smaller and more annoying question. Did anyone ever go back to the people who made the deal in 1984 and ask if they were okay with the deal changing? Because I can't find that vote either. So did the pie theory work? Ten years later, the state auditor pulls the books, and here's what's in the report. Since those 2010 changes, the lottery's total operating revenue went up 115%, more than doubled. Money going to education went up 66%. And the share of the sales actually reaching the schools dropped from 33% down to somewhere between 24 and 25%. Both of those things are true at the same time, and I want you to hold both. Schools did technically get more dollars, that's real, and I won't take it from them. And the machine grew about twice as fast as the promise did. Pi got bigger, your slice got thinner. And unless you read state audits recreationally, nobody ever mentions the slice. The same auditor found the lottery came up about thirty-six million dollars short to education in a single year because the law said school money was supposed to rise in proportion to revenue, and the lottery's position was, well, we just have to go up, not go up proportionally, which is a lawyer's answer. It isn't a liar's answer. And the difference between those two things is worth about thirty six million dollars. And there's one more line in that audit I couldn't stop thinking about. The state controller's office ran its own review, found something significant. The lottery disputed it, and the finding came out. God, I'd love that feature on my taxes, wouldn't you? Now here's where I got that feeling again. Same one I had smog fee. I didn't have a name for it, but the shape was familiar. Because look at what actually happened. Nobody stole anything. There's no villain in a back room twirling a mustache. And if that's the episode you wanted, I don't have it, I never do. What happened is the revenue got soft. The institution needed the revenue, so the rules got adjusted to protect the revenue, and the thing the revenue was supposed to be for took the haircut. The schools didn't stop getting money. The schools stopped being the priority in the math. And the brochure never changed. That's the part that gets me. Go look at a lottery ad today. What does it say? It's for the schools, same as 1984. The pitch sat frozen while the accounting got a lot more creative. Isn't it amazing how often temporary turns into tradition with government? And how often for the kids turn into a logo? Before you file this one either, this is not a California thing. Forty five states run a lottery, and almost every one of them has a beneficiary stapled to the name. Education, veterans, parks, senior programs. And that's not an accident. Nobody in the history of this country has ever passed a lottery by campaigning on hey, let us run a numbers game. You need the schools to get it through the door. The schools are simply the cosigner. So here's my honest scoreboard. Real problem, schools needed money, real fix, voters approved it, fair and square, 58%. Real money, billions still flowing, and I'll defend that. And then quietly, over about 25 years, the deal moved. Not stolen, moved. And the only people in the room when it moved were the people who benefit from it moving. So would California have voted yes in 1984 if the brochure had said 34% to schools for now, and in 26 years we'll take that number back out, and the share will drift down to about 24%, and you'll end up covering roughly 1% of the school's budget, and we will spend a great deal of money reminding you it's for the kids. Maybe 58% is a big number. Maybe it still passes. But nobody ever got the chance to answer the question. That's what bugs me. So now I've got two of these: a fee that helps pay for the thing that erases the fee, and a promise that quietly got replaced while the advertisement stayed exactly the same. And I'm sitting there thinking, all right, that's California, two weird stories out of one weird state. Coincidence. Go to bed, Chad. And then I found one with 46 states on it, and this one wasn't a fee. They didn't spend the money after it showed up, they spent it before. And before I get one word into this, let me be very clear about something. Smoking killed people. Enormous numbers of people. Decades of hospital bills and funerals that families should not have had to plan, and for years the companies selling it knew exactly what the product did and said otherwise. So nothing in the next few minutes is a defense of the tobacco industry. If you come away thinking this is Chad went to bat for Philip Morris, then I have failed at speaking English. This is about what the government did with the money after. 1998. The attorneys general of forty six states sat down across the table from four of the biggest tobacco companies in America. The states had sued and the argument was straightforward. We are the ones paying to take care of sick smokers. You caused it, you pay for it. And they win. That's the Master Settlement Agreement. The companies agreed to pay the states every year forever in perpetuity, roughly $206 million just in the first 25 years. Real accountability for real harm. One of the biggest wins any group of states ever pulled off, and I'd say that to anyone. Now here's the detail. It's small, it's buried in the mechanics, and it turns out to be the entire story. How do they calculate what the companies owe each year? Mostly by how many cigarettes got sold the year before. Think about that from the drafting table in 1998. I mean, it does make complete sense. In theory, it was the companies who sold the most pay the most, which sounds perfectly fair. But it also means the size of that check moves with how many cigarettes America buys. More smoking, bigger check. Less smoking, smaller check. Hold that thought because here's the part I did not know. The states got the money, and then a lot of them decided they didn't want to wait for it. So you have to understand, this is a new stream of payments arriving every April for the rest of time. Slow, steady, reliable, and a bunch of states had budget holes right now. So they did what Wall Street does all day long, which is turn the future into cash. It's called securitization, which is a word engineered to make you stop listening. Here's what it means in English. The state goes to investors and says, We have these settlement checks coming in for the next thirty, forty years. Give us a big pile of money today and the checks are yours. Investors say yes. States get paid up front. Those are tobacco bonds. It's a payday loan against cigarettes. And this was not two states messing around. Twenty-one states and territories securitize their settlement payments. Local governments in California and New York did their own. All in, you're looking at roughly $80 billion corner of the municipal bond market. Why would they do that? And I want to be fair here because there are real answers. Recessions, deficits, a hospital that needed building. Cash today is worth more than cash in 2041. The ratings agency signed off on all of it, and this is an ordinary financial tool, perfectly legal. Follow what it actually did. The moment you sell those future checks, you have made a promise to investors. And the money that keeps that promise only shows up if Americans keep buying cigarettes. So what happened next? Smoking went down, and it kept going down. Fewer teenagers starting, more adults quitting. Decades of public health work paying off exactly the way everyone hoped it would. That's the win. That is the entire point of the lawsuit. That is the thing 46 attorney generals stood up and said they wanted in 1998, and they got it, and the checks got smaller. Let me show you where that landed because it landed six weeks ago. Nassau County, New York, back in 2006, they did one of these deals, a little over $430 million borrowed against their share of the tobacco money. This April, the settlement payment came in to the Nassau Tobacco Corporation, $14.7 million. On June 1st, what they owed bondholders was $35.9 million in principal plus another $18.3 million in interest. $44 million due, $14.7 in the door. They didn't pay. June 1st, 2026, first payment default anyone can find in the entire history of that $80 billion market. The bonds traded down to 52 cents on the dollar. Auditors had already raised the question of whether the corporation could keep operating at all. And at a board meeting last November, an official said the big banks looked at refinancing it and came back with nothing. It isn't just them either. A couple of weeks later, another New York tobacco issuer had to reach into its reserve account to make the payment. Tobacco bonds were the worst performing corner of the municipal market that month, and the analysts who covers this stuff are now saying more defaults are close to inevitable. Because the thing the money was tied to is going away on purpose because we asked it to. And folks, I sat with that for a long time before I wrote any of this down. I'm not going to tell you what to do with it. I'm just going to say the sentence out loud and let you hold it for a second. Somewhere in America there is a spreadsheet where you quitting smoking is a risk factor. Did we accidentally build part of the budget around people continuing to smoke? I don't know. Keep going. Second one. And I need to front load the concessions even harder here so nobody misunderstands what I'm doing. Violent criminals belong in prison. Full stop, no asterisk. Public safety is the first job government has, and I'm not one of these people who thinks they can therapy our way out of armed robbery. Prisons cost money, and here's the part people forget. A prison costs almost the same whether it's full or half empty. The building is there, the staff is there, the lights are on. So when a company operates a facility for a state, they want predictability written into the contract, and that is not evil. That is just how anybody runs a business. Now, all of that conceded, let's go to the paperwork. A research outfit called In the Public Interest, that's the name, did something nobody had really bothered to do. They filed records requests and collected 62 actual contracts between governments and private prison companies, not press releases, the actual contracts covering 77 facilities around the country. Forty-one out of those 62, about 65%, contained something called an occupancy guarantee. Here's what that is. The state promises to keep the prison a certain percentage full, and if it isn't that full, the state pays anyways for the beds nobody is in. Most common number in those contracts was 90%. Virginia, 95%, Louisiana 96%, Oklahoma, 98%. And three prisons in Arizona are at 100%. 100, keep every bed filled or write the check for the empty ones. Now Colorado is the one that shows you what that means in the real world. Crime in Colorado dropped by about a third over a decade. That's good news. That's the thing every politician in America stands on a stage and promises. And because of the occupancy requirements across these facilities, taxpayers had to hand over an extra two million dollars for prisoners who did not exist. The researchers had a name for it. They called it a low crime tax, which is a business model with some awkward incentives. And one more, because this is one's just remarkable. Back in 2012, one of the big private prison companies sent an offer around to states. We'll buy your prisons from you outright, cash up front. You've got budget problems, we've got money. You just have to sign a 20-year deal and guarantee we stay 90% full. Now, to their credit, nobody took it, not one state signed that. But somebody wrote it. Somebody put it in an envelope, somebody thought it might work. One more, and this one's real quick, and it's the one where everyone in America already agrees with me. They just don't usually notice they're agreeing about the same thing, but let's back it up. Ferguson, Missouri. And I'll concede first, traffic laws exist because people die on roads. Speeding tickets aren't necessarily a scam. Cities need revenue and fines are a legitimate way to raise some of it. After everything that happened in Ferguson in 2014, the Justice Department went in and did a full investigation. And that report is worth your time because the thing tying it all together isn't a policy, it's a budget. In 2012, about 13% of Ferguson's city budget came from fines and fees. By the 2015 budget, the city had penciled in 23%. Almost a quarter of running the town coming out of tickets. And the DOJ found the city was managing it like a sales target, officials evaluating people in the justice system based on how much money they brought in. There's an email in that report from the city's finance director to the city manager saying court fees were expected to rise about 7.5%, and then mentioning that he'd asked the chief whether the department could deliver 10. The chief, quote, indicated they could try. The DOJ's conclusion was that Ferguson's law enforcement had been shaped by the city's focus on revenue rather than public safety needs, and that the weight of it fell hardest on the town's black residents. Oh, and here's why it's in this episode. Look who condemned it. The ACLU, obviously, and the Reason Foundation, who are libertarians, who wrote one of the most definitive policy briefs on fines and fees. Americans for Prosperity has been on this for years. Left and right, same verdict, without coordinating, because when a police department's ticket book turns into a revenue line, everybody's instinct goes off at the same time. Doesn't matter what you believe about anything else. So that's three more. A settlement where the checks shrink when people get healthier, sold off in advance to investors who are owed the money either way. Contracts where crime going down means writing a check for empty beds. And a town that budgeted for tickets the way a business budgets for sales. Which is Portland also, by the way. Now hear me on this. Nobody in any of these stories wanted people to get cancer. Nobody was sitting around hoping for more crime. That is not what this is, and if that's what you're hearing tonight, back up and run it again. These were normal people in normal jobs, inheriting systems somebody else built, doing the responsible looking things sitting in front of them. It's just that somewhere along the way the paperwork started rooting for a different outcome than the people did. And right about there I'd figured I'd hit the end of the trail. Three days of reading, cars, schools, cigarettes, prisons, a courthouse in Missouri, and every bit of it was 10, 20, 30 years old. Historical, finished, sad, but over. Then I found one that isn't finished. One that's being built right now, this month out in the open on the phone in your pocket. And I'll be honest with you, it might be the most fascinating one of all. Always concession first on Sequel Sunday, you know the drill by now. People were already betting on sports. Always have been. Your uncle had a guy, your office had a bracket, billions of dollars a year moving through offshore websites and neighborhood bookies untaxed, unwashed, with zero consumer protection. And if that offshore site decided not to pay you, congratulations. Who were you gonna call? So bringing it into the daylight is not a crazy idea. It's a defensible idea. And a grown adult in this country is allowed to spend his own money on something stupid. I've done it. I do it all the time. That's freedom, and I'm not here to take it from you. That's not what I'm questioning. But here's what's different about this last one. Everything I've shown you tonight was finished, over. The smog fight, the lottery deal, the tobacco settlement, those prison contracts. All of it already happened and we were reading history. This one is not history. This one is still being built. So I'm gonna do something different. I'm not gonna walk you through it. You've run this thing three times already tonight. You know the questions. Let's just do it together and you tell me if you get ahead of me. Question one. What was the problem? Illegal gambling, untaxed, unregulated, unprotected. Question two. What did they build? May of twenty eighteen. The Supreme Court strikes down the federal ban on sports betting and kicks it back to the states. And the states move fast. Thirty-nine of them plus Washington, D.C., legalize inside of seven years. That is not slow walking, that's a stampede. Question three, and you already know where I'm going. Where did the money start flowing? New York taxes mobile sports betting at 51%. 51%. That's not a tax, that's a partnership. And it brought in something like $862 million in a single year, over $2 billion in three years. Now, where is that money earmarked to go? Education. Yeah, I made the same face. Don't worry. New Jersey has pulled in around $549 million since 2018 and has been looking at raising the rate. Nationally, we went from about $7 billion wagered a year to $167 billion. Monthly, it went from roughly a billion in 2019 to $14 billion by 2024. That is not a trend line, that's a wall. Question four, and this one breaks the pattern a little, so pay attention because I'm not going to force it to fit. In every other story tonight, question four was what happened when the problem got solved. But this problem didn't get solved, it got legalized. So the honest version is what showed up afterward. What showed up is the research. Economists finally went and did the thing nobody did in 2018 when they legalized this. They pulled actual household financial data and looked at what happens in a state after online betting arrives. Bankruptcies go up. One estimate puts it at twenty five to thirty percent over a few years. Another finds about 10% bump in the likelihood of filing. Debt is going to collections, goes up, car loan delinquencies go up, credit scores go down, and here's the detail that got me because it's the opposite of what you'd assume. People do not cut back on other things to cover the betting. You'd figure they'd skip a dinner out, buy cheaper groceries something. They don't. They stop saving, and they start borrowing. The savings account is where the money comes from, which means the damage doesn't show up this month or even this year. It shows up the day something breaks and there's nothing behind you. And it lands hardest on young men in the lower income areas, which is roughly double the average. There's one line in that research I can't shake, a guy explaining what he lost. It was the money his wife had been putting away for their kids' college. Now, in every other story tonight, this is where the state notices a problem and responds. Question five. What happened next? Illinois raised the sports betting tax, and lawmakers moved to expand gambling even further. And a policy group in that state, a blue state, by the way, put it about as plainly as anybody ever has. Officials will tell you these taxes exist to discourage the behavior, but the state budget now depends on people continuing to do it. God, at least someone said it out loud. But that's not the twist. That's just the pattern doing what you already knew it was going to do. You called that one from your couch. Here's the twist, and I don't think anyone could have called this. There's a company called Calchi. Calchi is not a sports book. Calchi is a prediction market, a federally regulated exchange licensed by the Committee Futures Trading Commission, same agency that watches wheat futures and oil contracts. And on Calchi, you don't place a bet on the game. You buy a contract on the outcome of the game. I know how that sounds, so stay with me because the federal courts are taking it very seriously. If it's a bet, it's gambling, and gambling is the state's business. Their license, their rules, they're 51%. But if it's a contract on a future event, it's a swap. And swaps are federal, which means the states don't get a vote, any of them. So Calchi starts offering sports contracts and the states come at it hard. Nevada, Massachusetts, got an injunction. Tennessee, where a federal court turned around and sided with Calci. Arizona went furthest of anyone and filed criminal charges against the company, and a federal judge permanently blocked Arizona from pursuing them. Then April 6th of this year, the Third Circuit Court of Appeals, first federal appeals court in the country to touch this, rules two to one that Calci's sports contracts are swaps under federal commodities law, and that federal laws preempt New Jersey's gambling laws. New Jersey, the state that won the Supreme Court case in twenty eighteen that started this whole thing. Beat the federal government to legalize betting, and eight years later they can't regulate their own betting. But that's still not the part that made me stop. This is just political noise as usual. Bureaucracy, if you will. Here's the part. Michigan's attorney general goes into state court and gets a restraining order against Kelshi, june twenty ninth, and on july sixth, that court clarifies exactly what it wants. Trades made by Michigan users have to be voided, canceled, refunded. State court order, clear as day. Eight days ago, july fourteenth, the CFTC, a federal agency in Washington, stepped in and did something the people who follow this described as almost unheard of. It blocked the exchange's own move to unwind those trades and ordered Calci to honor them. Read that back slow. State Attorney General got a court order to stop it inside her own state, and a federal agency told the company to keep going anyway. Calshi did nine point four billion dollars in volume in June alone. And here's the last piece, and this is the one that made me laugh out loud, not because it's funny, because of course this is where it ends up. Because Calchi is a federally regulated derivatives exchange and not a state licensed sports book, the states don't collect their gambling tax on it. Not New York's 51%, not anybody's. So the state spent seven years wiring their books, their school money to sports betting revenue, and the thing growing fastest in that market right now doesn't play it. They can't tax it. And the courts keep telling them they can't stop it. So there's your fifth one. And let me draw the lines on this before somebody clips it wrong. I'm not saying Calchi broke a law. Federal courts keep ruling they didn't. I'm not saying the CFTC is corrupt because they tell you they're defending federal jurisdiction and that's literally their job. And I'm not saying the states are innocent because the states are the ones who went to fifty one percent and called it school funding. Every single person in this story is doing exactly what the structure rewards them for doing. I'm just pointing out where we are. The revenue is already load bearing, the harm is already documented in the research, it's in the bankruptcy filings, it's in somebody's kids' college fund, and the states that might want to slow it down or finding out they might not have the authority either. It took about seven years to switch this on. Nobody has any idea how you'd switch it off now. And every other one I showed you tonight, the feed, the ticket, the settlement, the beds, every one of those took 25, 30 years before anyone noticed. This one is seven years old. And we're already here. Meanwhile, these same politicians talk about affordability crisis and cost of living crisis out of their same pie holes while they're quickly collecting all this gambling revenue that they know people are using their savings on. They have no problem passing the gambling. Same time talking about cost of living. It's sick. And when I started digging into this, I really thought it was an episode about California, that I wasn't. And I'll tell you the other thing I had wrong, which is the more important one. Like always, when I started pulling on that first receipt, some part of me was hunting for a bad guy. Of course I was. That's the fun version of this episode. Somebody in a back room decides to keep the problem alive on purpose. I find the memo, I hold it up, we all get mad together, everyone goes home satisfied. But I never found that memo and I looked. What I found instead was a lot of ordinary people doing the responsible looking things sitting right in front of them. Budget analysts closing a gap, a legislator listening to people who told them this would bring in more money, a county treasurer who in 2006 honestly believed he was being smart, and by the standards of 2006 he was. Nobody in any of those rooms was hoping for dirtier air or worse schools or more cancer. Which actually bothered me more if I'm being straight with you, because you can fire a bad guy. You can't fire an incentive. Now here's what I actually want to say, and I mean this. Somewhere around the third one tonight, you stopped needing me. I could feel it while I was writing this thing. By that third story, you already knew where I was going. You were finishing the sentence before I got there. Some of you probably said it out loud in your kitchen looking at your phone. And I want you to notice that, because that was not me convincing you of anything. That was you spotting a shape you had already seen twice. You found it. I just brought the paperbook. And they all start the same way. There's a real problem, not an invented one, a real one. Somebody builds something to go fix it. Money starts moving because things cost money, and that's not a scandal. And then the thing works. They shouldn't need the money. They shouldn't need the agency anymore. It should evaporate, but they can't because they're dependent on it. That's what finally clicked for me, somewhere around two in the morning, about 40 tabs open. Every one of these programs had a beginning. Somebody wrote the ballot measure, somebody drafted the bills, somebody built the agency, hired the staff, set the fee, ran the projections. Not one of them had an ending. Nobody ever wrote the page that says, here's what we do the day this works, here's what happens to the fee, here's what happens to the staff, here's how we wind it down or hand it off, or stand up and say out loud that the job is finished. I just talked about this earlier in the week. We're extremely good at starting things in this country. We have never once written the last chapter. So here's the question I'm leaving here with, and it's not a gotcha. I don't have a clean answer, and I'd be suspicious of anyone who tells you they do. What is success supposed to look like? Not for a candidate, not for a party, for a program. If a fee genuinely fixes the thing it was created to fix, like smog, should the fee end? Should the agency get smaller? Should it get pointed at something new? And if so, who decides that? And do the rest of us get a vote on it? Or does solving the problem just hand you a brand new problem written down in the budget? I don't know. What I do know is we almost never ask it at the front end. We ask it twenty five years later when the numbers stop working and someone has to go find the money somewhere else. And look, I know how this show gets clipped, so let me be clear as I know how to be. Tonight we went to red states and blue states. We looked at things one party built and the things the other party built, and a whole lot of things both of them voted for together cheerfully on the same afternoon. Taking more money. That's never partisan. Nobody came out of it uniquely dirty either. So this is not a Republican question and it's not a Democrat question. It's not really even a political question, it's an institutional one. It's about how we design things, and right now we design them to start and we don't design them to finish. Which means everybody watching eventually pays for it. The guy in the F 250 and the guy in the Tesla. The person who has never bought a lottery ticket and the person who buys one every Friday on the way home. It comes for all of us just through different doors. And I want to be hopeful here because I actually am. This is fixable. That's the good news buried underneath all of it. It is not a morality problem. You don't have to make anybody good. It's a design problem, and design problems get fixed by asking better questions earlier. So that's what I'm leaving you with. One question, that's it. Next time you hear about a new program, and you will, probably this week, probably from someone you like and vote for, don't just ask the normal questions. Don't ask whether it'll solve the problem. Ask one more. If this actually works, what happens next? Who tells us? Who gets the money? And who anywhere in that building is in charge of turning it off? I called this episode the problem was too profitable. That was never me making an accusation. That was me asking. And now you've seen what I've seen, so you tell me. All right, tonight's Reagan reminder, nineteen sixty four. Ronald Reagan is not a governor yet. He is not a president. He's a guy giving a speech for somebody else's campaign, and he says a line about government programs that people have been quoting ever since. He said federal programs, once you launch them, never actually go away. And he called the government bureau, quote, the nearest thing to eternal life we'll ever see on this earth. It's a funny line. I laugh every time I see it, hear it, or read it. But here's what I didn't know until this week's research. Three years later, August of 1967, that man, same man, now the governor of California, picked up a pen and signed the Mulford Carroll Act, which created California's Air Resources Board. The man that told America that government agencies never die went out and created one. And I want to be careful because this is not a gotcha, and I'm not doing that to him. I never would. He was right to sign it. That's the thing. The air in Los Angeles was hurting people. The science was solid. Somebody had to do something, and he was the one governor, so he did it. And it worked. That agency helped clean up the air over the entire state. Both things are true. He diagnosed the disease in 1964, and then in 1967, because the problem in front of him was real, he built one anyways. And that might be the most honest thing in this whole episode. Because that isn't hypocrisy. That's what governing actually is like. The problem is real, it's sitting on your desk, people are sick, and the responsible move is to build the thing. Knowing full well what you know about how these things tend to go. Reagan understood both halves of it. He just never got the second half written down, sadly. So here's the coalition part, and then I'll let you go. Tonight had a Republican governor in it, a Democrat legislator, forty six attorney generals from both parties, red states charging four hundred dollars for an electric car and blue states building a mileage meter. Everybody in this story thought they were doing the right thing, and most of them were. That is not a priority problem. There's no election that fixes that. The only thing that fixed it is somebody at the very beginning asking the question Reagan basically handed us in '64, and nobody bothered to write down. Not will this work. What do we do when it does? Because if the problem becomes too profitable, there's no incentive to fix it, and fixing it becomes performative while the government continues to feast off the fees, fines, and taxes they've become dependent on. I'm Chad Law, the Las Gay Conservative, America's binary brother, the holiest homo, reminding you to always look at the problems that become too profitable to resolve. If you're on Rumble, stick around for about 10 seconds. We'll answer all the questions that came in during the live broadcast. And America, that was common sense. And quick reminder: we'll be running the best of Chad all next week, Monday, Wednesday, Friday. All of those live broadcasts will be repeats because I have to go to Montana to have a little personal vacation. I'll be sending pics and updates on my social media, so make sure you follow. All right, we're gonna move into the rumble room now. God bless you, President Reagan, and may God save America.

SPEAKER_02 52:48

It's marvelous that you should care for me. Yes, you've made my life so glamorous. You can't blame me for this. It's so marvelous that you should change for me. It's once the boots marble dance.