Liquidity in Nassau County, Insolvency in Ireland

David Halbfinger profiles the budget woes of Nassau County, Long Island. It’s a good piece and worth reading. It’s also important to keep in mind that the basic story here—voters want politicians who provide generous social services and low taxes—is really pretty different from the story in Ireland.

Nassau County (like, say, California) is a very rich place and could afford to support a very large public sector if voters were willing to pay the taxes. That’s not to say they necessarily should want this, but Texas shows you can be rich and get by with low taxes and low services while Scandinavia shows you can be rich and get by with high taxes and high services. What you can’t do is repeal math or have a dysfunctional political culture.

Ireland, though, just doesn’t have the money. Households couldn’t pay back debts to banks, so the government said it would assume the debts. But the government doesn’t have the money either since its revenues come from taxing the very same households who can’t afford the debts in the first place. This difference, roughly speaking, is why America is currently awash in long-term fiscal consolidation plans that aren’t being implemented while Europe is awash in furious implementation of austerity measures that aren’t undergirded by any kind of real plan.