5.30.2010

There's No Such Thing as a Free Lunch: the Coffee and Tea Version


Earlier this year, for an assignment at work, I became well-acquainted with the local news coverage concerning budget discussions at several nearby school districts. Given the primacy of public education and the distressed nature of most localities' finances, these were no doubt heated discussions. Particularly in districts with highly regarded schools, tensions rose even higher; parents were indignant about cuts that might jeopardize the quality and reputation of their schools, while non-parents recoiled in horror at the level of some of the proposed tax increases.

Compromising, in cases like these, requires some empathy. Parents need to understand that it's not so noble to proclaim that they are willing to have their taxes raised in lieu of cuts, since they are the minority in these districts and the brunt of those higher taxes will be borne by others. And non-parents need to understand that they actually do have an interest in maintaining the high caliber of schools, since that is the highest correlate to high property values.

Alas, compromise and moderation are hard to come by nowadays. At a national level, we are seeing similar dynamics. One side demonizes the other for refusing to pay for things that seem obvious to them are worth paying for. The other side has decided to shorten the battle cry from Revolutionary War days - "no taxation without representation" - and has mindlessly and simply demanded "no taxation."

We've made things worse by gerrymandering our districts such that taking moderate positions is paramount to political suicide. What has been happening in California for years if not decades is now being played out on a national stage: upstart candidates outflank incumbents in the primaries by providing red meat to their bases, leading to polarizing choices in the generals. Resultingly, California's budget meltdown should be a cautionary tale for the US as a whole, for when one side refuses to cut spending and the other side refuses to raise taxes, you bring public budgets to the brink.

You may reply that unlike California, America can deficit spend. But that's no free lunch. All of Europe is paying for the unsustainable habits of a handful of small southern European countries that thought they could get away with unrestrained growth in public sector salaries and insufficient growth in the private economy, and the trillion dollar bailout and fiscal austerity plans that have resulted will yield years if not decades of slow or no growth.

I'm not a smart enough economist to know if the US is headed for the same fate. But I at least know that there's no such thing as a free lunch. If one side - let's call them coffee drinkers - wants lots of things, it has to know there has to be a sensible and sustainable way to pay for them. And if the other side - let's call them tea drinkers - wants to hold the line on taxes, it closes itself off to any discussion that might result in identifying some spending cuts that are bad and some tax increases that are good.

Jerry Seinfeld has a nice routine where he talks about friends going out to dinner. You sit around the table, stomachs rumbling, the whole menu laid out before you. You order lavishly, eat sumptuously, and revel in the abundance of it all. Then the bill arrives. You're full, the fun is over, and you pass the piece of paper around quizzically, wondering why you need to pay for this thing or that thing.

Ordering and eating are fun. Paying the bill, not so much. But that's part of the package. And, politically and fiscally, in small school districts and in the nation as a whole, the bill is coming due. Coffee and tea drinkers alike should know that when they are ordering the beverage of their choice, it doesn't come free.

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