Gilder Guts Higher Ed

George Gilder. Photo credit: Wall Street Journal-

No wonder conservatives and libertarian voters are getting increasingly jaundiced about higher education. They’re reading more and more devastating take-downs of America’s colleges and universities like those expressed by author George Gilder in an interview by Tunku Varadarajan in the Wall Street Journal. I quote liberally to make sure readers get the full effect.

As we talk of capitalism and America’s universities, Mr. Gilder sits upright, unable to mask his indignation. “The point is that we didn’t want manufacturing in this country, and we suppressed it. All of our colleges are devoted to stopping things rather than starting them.” The “whole focus” of science in American higher education, he says, is on “the dangers and perils of technology rather than its promise.”

America’s university system, says Mr. Gilder, is “incredibly corrupt and ideological.” How did it come to be like that? Surely, I observe, it wasn’t that way when he graduated from Harvard in 1962. “It was beginning to get that way,” he says, and he revs his engines for a fresh sortie. “The rise of affluence through the 1960s created this kind of amazing irresponsibility that resulted in a whole generation losing track of reality.”

The pithy apercu is Mr. Gilder’s forte. He tells me here that “human beings have a propensity to believe in leftism — in the idea that government can “answer all of their problems, guarantee the future, and relieve them of the challenges of life.” The idea of a “completely providential government” arose in America, and a “whole generation of young people were given college loans in a fabulous national mistake, in which the Republicans participated.” These loans were used by the university system to “increase perks and tenured luxuries” — all of which led to the “diversity campaigns and CO2 panics” that currently dominate university faculties.

The only way to undo this “vast blunder,” says Mr. Gilder, is to forgive student loans across the board and “extract the money from all the college endowments and funds that were used to just create useless departments and political campaigns.” More than $1.5 trillion in student loan money is outstanding, according to the Federal Reserve. That money, Mr. Gilder says, “wasn’t deployed to improve education. Not a scintilla of evidence has been adduced that learning has been improved. It was used entirely to lavish on bureaucracies that, in turn, paid tribute to government and leftist socialism.”

The impact of these loans, and of the academic ecosystem they engendered, has been catastrophic, in Mr. Gilder’s view. “The result was to destroy the entrepreneurial optimism of a whole generation of young people, to drive them toward socialism, which they now tend to favor, and even dissuade them from marriage.” The last is a consequence of debt, “which cripples them for the future.”

Gilder’s critique is hyperbolic at times — more accurately describing elite institutions than community colleges and land-grant universities — but it captures the way in which many institutions use tuition, fees, room and board to soak the booboisie, whose values they often ridicule, and extract wealth by means of student loans from the poor and minorities, whose well being they supposedly espouse. Talk about privilege!

At some point the middle class will revolt against higher ed. At some point. Right now, there are few signs of declining enrollment at at small, less prestigious liberal arts institutions that have priced themselves out of the market. But the more people listen to intellectuals like Gilder, the sooner the day of reckoning will come.

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40 responses to “Gilder Guts Higher Ed

  1. George Gilder must be a long time subscriber to, student of, and lurker within, the Bacon’s Rebellion Blog.

  2. Haven’t figured my way past the WSJ firewall yet, but looking at the headline higher ed is only a minor target of Mr. Gilder in the interview. I know the cranky fellow has a point about the rising cost and easy loans simply feeding a burgeoning bureaucracy, which I too am eager to starve, but I’m not quite ready to abandon the system that trained my wife the superstar teacher, my son the engineer, my daughter the nurse practitioner, or all the other highly educated people we need in this economy. The phrase about babies and bathwater comes to mind, Jim.

    Do like that idea of linking fat and idle endowment funds with lowering cost, however – he put his finger on the heart of the problem there. For too many university bosses the growth of the endowment seems to be their measure of success, their “shareholder value.” For public universities in particular we are all shareholders and the value I want is educated graduates at reasonable cost.

  3. First things first … tax the investment gains (realized and unrealized) from the endowment funds and put the money into the student debt bailout fund. As far as I know the endowment fund gains are tax exempt.

    • The gains typically are tax exempt (although that changed a bit for extremely large endowments with the recent tax reform bill), but it’s important to understand how endowment accounts are utilized. A typical endowed account is intended to maintain its purchasing power (i.e., keep up with inflation) while also providing an annual allocation for spending on the purpose of the account (e.g., financial aid, scholarships, or a professorship that provides supplemental income to the associated faculty member). If the gains were to be taxed, donors likely would dramatically reduce their charitable contributions to university endowments.

      • The endowments aren’t working anyway. US colleges and universities have rapidly escalating tuition which makes them unaffordable to the middle class. The leadership of these institutions seem to have no serious concerns whatsoever about the rapidly escalating costs of college education. The reaction has been a wild increase in student debt as people buy the “you need a college education to prosper” theory hook, line and sinker. The end game is obvious – a cyclical recession causes a huge spike in student loan defaults which requires government to make good on its guarantees. This economic free fall will be funded one of three ways – new taxes, lowered government spending or bigger deficits. Lowering government spending is a pipe dream from a political perspective so cross that off the list. At some point increased deficits actually do push up interest rates on government debt and start a spiral of spending just to maintain the debt. So, that leaves higher taxes to bail out the incompetent university administrators who couldn’t maintain control over their costs. And who will pay these higher taxes? The same middle class who were priced out of the college education system by the incompetent university managements. No thanks. Drain the endowments before sticking it to the middle class (again). Then, do what Obama should have done to the bankers back in 2009 – 2010 and remove the managements of the public universities replacing them with competent administrators.

        If people stop donating to universities, so be it. They won’t get the tax breaks from making those donations and more money will flow to government.

  4. I read a whole lot of nasty generalizations couching a real problem .. student debt. Bernie and the Left you all moan about want to do something about that debt. There is also a conservative who has written a book about that debt causing the next financial meltdown. Bernie’s argument is that a high school diploma used to be enough education, but now students need to go further and t least our local 2-year colleges should be free. His argument makes sense.

    There are other issues too. I became the ‘leftist’ as I watched corporate money take over our decisions, specially corporate offloading of environmental, and its health related, costs. Dr. Epstein’s study a few years back estimated the true cost of our coal fired electricity was actually 9-26 cents per kw/hr more than we paid, and if you discount the health issue … note that Richmond’s asthma’s rate dropped the city out of 2nd pace when some coal plants were closed there. That 9-26 cents is sitting in those coal ash pits and other spots.

    So that other issue is corporate funds our University’s vie for as research grants. And these grants are tied to marketable, not pure, research. The discoveries and their patents go to the corporations. This corporate competition has shifted the focus away from teaching. To be sure this argument was true a decade ago. Haven’t kept up with my Ivy, so it may have changed.

    And a good thing about our colleges and universities … Smith and Holyoke now have an expanded international student body, since the loss of favor for women’s colleges. The Ivy’s too. Bet those students go back home with an intolerance for authoritative governments.

    Finally, some of that endowment does go to decrease student cost. The universities with the larger endowment are not the most expensive and are more generous with scholarships. Check it out.

    • “Bernie’s argument is that a high school diploma used to be enough education, but now students need to go further and t least our local 2-year colleges should be free. His argument makes sense.”

      Unfortunately, Jane, there is a downside to Bernie –

      Right now about 50% of high school graduates have at best an 8th grade education. For Commmunity College graduates, the number is only slightly higher, say 9th education.

      For four year College around 50% are graduating at the high school leval at best. Only about 5% of those at most receive anything close to a real college education.

      You see only a minority of students in this country today get beyond the 9th grade, including all our college graduates. And it gets worse every year. Its a cultural failure on a historic scale. And all we do is lie about it, hiding the facts, like Bernie. Simply put, I hate to break your heart, but Bernie is a fraud.

      • Reed, there you go again … “Bernie is a fraud.” And your stats are probably right, but they have nothing to do with those kids out there with all that debt .. a problem that needs fixing now, as well as for the future.

        Fareed on CNN this morning had an international education analyst who said that the evaluations of countries, done with a non-content based test, has ranked the US at 40th for math, I think, but about 20th for reading and science. Those are averages so in the US we have a very wide range of competence making are average low.

        What he said was … a lot depends on how education is valued in the home and community, and on what is done to upgrade those students who arrive in school with no skills, as they cost more. So there we are back at the argument of school funding and teacher evaluation.

        In CT where I served on a school board, in a town that valued education, there was state formula that helped fund low property asset systems, since school funding comes from property tax, and there was a testing system that did not rely on content only. The issue then was writing in high school. Our answer, we put extra dollars into teacher refresher courses. It was good for the curriculum but also good for the teachers who got reenergized by going back to school.

        Seems like the states, where authority for schools resides, must do a takeover when schools aren’t working … send in a principal to evaluate school direction and then make changes. But the truth is … we are not serving all kids and that shows a complete lack of vision for the country.

      • Reed, I don’t think what you and Jane are saying are contradictory. Bernie, quoted approvingly by Jane, endorses free 2-year community college because students “need to go further” than high school. You talk about the value of the current high school education received by far too many kids, debased as it is by grade inflation and lowered expectations; and how far too many of them go on to a “college” education that in fact they should have received in high school. The latter is indeed “a cultural failure on an historic scale.” But I support Bernie’s conclusion that even those high school students that take full advantage of good high schools and receive a fine education up to that point, often run into a brick wall — the cost of continuing their education. Only those with wealthy parents or tolerance for outrageous indebtedness can continue. And these students are our brightest and best hope for a nation that depends on brains, not brawn, these days.

        I agree that the current system has produced bloated college bureaucracies increasingly incentivized to pursue the wrong corporate goals and divorced from the reality of what our kids actually need to learn to succeed in today’s world, and that travesty builds on the terrible job done in secondary education in many places — no excuses there; but that is NO REASON to refuse to give our brightest young people, the ones taking their secondary education seriously, the opportunity to make the most of themselves. To deny that opportunity to those who seek it on the grounds that the existing educational system has severe problems would be to deny our own future. As Larry points out, “re: baby and bath water – totally true…”

        • Acbar – the problem is that the cuts are never made. Government at all levels is a jobs program, especially for people with advanced degrees.

          I’d like to see a comprehensive study of the productivity of higher education over the last 30 years (say by 5 year measurements). Hard measurements that include teaching loads by type of instructor (e.g., professor, associate professor, assistant professor, instructor, adjunct professor & part-time instructor); ditto for research hours; administrative positions per student or instructor; positions that pay above say $50 K in 1988 dollars adjusted for inflation; and percent of money not spent in the classroom for instruction or in the lab/library/field for research. Lay this out for every college and university that receives public tax dollars. Then publicize it and begin a discussion.

          I don’t know what the numbers would show but speculate that more higher paid people do less today than their counterparts did 30 years ago. I speculate that there is more spent on non-instructional programs than 30 years ago.

          If folks on the left really cared about students and affordable access to higher education, they’d support this because demanding more productivity and more focus on instruction would make college more affordable and student debt less than it would otherwise be. But I believe that with many, but not all, of the left doesn’t really care about people as individuals but rather, sucking more money from the taxpayers.

          We need government. We need taxes and regulation. But at the very same time, government is an overhead that takes money from the private economy, which creates wealth. Moreover, if one focuses on the economic incidence of taxation and spending rather than the legal incidence, one would find that much, but certainly not all, of the costs are passed along to those without a lot of money, power and skills.

  5. re: baby and bath water – totally true… Gilder has a lot of things to say about a lot of things as a faux-libertarian/supply-sider and adherent of Friedrich Hayek and novelist Ayn Rand and Laffer – it’s funny to hear calls for the Govt to step in to control higher ed with more rules and more bureaucrats!

    There are a LOT of choices for Higher Ed -and our technological-laden world is powered by highly educated people that do get their knowledge from higher ed.

    The main comfort that I have is that folks like Gilder know that if they actually ran for office – 98% would not buy their shtick… Libertarians barely pull 5% and 4% of that is basically a vote for “other”..

    The most prosperous countries on earth.. the most prosperous States in the US – like California and the most prosperous cities in the US – do not operate according to Libertarian LA LA land rules.. and that’s a good thing.

    • It’s long been a principle of both left and right governments that regulation is appropriate in a market failure or where one or more entities have market power. The OECD defines “market power” as referring to the “ability of a firm (or group of firms) to raise and maintain price above the level that would prevail under competition is referred to as market or monopoly power. The exercise of market power leads to reduced output and loss of economic welfare.”

      Firms or entities with market power generally have a monopoly or near monopoly on a critical asset or resource. Dominion, for example, has monopoly control on the electric transmission and distribution network and, I’d argue, on the generation facilities needed to supply total demand within its footprint. To the best of my knowledge, no other entity could supply customer demand if Dominion shut down its generating plan. Ergo, we should have regulation of Dominion’s electric operations.

      Turning back to higher education, existing “nonprofit” colleges and universities have a near monopoly on the ability to grant degrees that are recognized by the “world” as signifying the graduate has mastered the subjects necessary to receive a degree and is qualified in her/his area. For example, a person with a DDS degree is eligible to practice dentistry after state certification.

      These same schools, most especially public colleges have a near monopoly on access to state dollars. Ergo regulation is appropriate.

      If, on the other hand, the government provided funds only to qualified students and forced all schools from K-to-post graduate to compete for students, there would likely be less of a need to regulate education.

      I’ve dealt with regulated and unregulated businesses for more than 40 years. I’ve never see the issue of regulation be totally black and white. Rather, it’s generally be based on some level of economic analysis.

      I will quickly concede, however, that the regulatory system can be misused by participants. Staff try to preserve outdated regulations to save jobs. Regulated companies often try to use regulation to keep out competitors and to retain market power. Outside interest groups try to manipulate regulation to achieve power and impose their agendas on others. Thus, the regulatory process needs to have oversight as well.

    • The most prosperous countries on earth.. the most prosperous States in the US – like California and the most prosperous cities in the US – do not operate according to Libertarian LA LA land rules.

      Tell that to Hong Kong and Singapore, which consistently rank as having the freest economies on the planet.

      • “Tell that to Hong Kong and Singapore, which consistently rank as having the freest economies on the planet.”

        I’m not particularly familiar with Hong Kong, but my strong sense is that Singapore has had one of the most aggressive, comprehensive industrial policy regimes in the world, one that has generated transformational economic gains over the last few decades. What do you mean by “free” in this context?

        • “What do you mean by “free” in this context?”

          I don’t want to speak for Jim, but I imagine he has rankings like the Index of Economic Freedom in mind. https://en.wikipedia.org/wiki/Index_of_Economic_Freedom

          • Yes, Izzo nailed it. I draw upon the Index of Economic Freedom.

            To say that Singapore is No. 2 in the world is not inconsistent with the country pursuing an aggressive industrial policy. Many, many factors go into the economic freedom ranking, and industrial policy is only one. Here are the four broad categories used:

            1. Rule of Law (property rights, government integrity, judicial effectiveness)
            2. Government Size (government spending, tax burden, fiscal health)
            3. Regulatory Efficiency (business freedom, labor freedom, monetary freedom)
            4. Open Markets (trade freedom, investment freedom, financial freedom)

          • Thank you, Izzo (and thanks, Jim, above). I think Singapore represents an interesting case study from an economic development perspective in that it has embraced a very activist economic development regime (with great success) for a long time while also exhibiting the characteristics highlighted above by Jim. I’ve long been fascinated by the extent to which the country shaped its economic future in a deliberate way, transforming itself from a high-poverty place to one of the richest countries in the world in just a few decades. From time to time in meetings with corporate executives at large multinational companies, I ask which country has the best economic development agency in their view. Nearly every executive with a broad enough perspective to answer has said the Singapore Economic Development Board (EDB), which is lead economic development organization for Singapore.

          • Everyone should go see “Crazy Rich Asians” to get a sense of how much wealth has been created in Singapore. It is astonishing to think that the country has progressed from the devastation of World War II to one of the top two or three wealthiest (per capita) incomes in the world.

            (I would add, however, that Singapore’s economic model may not translate to a country as large and diverse as the U.S., where a given industrial policy would benefit one industry and hurt another. Just witness the effect of President Trump’s steel tariffs.)

            Another way in which Singapore is instructive: how it has kept the peace among the three main ethnic groups: Chinese, Indians and Malays. It has pursued policies that I, as a conservative/libertarian would not countenance in the U.S. But there can be no denying their effectiveness.

    • Agree with you, Larry; and you too, TMT, except for a not-so-minor detail: You say, “To the best of my knowledge, no other entity could supply customer demand if Dominion shut down its generating plan.”

      But there is such an entity — established just for the reason you surmise, to deprive Dominion of market power to exclude independent generators and others from competing in the wholesale electricity marketplace.

      Dominion’s total load (summer, including both VA and NC) was 18,902 MW (2017) and its total currently-owned generation is 18, 265 MW (summer rating). Dominion’s generating units are dispatched within and by PJM, which had (in 2017) a total load (summer) of 165,492 MW and generating capacity of 178,563 MW. If DE were to shut down all of its generation overnight, putting aside all the commitments and contracts and regulatory orders it would breach and its lost revenues from doing so, PJM would manage to cover Dominion’s retail load anyway, using its own reserves and, to the extent necessary, buying from neighboring regional systems.

  6. Prior to joining VEDP, I led the LSU Foundation, which is responsible for managing the endowment assets of LSU, as well as fundraising and real estate development. My recollection is that more than 90% of charitable gifts to the university were restricted to a particular purpose — and further that similar proportions of gifts to other institutions also are restricted. I share the concerns of many about the rising cost of higher education, but I think we should be very careful mandating a reallocation of endowment funds away from their intended use. If I recall correctly, most of the value of restricted gifts is associated with donor agreements that I presume have some legal enforceability. Philanthropy to higher ed would plummet if universities were forced to begin using gifts for purposes different than what donors intend. It would be great if all donors were willing to make unrestricted gifts, but very few do, at least as a proportion of total dollars raised.

    • A very close mentor and relation of mine over the years gave very substantial sums of money to the University of Virginia Law School from which he graduated after WWII. Some of those monies he gave very shortly before his death less than a decade ago. If alive now, he would be horrified at the current political posture and recent actions of some faculty members of that law school in and around Charottesville from spring of 2016 through the summer of 2017. Never ever, would he want to be associated in any way with such conduct, much less an institution that lauded it in their own Law School magazine in the fall of 2017.

    • “The only way to undo this “vast blunder,” says Mr. Gilder, is to . . . extract the money from all the college endowments and funds that were used to just create useless departments and political campaigns.” I agree with Smoretva, Mr. Gilder ignores the wishes of the alumni who gave much of that money, at least the endowment part, and whether those wishes are legally binding or not is beside the point as the spigot would be turned off if those wishes were not observed. But, then:

      We have discussed here the tradeoffs between public and private funding of higher education in Virginia, and particularly the decisions made a few years ago to reduce public support for Virginia’s premier schools on the assumption that they would elicit the difference from alumni if allowed to market themselves in ways that alumni collectively responded to. Your 90% experience, however, suggests a bleak answer: there is no unrestricted-giving alumni response to be had; rather, these schools must market themselves in ways that alumni individually, more especially the big donors, individually dictate to them. A not-so-subtle difference.

      I have read about higher ed. institutions wrestling with the ideological strings attached to large gifts they have been offered. But you imply that using endowment funds for such purposes as defraying tuition and fees, rather than image enhancement, is largely, essentially impossible. For how can an initial restricted gift be used to generate, through earnings, unrestricted funds? If it can’t be, then is it meaningless to talk about “the Endowment” of a school like UVa as though it were a single asset, rather than thousands of little pigeon holes set aside for specific alumni gratification? Or to talk about substituting alumni-given funds for those of the State?

      • Wishes of the donors. They need to be followed but too often aren’t, in my opinion. I think the old legal doctrine of cy pres has been twisted beyond meaning.

        The IRS discusses cy pres as follows:

        “The cy pres doctrine is a principle of law that courts use to save a charitable trust from failing when a charitable objective is originally or later becomes impossible or impracticable to fulfill. In such a case, the court may substitute another charitable object which is believed to approach the original charitable purpose as closely as possible. (The term y pres comes from French law and means ‘so near’ or ‘as near (as possible’.)) This legal doctrine is based on the theory that a court has the power to revise a charitable trust where the maker (also called the creator, settlor, or – in the case of a trust under a will – testator) had a charitable intent in order to meet unexpected emergencies or changes in conditions which threaten the trust’s existence.”

        IMO, too often courts or even foundation boards frustrate the donor’s original intent by modifying the work of the foundation or trust over time. The clearest example may be the Ford Foundation. Henry Ford was as conservative of a person as Warren Buffett is liberal. Yet the Ford Foundation can always be funding causes and projects viewed as leftist. That’s simply wrong even as it would be to use Warren Buffett’s money 70 years from now to fund causes and projects viewed as rightist.

        While I’d go further and put a limit on the life of any private foundation, say 50 years, foundations and trusts must not be permitted to deviate from the vision of their original donor(s). The cy pres doctrine should be repealed. Ditto for gifts to colleges and universities. Either the original intent is followed or the gift must be returned to the donor or estate.

      • “But you imply that using endowment funds for such purposes as defraying tuition and fees, rather than image enhancement, is largely, essentially impossible. For how can an initial restricted gift be used to generate, through earnings, unrestricted funds? If it can’t be, then is it meaningless to talk about ‘the Endowment’ of a school like UVa as though it were a single asset, rather than thousands of little pigeon holes set aside for specific alumni gratification? Or to talk about substituting alumni-given funds for those of the State?”

        Indeed, a large university endowment can be comprised of thousands of individual accounts, most with a distinct purpose. While the total endowment value may be reported as a single dollar figure, the institution typically is very restricted in how most of the various accounts can be utilized based on the terms of the gifts. That said, many donors do focus their gifts on financial aid and/or merit-based scholarships as well as other constructive purposes (e.g., endowing professorships or department chairs for broadly important fields of study, or providing funding for laboratories, equipment, and/or buildings for core programs) beyond simply image building. Many of the great things that higher education has achieved were made possible in large part by generous charitable gifts from individual donors and foundations.

        Most donors desire to make an impact on students, the institution, a particular program, or some other initiative that would make a difference in the world. They generally will not make large contributions simply to make up for a decline in state funding. Usually declines in state funding primarily are offset by increases in tuition and/or fees.

        • Stephen is absolutely correct to say that most gifts rolled into the endowment are dedicated to highly specific purposes. That’s why (1) your alumni gift of $100 per year, which has no restrictions, is so highly valued, and (2) why the Strategic Investment Fund at the University of Virginia and its analogue at the Virginia Commonwealth University are so valued. The money can be spent any way the Boards of Trustees desire.

      • Government ignores my wishes for my money every time it raises my taxes to fund the latest wealth transfer scheme. Why should government have any more respect for the desires of donors to college endowments than it has for monies earned by private citizens?

        When the student loans default en masse the government will need to go somewhere for the money to pay the guarantees. Why should middle class and upper class Americans be better targets for settling the accounts? After decades or gross incompetence and culpable negligence on the part of college and university leaderships why should the middle and upper class bail them out? Our coercive government is going to take someone’s money under threat of incarceration … let it be the endowments’ money. Why is John Q Taxpayer always the first target for fiscal assault when yet another American institution goes belly up based on the arrogance of the management of those institution and the incompetence of the government enabling those managements?

    • Suppose a donor offered a large gift to a university with the stipulation that the funds be used to investigate and implement ways the university could operate more efficiently such that tuition and fees would be lower over time. Would a major university accept the money?

      • Interesting idea. Create a pot of money to use in pursuing continuous-improvement and administrative process improvements. Of course… because money is fungible, universities then would divert money already dedicated (or that *should* be dedicated) to that purpose.

  7. This guy is repeating some of the anti-manufacturing themes I’ve been trying to say exist in our Country, and I am worried will weaken progress. Not sure about his solution though.

    I discussed backwards view of technology here:
    https://www.baconsrebellion.com/wp/i-want-to-say-two-words-to-you-plastic-reycling/
    Where landfill is preferred to treatment, and prefereence for coal vs. nat gas…etc. etc.

  8. Gilder’s comments about endowments are way off base. As I understand major gifts they do have specifics attached and those specifics are worked out with the University. The specifics just don’t come off the top of the head of the giver. The University, I suspect both private and public, works hard to direct funding, maybe into a new climate science program. 🙂 Maybe it is a building or other infrastructure that gets the giver’s name. Maybe it is a professorship, a ‘chair’, that also gets a giver’s name. Maybe it is dedicated to scholarships. Prior to a big reunion I participated in a discussion about our class gift. Me, the environmentalist wanted to give the funds to redo some buildings energy systems. I got shot down with laughs back then. Our class gift went to scholarships. OK!

    • You don’t seem to understand the coercive nature of American government. Money can be taken (through taxes) on anyone and anything. Deductions that were once allowed are canceled with the swipe of a pen in the legislative and executive parts of government. Citizens who had agreements with mortgage companies to pay their mortgages may not be able to do so after those deductions are lost. Do you think the Federal government cares?

      Why do you think that college endowments are special protected classes of wealth that can’t be taxed? Because of some private agreement between the donor and the university? Why is that agreement any more important than agreements between homeowners and lenders when governments increase taxes on homeowners?

      I pay arbitrary property taxes to help pay for education. I pay those taxes whether I have any kids and whether my kids attend public schools or not. When the economy turns bad and the value of my property falls the government just raises the rate on the property in order to generate the same amount of tax. the government can and does tax my asset base for any reason or for no reason at all.

      Why should the asset base called endowments be more protected than the primary residences of American citizens?

      To hell with the endowments. Tax them 1% of their asset base starting now to build the “soon to be required” student loan bailout fund. Someone is going to have to pay for the incompetence of our government in guaranteeing $100,000+ loans to anthropology majors. It might as well be the colleges and universities that put up the first pile of money that will be needed to right this fiasco.

      • Good Heavens .. Most colleges and Universities are non-profit corporations … even if they are state supported!
        And the banks have so far made a bundle on these loans, like they are making a bundle on the shale wells that haven’t made a penny and are billions in the hole.

        • Now, I have lost respect for you Jane.

        • There is a huge difference between non-profit and poor. About 18 months ago there was a story about Teresa Sullivan attending a meeting in Herndon. She flew to Herndon in UVA’s private plane. Meanwhile, UVA (my alma mater by the way) managed to put together a billion dollar slush fund despite being a so-called “non profit”.

          While I usually reserve a fair bit of invective for the banks they seem like a relatively innocent party here. The banks didn’t lose control of tuition costs, the universities did. The banks didn’t agree to loan children hundreds of thousands of dollars to pursue degrees with minimal economic value in a vacuum. They agreed to loan those children money because the government guaranteed the loans in case of a default. I know for a fact that many of those loans would never, ever have been made by the banks absent that government guarantee.

          Yet the banks are not without some fault – especially “rackets” like Sallie Mae (side note: the term “racket” used in reference to Sallie Mae was famously made by Barack Obama). Obama had no love loss for Sallie Mae early in his first term. And where were Virginia’s Progressive politicians with regard to President Obama’s efforts to curb Sallie Mae? Why they were right where Virginia politicians always are … in the pockets of big business …

          https://www.politico.com/story/2016/10/tim-kaine-student-loans-sallie-mae-229029

          Yes, Tim Kaine (Progressive hero) was bust trying to undercut Barack Obama’s reforms. Why? to protect jobs in Virginia. And what did Sallie Mae do anyway? Move those jobs to Delaware. One can only assume they thought Joe Biden would be a more effective advocate for them then Tim Kaine proved to be.

          The crony capitalism and corruption around student loans runs deep Ms Twitmyer. They fund sky high salaries and private plane trips for university officials, campaign contributions for Virginia politicians and whole lot of other things.

          • I think non-profit status needs to be reevaluated. The thinking behind nonprofits getting tax exempt status is that the nonprofits benefit society and will relieve a potential burden on government. (There is also the religious grounds of preserving separation of church and state.) What I see happening, at least in some sectors (elite college endowment accumulations, some nonprofit healthcare systems) calls the benefit to society rationale into question.

  9. “Gilder’s critique is hyperbolic at times — more accurately describing elite institutions than community colleges and land-grant universities — but it captures the way in which many institutions use tuition, fees, room and board to soak the booboisie, whose values they often ridicule, and extract wealth by means of student loans from the poor and minorities, whose well being they supposedly espouse. Talk about privilege!”

    I attended a large land-grant university for undergrad and then two elite private institutions for graduate degrees. I think Gilder is painting with a very broad brush. The main difference I observed between the land-grant public university and the elite private schools I attended was that the elite universities had ample resources to do everything in a very high-quality fashion, e.g., exceptional support for academic and career services as well as first-rate facilities and equipment.

    It’s important to understand that an economically poor student often can attend a top-10 private university for less than it would cost for them to attend an open-enrollment regional public college or university, as the elite institutions often offer generous financial aid for those with limited financial means.

    I do agree that, in general, managing costs is not the forte of higher education in America, which largely charges what the market will bear — aided by generous federal student aid programs.

    • It is true that “an economically poor student often can attend a top-10 private university for less than it would cost for them to attend an open-enrollment regional public college.”

      That’s why I argue that the middle-class is getting the short end of the stick. Higher ed is managed first and foremost for the benefit of the faculty and administrators who share an interest in promoting the prestige and status of the institution. In pursuit of prestige and status, special consideration is given to legacies (because of the prospect of alumni donations and bequests) and to minorities and the poor (consistent with the identitarian ideology prevalent at most institutions). The middle class gets lip service but not much else.

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