Don’t seize Harvard’s endowment. Cut off federal funding

Conservatives often have the right diagnosis of the problem but the wrong solution. One such case is the proposal for the federal government to tax, or seize, the endowments of Ivy League universities. While the authors accurately assess the problems of the modern ivory tower, their self-defeating recommendation would ignore the real source of the problem, violate fundamental rights, and ultimately legitimize the Left’s thuggish suppression of conservative organizations.

Getting the problem right

Confiscating universities’ endowments has been the topic of two recent articles: “It’s Time To Tax The University Endowments” by Zak Slayback in The American Conservative, and “Seize the Endowments” by Will Chamberlain in the recently relaunched Human Events. While their critiques differ somewhat, their recommendation is identical.

Both begin by reviewing the well-known shortcomings of modern academia. Administrators are quick to raise tuition, hostile toward conservatives, indiscreet with high-value technological secrets, facilitate foreign propaganda in exchange for funding and indoctrinate students in useless or harmful ideologies such as intersectionality and critical theory. This often makes earning a college degree a poor return on investment. And in the age of coronavirus, universities’ ample endowments did not discourage them from laying off workers and even demanding federal stimulus money.

It’s impossible to quibble with their assessment, which I share. (The first media attention I ever got as a writer came in response to an article critiquing the Ivy League, and I’ve written two books and countless articles about political extremism funded by tax-exempt foundations.) The strongest retort is that some university workers may fare better on unemployment.

Chamberlain adds a critique about student loans:

College debt is uniquely odious; it’s the only debt that’s non-dischargeable, and it’s offered to children. Today, 44.2 million Americans carry almost $1.5 trillion in student loan debt.

Technically, you can discharge student loan debt in bankruptcy, if it presents an undue hardship. The government also caps student loan payments based on your income and forgives student loans after you make 10 to 25 years of regular payments, regardless of your outstanding balance.

But the point remains: High college tuition prevents some students from attending and shackles others with crushing debt. The problem is so acute that we devoted the Spring 2019 issue of Religion & Liberty to the topic. But as much as I share their sentiments, I cannot endorse their conclusion.

Three wrongs on the Right

There are at least three problems with their proposal to confiscate university endowments. First, Chamberlain encourages the federal government to “seize” nonprofits’ private property in part for “attacking our voters.” Beto O’Rourke made the same argument when he proposed revoking the tax-exempt status of churches and synagogues that oppose same-sex marriage. It’s a short intellectual journey from crafting policies transparently designed to punish one nonprofit to punishing entire classes of socially disfavored nonprofits. Ask the Tea Party organizations that applied for 501(c)4 status under the last administration. Second, the government created by these policies would be anathema to our Founding Fathers. These arguments will receive greater development in a separate article.

However, the third problem with their argument is that they do nothing to rein in the greatest force behind skyrocketing tuition costs and student loan debts: federal spending.

Seizing college endowments while maintaining federal funding is like trying to save a drowning man while shoving a fire hose down his throat.

Eliminate the source of the problem: federal funding

Chamberlain alludes to the problem of federal funding in his article only to drop the subject. “The Federal Government has already spent trillions of dollars to make a college education more affordable,” he writes. “All that has happened is that price-gouging universities have spent like drunken sailors on administrators and facilities.” The government spent $172.4 billion on higher education in 2017 at the federal, state, and local level—not including federally subsidized student loans. Chamberlain notes the results:

Inflated tuition costs, of course, is largely to blame ... In the past 20 years, the average tuition and fees at private National Universities have jumped 154%. In-state tuition and fees at public National Universities have grown the most, increasing 221%.

That makes debt-laden college graduates (and non-graduates) “the victims of fraud, a fraud jointly perpetrated by their alma mater and the federal government.” Curiously, Chamberlain does not draw the most obvious conclusion from this data: The government should stop perpetrating its role in modern academic fraud.

Conservatives documented the connection between increased federal funding and higher tuition more than 30 years ago. They even have a name for it: The Bennett hypothesis. In a New York Times op-ed on February 18, 1987, then-Secretary of Education William Bennett wrote:

[I]ncreases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase. ... Federal student aid policies do not cause college price inflation, but there is little doubt that they help make it possible.

Since 1978—the year the federal government began offering subsidized loans to all students—the cost of college tuition has risen by 1,375%, or 238% since 1980 in inflation-adjusted dollars. Every dollar in federal financial aid raises tuition by between 60 cents and a dollar, researchers have found. For instance, Nicholas Turner found for every dollar on federal aid, colleges reduced their private scholarships by 83 cents. And the Federal Reserve Bank of New York revealed that federally subsidized loans’ effect on tuition is “most pronounced for more expensive degrees” and “those offered by private institutions,” like Harvard. In other words, the proposal to seize the endowments does nothing to remove federal incentives for the behavior they deplore.

Seizing college endowments while maintaining federal funding is like trying to save a drowning man while shoving a fire hose down his throat.

Chamberlain also ignores another dirty little secret: The federal government is the primary holder of student loans. Under the Health Care and Education Reconciliation Act of 2010, Barack Obama virtually nationalized the student loan market. Thanks to that Obamacare-related legislation, the federal government holds $1.2 trillion of the $1.5 trillion in total student loan debt. Student loans now make up almost 60% of all federal assets.

The federal government enabled universities to drive up tuition costs. Then it set itself up to collect an ever-increasing share of student loan debts. Government intervention into education created a trillion-plus-dollar debt crisis of which it and academia are the joint beneficiaries.

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From Dr. Fauci, a reality check for colleges and students as they look toward fall

The nation’s top infectious disease expert on Tuesday offered a blunt reality check to college presidents who have been bullish about reopening their campuses to a flood of students this fall.

During a Senate hearing, Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Disease, told Congress that there are unlikely to be vaccines or treatments widely available by this fall to help assure students worried about returning to campus life. Asked, for instance, by a Tennessee senator what he would tell the chancellor of the University of Tennessee Knoxville, Fauci offered a stark answer.

“I would be very realistic with the chancellor and tell her that in this case, that the idea of having treatments available, or a vaccine, to facilitate the reentry of students into the fall term would be something of a bit of a bridge too far,” Fauci said.

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Australia: Queensland university in the pocket of China

Liberal senator James Paterson has taken aim at universities' reliance on international students, using a speech in Parliament to reveal confidential details about the University of Queensland vice-chancellor's pay incentives to deepen ties with China.

In a late-night speech on Tuesday, Senator Paterson said a whistleblower from the university had given him a copy of last year's senior staff remuneration report, which showed vice-chancellor Peter Hoj had received a $200,000 bonus based partly on his success in growing the university's relationship with China.

According to Senator Paterson's read-out of the document, one of the key performance indicators Professor Hoj was judged against was a "sound and strategic positioning in China" because of its growth as a research provider and it being a "very important source of international students" for at least another five years.

The remuneration report noted Professor Hoj had visited China six times over 2018 and 2019 and the demand for UQ courses from Chinese students had "continued to grow strongly and we will likely end up with 63 per cent of commencing international students coming from China in Semester 1, 2020".

Professor Hoj was awarded his "significant" bonus in 2019 even though, Senator Paterson said, he had not been as successful against another key performance indicator seeking "greater diversity" in the international student body to make the university more financially resilient.

"Despite his failure to achieve this KPI, the vice-chancellor was awarded a bonus of $200,000, a significant sum in anyone's language. Perhaps this is because the remuneration committee regarded the achievement of the China KPI as more significant," Senator Paterson said.

"But far from an achievement warranting a bonus paid from student fees and taxpayers dollars, the prospect of 63 per cent of the university's foreign students coming from only one country should have been an alarm bell for the chancellor Peter Varghese, and the governing body of the university, the UQ senate."

Senator Paterson said international students were welcome on campuses and brought a range of positives but universities had not properly managed the risks in the market.

"Even before the coronavirus, there were good reasons to be concerned about this dependence, particularly on students from China," he said.

"There was always a risk of a downturn in this market, whether due to natural economic events or as a result of deliberate policy measures introduced by a foreign government we have limited influence over."

He said over-reliance on China also presented non-financial risks because the authoritarian Chinese Communist Party does not uphold free speech and open academic inquiry. "These non-financial risks are readily apparent at UQ," he said.

Senator Paterson pointed to the matter of Univesity of Queensland student activist Drew Pavlou, who is facing disciplinary action related to his protest activities, which have targeted the university's China ties.

Senator Paterson criticised UQ for its approach to hosting a Chinese government-funded Confucius Institute culture and language centre. He said the original agreement had been "hopelessly inadequate" as it handed too much power to the Beijing-based headquarters.

The university has also offered four courses established with Chinese government funding – an arrangement which has since been ceased.

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