Sunday, March 06, 2011
New and Innovative, or Moving Money from One Pocket to Another Pocket?
Hat Tip: Google Alerts
There is a saying, "you can't buy your way out of debt" or "you can't finance your way out of debt." That is what popped into my mind when I read the newest creative proposed solution to the "tuition crisis" published in Jewish Image Magazine. (Brooklyn Sephardic/Syrian Community Magazine).
I had to hand the article over to my husband to read before committing pen to paper, or in this case fingers to keyboard, because I was certain that I was missing some important detail in the article, something about restructuring schools or cost reduction. Turns out I wasn't missing anything. The plan appears to be one where money is moved from pocket to pocket.
The plan proposed by the article is as follows:
I'm not certain I understand how this proposed system is to develop and mature across a community, in a non-Utopian society (perhaps the Syrian Jewish community is more of a utopia? Do note that the author didn't limit this plan to his particular kehillah). The proposed system seems to make some bold assumptions:
1. That grandparents are not current contributors (could there be anything further from the truth? Seems many grandparents are contributing cash--even if not directly to tuition--or services--read: free babysitting while their own children work).
2. That young people, ages 20 +, have the means to make significant contributions to tuition while they are just starting out, either as singles, couples, or young families.
3. That families are similar sized. In figure 3, note that the grandparents had 4 children, and their more middle-aged children have 3 and 4 children a piece, nearly equal-sized.
4. That each and every member of a branch family will make their contribution from here until age 70 without dispute. The article states: "While the plan might not call for redistribution of wealth within the community, it does seem to assume that branch families will be happy to share costs within their own unit. Should that not be the case, one can only imagine the potential disputes.
5. That all contributors will able to meet their obligations for a period exceeding any mortgage on the market.
6. That children from the family are all attending schools within the same system.
7. That grandparents have (even more) money to spare.
There will be a public forum, according to the article. So, I'm very curious what type of discussion will ensue. It is extremely difficult for me to envision such a plan working, but perhaps I'm mistaken.
What I'm certain I am not mistaken about is the following: you can't spend your way out of debt! Costs must be reduced. Even if tuition increases are kept in line with inflation (a stated goal), we all know how hard it is to keep up with inflation alone. I think each community exploring their options needs to ask themselves if their income plan raises new money or just moves money from one pocket to another and if their expense plan reduces cost.