Sunday, February 24, 2008

The Great Money Divide

We talk about the "frum world." When we do so we are including a whole range of practices within those two words. Even within frumkeit you begin at the left and move all the way to the right. This "frum" world maintains a huge number of mosdos of Jewish learning, both for males and for females as well as some co-ed ones. There are shuls and mikvahs that are essential. There are any number of summer camps. There are any number of tzedaka and chesed organizations that deal with a full slate of problems that can beset frum people. In short, frum Klal Yisroel has a zillion "projects." What they all have in common is a need for money. So where is that money coming from? The answer is a bit complex.


Generally, you can't give someone else any money if you have none yourself. I edited a book on tzedaka last year and one of the points was that if you are a recipient of tzedaka you are "patur" from giving tzedaka. Look around at the people you know. Lots of them have no money, certainly the ones who are supported while they are still learning. So the institutions of frum Klal aren't being supported by these people. It is not kollel yunge leit that are supporting the kollels they learn in, never mind all the other projects that need money.


Look at the parents of these learning couples. It's the norm for the parents to be supporting the children. Many of these parents are putting themselves into debt to support their children. Even partial support or "helping out" is straining limited resources. The ones who aren't going into debt are just barely making it on their own. They are not the ones who are supporting the institutions of frum klal with large infusions of cash. Even those with lots of money are finding family putting a strain on their spending habits. Add up the figures if your 5 children who each have 5 children of their own are counting on you for the "big ticket" items such as buying homes and paying yeshiva tuition. And eating.

So where is the money coming from, because it has to come from somewhere? Yes, there are right now some few individuals all the way on the right who have the kind of money that can take care of their family's needs and give generously to the needs of Klal. The key is "few." The "real" money in frum Klal is sitting in the middle ranges and the areas to the left. And it is "old money" in a very real sense. The serious money is sitting in my generation. The younger you get the less there is. Even where there is serious money in the middle generation, that generation has bought into the idea of "unlimited familial support" in far larger numbers then my generation did. More money is going to family and less to institutions.

What does this mean for the institutions of frum Klal? Yeshiva X has always counted on Grandparents Y for financial support. But grandparents Y may or may not have the same level of money as they head into the retirement-age years. Grandparents' Y children, if they have decided to adopt the lifestyle advocated by Yeshiva X, will need their parents' money to support their own children. If they haven't adopted the lifestyle then you run into another problem. Yeshiva X will have been rather vocal about pushing their lifestyle and saying that any other lifestyle is "not as good as theirs," "not as frum as theirs," "not the right way to be living." They are slowly but surely cutting themselves off from sources of funding. This is biting the hand that feeds you with a vengeance.

What will be the situation twenty years from now? If the vagaries of an economic turn down today can affect those with money and how much they can give, then how much greater will the problem be when there is less base money to begin with? If our frum institutions would like to have a future they had better start thinking of the future. If our frum communities want those institutions in the future, they had better take a hard look at how what they are doing today is going to affect that future.

Someone was a bit insensitive and told me that when my generation dies out the yerusha money will take care of the finances of the next generation. Nothing like knowing that someone is counting on you to die before they go belly up. But let me concede that point for just a moment. A well-to-do man I know has put away $25,000,000 that will go to his grandchildren upon his death. Many of those grandchildren are still very young; the others, among them, have at present 29 children and still counting. Do the math. Just how much money is that yerusha going to be earning in interest? Divide that interest by the number of people it will need to support. And do remember that all of this is pre-tax. Not a whole lot of money really. After taxes you are left with just about enough money to pay one yeshiva tuition, maybe two per grandchild/great grand child. Donations to the other institutions of Klal? Not there.

I am not anti-learning. I am very much in favor of learning. By all means let's all sit down and "learn" about how our spending habits today will affect the future.


19 comments:

Ezzie said...

I've said this for a long time. We're about 15 years from an economic collapse on the right.

tuvi said...

Not sure it will even be 15 years. If the economy continues like it has been the collapse could come sooner.Even if it is 15 years that is scary to consider. Just about then we will be having to make decisions for our oldest about schooling and future marriage plans. Not going to be fun with what is coming down the road.

Yoni said...

and this is the kind of reason why halacha requires ever married male to work for a living and not sit around and only learn torah. (torah without work will in the end cease and lead to sin. [perkei avos])

I'm just scared for all of the children who are going to be victims of this crazy policy.

Ezzie said...

Tuvi - I'd say 5-10, but I think it'll get bailed out once or twice before then by well-meaning people.

Allan said...

You might look at this as the jewish version of the president's faith based initiatives. These institutions are really big on having faith that all will continue and they sure don't take any initiatives to secure that future.

If the markets take a major correction or two those institutions are going to be swamped with people needing help just when their source of money is going to dry up big time. I'd say that 5 years is about when we are going to hear the first cries for help.

Chaya said...

I refuse to believe that the head of every frum yeshiva and organization is blind, deaf and dumb. I cannot believe that every one of them is refusing to see what is coming. But then where are the voices that are speaking about this? Where is the writing that should be warning people?

If you saw this situation in a movie you would say the writers were being way too unrealistic. But this isn't a movie. If I can see it and talk about it, and the other commenters can see it and talk about it, where are those who are in charge in this conversation?

Ezzie said...

Chaya - Not on blogs. Generally not reading things outside a certain circle.

Michah said...

If the only place this is being discussed is on blogs then the 5 years is being too optimistic. Wouldn't think that there are enough of us or in a position to act when the roof comes caving in.

Sara said...

You know what irks me the most? These groups that are heading for financial disaster are the same ones that look down on me for being too modern for them. But they'll come running to me anyway when they are in trouble because we're all brothers and need to care about each other. You mean like how they care about me now? If I dropped dead today most of them would breathe easier and be quite happy to go on without me.

Yoni said...

Sara, the irony is that the "modern" approach to things is infact the ancient approach (circumstances and knowledge were different, but the mindset and thought processes are the same) and their approach is the "new" and "modern" one.

and they don't get it.

Eli said...

Sara makes me think of an interesting question. After the financial disaster hits, and it will hit, who will be left standing? What will be the ratio of groups in the frum community? Maybe someone should mention those figures to a rosh yeshiva when he condemns the modern and the middle.

Nussi said...

There is another side we aren't looking at. Most of the financial collapse will come because parents and donors will not have the money to give the institutions because that money is going to support multi-generations of family. That would mean many institutions will not be able to survive and will fold.

What would happen if we worked on the parents to end this multi-generational support? If that could happen what would be the affect on the institutions? Yeshivas would be the hardest hit since they would have far fewer students attending in the kollel years and perhaps in the beis medrash years. They would have to downsize but they would still be in existence for the most part. Since there would be more people working, including the previously supported families, there would be money for the various tzedaka programs. These programs might have less people who needed what they offer but that is only a good thing for a tzedaka.

So what the institutions of the frum community are looking at is a choice between possibly going out of existence or having to downsize. The real question is which one would they choose to do if they spent some time thinking about it?

SephardiLady said...

Another great post. I hope that there is no collapse that shakes the foundations of the Torah world. I'd prefer to see a recognition that things just aren't adding up and that we need to reconsider the current path.

But things aren't looking too good. There is a very good chance that federal taxes will increase in the coming few years. My readers know that I do not endorse debt financing of much more than a manageable mortgage. But, we know the frum world has spent itself into quite a hole and that lending is likely to become much tighter. So those parents who are supporting their household expenses (read: tuition) via home equity lines or credit, etc, may find themselves with a lot less access to cash.

As for a Yerusha, agreed that that won't take us into the next generation without major adjustments. For off all, we hope both sets of parents will live until 120 and enjoy their money. But, my in-laws already took the borrowing against their home route for yeshiva 15 years ago extending the life of their own mortgage. To think they could pay for the tuition of more than 3 times the number of children that they had is, well, laughable. My own parents hae always scrimped and saved and paid cash for everything with the exception of their first and only home. But, my father always worked for himself. So, there is no pension plan. No paid company health insurance. They are on their own and I just hope they will be able to support themselves comfortably and enjoy what they have when/if they retire. They gave me a good start in life and taught me what I needed to know. I don't expect them to leave much of anything and find it distastful to even think about a yerusha after 120.

JN said...

Our jewish institutions and our children should not be making any plans for the future that include a yerusha in them. From a strictly financial point of view that is being irrational. Money and how much there is fluctuates and there can be unforeseen expenses that reduce the amount of money. To be counting on someones dying by a certain age is awfully morbid to me. No one knows when death will happen. To count on death to receive money has got to be un-jewish.

jewtoo said...

It's sort of like buying a baby one ton elephant. You have the money to feed it when you buy it. And maybe you also buy a one ton hippo and you can feed it. And then they grow up and weigh ten tons. Now you have problems. You can't feed both of them at this size and you didn't think about what would happen when they grew up.

Shari said...

Lol jewtoo, have heard Klal Yisroel described in lots of ways but never as an elephant or a hippo. Still your analogy works. The baby grows up and is eating you out of house and home. Now what are you going to do?

Anonymous said...

So here we are again talking to each other instead of to the people who are in charge. Maybe it's time to ask the machers if they know what's coming up pretty soon? Maybe letters need to go to rosh yeshivas telling them we are worried about their financial future? Maybe we need to ask them to go public with their financial plans for the future? I don't think too many of them are reading the blogs and seeing our worry.

Anonymous said...

Frankly- I don't give a crap what happens with the far right. Just like an individual: if you don't work, you cannot thrive. It's a problem that will fix itself and eventually the far right will have to correct itself and begin working. This could happen in Israel overnight, but here it could take longer for the market to do its work. Unlike other ethnic groups that fall below the poverty line and manage by relying on the government/minimum wage, etc., the Frum community has unrealistic financial needs- such as Yeshivot, Rebbe's salaries, all the expenses of frumkeit. The Modern Orthodox have it right, but are still facing the same tuition crisis. All I say is- don't come knocking at my door. There are enough Yeshivot here and in Israel that are deserving of my maaser. Lakewood can deal with its own problems.

Anonymous said...

"Chaya - I refuse to believe that the head of every frum yeshiva and organization is blind, deaf and dumb. I cannot believe that every one of them is refusing to see what is coming. But then where are the voices that are speaking about this? Where is the writing that should be warning people?"

But they *do* see it. They see it every day when more and more people request tuition aid, and when they need to shnorr more and more to make the budget.

But what do you expect them to do exactly? They don't have much of a choice as they are in the same boat, and rocking that boat will only serve to destroy their own family without really helping anyone else. A close (very close) family member is a "Head of School" of a large Jewish Day School (2 year olds through High School) and lives with these facts every day. But what exactly should he do? Should he raise a hue and cry, and end up risking (ha, it would be definite, the rich folks* on the board don't like to "talk about the lack of money") not having his contract renewed? And then he loses his $180k+ salary that he uses to pay for his home and tuition for his 4 kids (that all attend different schools than his, with no or very limited reciprocal agreements regarding tuition discounts for administrators at other schools) and the other usual expenses. And then suddenly we have one more family on tuition assistance.

* By the way, I only fault these "rich folks" on their outlook on life, not on anything else. They are generally big baalei tzedaka, and at the end of the year, when the school budget almost always gets tight, they always come up with (either write the checks themselves or raise the money elsewhere) the extra $500k or $1M that is necessary. Heck, that's usually how you get on the board in the first place! But still, these kinds of rich people have a very different outlook on life and finances than most of the people who struggle to pay the tuition do.