Harvard as Hedge Fund

Brad DeLong said we could understand Harvard as something like a worker-managed firm from Communist Yugoslavia, now Jim Manzi suggests we might understand it as a large tax-exempt hedge fund:

So if you just think about how much cash went into the shoebox and how much came out of it, a more accurate accounting for Harvard for FY 2007 would, in rough numbers, be a lot more like the following:

• Receipts = $2 billion of operating revenue + $7.3 billion of investment income + $0.6 billion of gifts to the endowment = ~$10 billion.
• Operating costs = ~$3 billion.
• Profit = $10 billion – $3 billion = ~$7 billion.

This explains why Harvard’s net assets increased about $7 billion in 2007, from about $35 billion to about $42 billion.

Viewed purely in terms of economics, Harvard is really a $40 billion tax-free hedge fund with a very large marketing and PR arm called Harvard University that has the job of raising the investment capital and protecting the fund’s preferential tax treatment.

I have no idea whether or not this endowment tax idea kicking around in the Massachusetts legislature really makes sense. My guess is that it may not since the flow of resources toward Harvard may well be good for the state in which it's located even if it doesn't particularly serve the public interest. But the people making additional gifts to Harvard and similar institutions really ought to rethink their giving strategy. Even in terms of helping your kids get in, if you're really rich and give a lot of money to deserving charitable institutions, the admissions office will still view you as a good development prospect and let your kid in. Then just don't pony up the money!

Comments

>>Viewed purely in terms of economics, Harvard is really a $40 billion tax-free hedge fund with a very large marketing and PR arm called Harvard University that has the job of raising the investment capital and protecting the fund’s preferential tax treatment.>>

No. This would be the case if there were other investors, but the sole beneficiary of the endowment is the University.

Posted by richard | May 13, 2008 12:34 PM

This would be the case if there were other investors

Exactly. What Manzi is missing is who the profit is for - which is nobody. Nobody can pull the profit out of the "hedge fund".

Posted by Al | May 13, 2008 12:43 PM

My church is holding a festival whose profits are taxed, even though the money is being used to benefit the church itself. One could claim that the endowment fund is much like a taxable sideline business that a non-profit might use to provide itself with funds, and it's not unfair to at least talk about the idea of treating some endowments the same way.

However, I'm generally on the universities' side on this one: endowments are part of the assets of a non-taxable non-profit, and just because Harvard has been able to work this system much better than plenty of smaller universities doesn't, by itself, justify treating their endowment as taxable.

Posted by Tyro | May 13, 2008 12:43 PM

well, it isnt that harvard is non-taxable, as though some principle from on high was handed down reading 'thou shalt not tax harvard' it's that it is tax-exempt, presumably because the legislature felt that exempting it's class of institutions served some public good.

What is proposed is maybe better understood as narrowing that class, so that once a school's endowment reaches a certain level, the presumption is that the endowment isn't serving a public good that would justify the tax-exemption.

Posted by ml | May 13, 2008 12:53 PM

What's got Harvard's panties in a knot is that the US Congress is finally catching on that Universities are raiding the US Treasury.

Universities like Harvard get tax free status -- then jack up tuition WAY above the rate of inflation -- then let parents badger Congress to give the Universities more more money via state-subsidized education --even though the tax-free endowment fund has more than enough money to allow tuition relief.

Congress is starting to get fed up with how poor students are getting fucked -- which is why the Ivy League is suddenly talking about how generous they PLAN to be with financial aid in the FUTURE. It's a preemptive ploy to head off legislative action until the heat/threat dies down.

See http://www.boston.com/news/education/higher/articles/2007/10/25/congress_to_look_at_college_endowments/?rss_id=Boston+Globe+--+Education

Posted by Don Williams | May 13, 2008 12:53 PM

I'm strongly in favor of endowments and non-profits, but think that there is a tendency for them to become less beneficial as they age.

My proposed solution is not an endowment tax, but a much higher required use percentage--for all non-profits. Say, 5% of the value tax-exempt assets PLUS the yield on 1-year corporate bonds must be spent annually on the defined purpose of the non-profit.

Posted by SamChevre | May 13, 2008 12:54 PM

My guess is that it may not since the flow of resources toward Harvard may well be good for the state in which it's located even if it doesn't particularly serve the public interest.

But this money is serving no purpose at all. It increases so that the people managing it are managing more money over time. That is the only way value is being extracted at it's current level. Given that Harvard's operating cost exceed $1B, I'm not sure that it's fair to set the tax on the endowment at that threshold, but it seems perfectly fair to extract a tax of some kind when a non-profit is accruing a huge and growing pile of money for no good reason.

Posted by mpowell | May 13, 2008 12:56 PM

The fact that nobody can pull out the money other than the university itself is a good point.

But nevertheless, it does not make a lot of sense for a university to have a giant endowment even the yearly proceeds of which are much, much higher than the gap between the operating costs and the other incomes so that the endowment (and the investment income out of it) grows and grows. At least they could abolish tuition for students other than those from very affluent families (like Stanford did) or for everybody (like CalTech, if I'm not mistaken).

And indeed, why should I donate to Harvard when they already sit on tons and tons of money they obviously have no intention to use?

Posted by Patrick | May 13, 2008 1:06 PM

Universities like Harvard get tax free status -- then jack up tuition WAY above the rate of inflation -- then let parents badger Congress to give the Universities more more money via state-subsidized education --even though the tax-free endowment fund has more than enough money to allow tuition relief.

This is totaly pointless blather. Needy kids don't attend Harvard, and the few that do go for free as they do at other Ivies. Harvard-bashing makes easy headlines, but it has nothing to do with college affordability.

There is a college affordability problem--but it's not a Harvard problem. Tuition is rising fastest at low-cost public institutions (most of which have no endowment to speak of) because of stagnant or declining state support. These are the institutions that actually serve needy populations. Harvard is not an instructive example of anything and shouldn't be the starting point for any policy prescriptions dealing with higher education, unless the goal is for rich and high-achieving students to have it even easier.

Posted by Jake H. | May 13, 2008 1:06 PM

Re richard's comment "No. This would be the case if there were other investors, but the sole beneficiary of the endowment is the University."
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1) The "other investors" are the parents and US taxpayers who have to pay through the nose for poor to middle class kids to go to Harvard.

The beneficiaries of Harvard's Endowment are the plump administrators and faculty.

You know -- the kind of people who turned the other nuclear-armed superpower against the USA after Harvard economists tried to sell off Russia to the oligarchs for 5 cents on the dollar.

2) And if you think only rich kids should go to Harvard, then there's no justification for Harvard to get a tax-free status from the state.

3) And this is not even a socialist viewpoint. Harvard, Princeton, Yale set up this smug, snug inbred situation during the Gilded Age.

As a result, the Manhattan Project had to be heavily staffed by European refugees. Because if the US Government had had to depend upon the Ivy League to develop the atomic bomb, we would be speaking German today and goosestepping.

Posted by Don Williams | May 13, 2008 1:07 PM

Matt,

You and Ross should be tithing to Harvard, considering how going there helped land you your current cush jobs at The Atlantic.

Posted by Fred | May 13, 2008 1:09 PM

However, I'm generally on the universities' side on this one: endowments are part of the assets of a non-taxable non-profit, and just because Harvard has been able to work this system much better than plenty of smaller universities doesn't, by itself, justify treating their endowment as taxable.

But Tyro, we grant tax-exempt status to organizations because we believe it is in the best interest of society to do so. If Harvard was using it's endowment to greatly increase the number of students receiving an quality education, that would be one thing. But they're just growing an increasingly large pile of money. At some point it would be reasonable for the state to say: there is decreasing social benefit to allowing such organizations to grow their endowment beyond a certain ratio of their annual operating expenses, and start taxing them accordingly. I don't know why Harvard should get a free pass just because they've been able to 'work the system'.

Posted by mpowell | May 13, 2008 1:10 PM

First of all, Harvard's financials are in the public domain, so there's really no need to guess.

Second, this doesn't take into account tax-exempt debt, of which Harvard has over $3 billion and soon to increase dramatically. Harvard borrows for a good portion of its capital expenditure, the IRS subsidizes that by foregoing income taxes on the interest payments (meaning Harvard can borrow at a low rate), and meanwhile Harvard racks up gains on its net assets, aka the endowment.

Third, since Harvard seems to be a particular bugaboo on this site, let's note that Harvard is unusually decentralized and the humongous endowment is in fact mostly controlled by disparate pieces (it's managed together, but it's not like the President can unilaterally spend it). However, Harvard did implement an internal endowment tax to pay for the new Allston campus, which development, by the way, was only undertaken to provide a rationale for continuing to raise money.

I'm not a bug fan of any particular public policy around this. People donate to Harvard because it's a status symbol. The fact that billions is sitting around doing nothing just means that Harvard is a pretty inefficient institution when it comes to bettering the world or creating knowledge.

Posted by Marshall | May 13, 2008 1:11 PM

Two unrelated thoughts (note that I am using "Harvard" here as a placeholder for both that institution and similar institutions):

1) One of the reasons Harvard can manage its endowment so profitably is that it can invest for the very long term, thereby taking advantage of investment opportunities that ordinary mortals cannot. Correspondingly, it makes no sense to remark, "Wow! Harvard's endowment made a ton of money last quarter!" without thinking about what (a) performance and (b) spending from the endowment has looked like over the very long term.

2) From a pragmatic/progressive point of view, it probably makes more sense to think about what good deeds Harvard should be persuaded to spend its money doing, rather than thinking about how its sources of income could be shut down and/or its portfolio taxed. I thought Brad DeLong's discussion of how the UC system chose to expand offered an interesting template. (I personally think the "build clone Harvards in developing nations" idea is not workable, but perhaps I'm wrong.)

Posted by alkali | May 13, 2008 1:13 PM

That is, it is not in the interest of the United States to allow Harvard,Princeton , Yale to use their tax-free status to create a mandarin class of overprivileged, underchallenged, genetically deficient --but RICH! --morons.

Just look at Britain's House of Lords if you want to see what an evolutionary dead end that would be.

Posted by Don Williams | May 13, 2008 1:13 PM

The problem with all this outrage over Harvard's endowment is that everyone is trying to think up ways to tax Harvard, but it is near impossible to do this without any collateral damage. Any form of endowment tax will destroy the vast majority of liberal arts institutions in this country. I used to work at a university that was hemoraging money from its endowment (on operating expenses, because of years of deferred maintenance), and it was not pretty. I became very aware of university endowments after that, and it is amazing how close many schools are to effective bankruptcy.

Harvard is a lone exception. Even the other Ivies do not have that level of endowment. There is no way we can do anything about this without a tax that says "Harvard, and only Harvard".

Posted by Walker | May 13, 2008 1:13 PM

Walker's version of my thought #2 is much better.

Posted by alkali | May 13, 2008 1:16 PM

At least they could abolish tuition for students other than those from very affluent families (like Stanford did) or for everybody (like CalTech, if I'm not mistaken).

They beat you to it: http://www.hno.harvard.edu/gazette/2007/12.13/99-finaid.html

Steep discounts for everyone with incomes under $180,000, no one under $60,000 pays a cent. If I were in charge I would extend that up to $100,000 (perhaps with regional sensitivity for cost of living), but the point is that they've got a pretty generous aid program in place for everyone except the very affluent, and I don't give a crap about them.

Posted by Jake H. | May 13, 2008 1:16 PM

Re jake H's comment "but the point is that they've got a pretty generous aid program in place for everyone "
-----------
And they only put that aid in place in the past few MONTHS -- to forestall action by the US Congress.

Of course, Harvard can rescind their aid program any time they please. In a year or two. Whereas a US Law would be permanent.

Posted by Don Williams | May 13, 2008 1:20 PM

My church is holding a festival whose profits are taxed, even though the money is being used to benefit the church itself.

Well that seems odd. I don't think that should be taxed.

But Tyro, we grant tax-exempt status to organizations because we believe it is in the best interest of society to do so. If Harvard was using it's endowment to greatly increase the number of students receiving an quality education, that would be one thing. But they're just growing an increasingly large pile of money.

They are increasing the amount of money they are using as well. Remember, Harvard's mission is not only education, but also research. The research capabilities at Harvard have grown tremendously over the last few decades, and provide a critical social good.

I agree with all the comments about the education side of things, and think satellite campuses / Harvard-clones would be a worthy endeavor.

this doesn't take into account tax-exempt debt, of which Harvard has over $3 billion and soon to increase dramatically. Harvard borrows for a good portion of its capital expenditure, the IRS subsidizes that by foregoing income taxes on the interest payments

How is this different from any other company or non-profit? Interest on debt is always tax-deductible, as far as I'm aware.

Posted by right | May 13, 2008 1:27 PM

Don, on one hand you complain that Harvard and the other Ivies do nothing but create a self-perpetuating elite, and on the other hand, you constantly talk about how few of the top wealthiest people in the world went to Ivy League schools.

Posted by Tyro | May 13, 2008 1:28 PM

And why the fuck can't the Ivy League use their tax-free endowment fund to offer some scholarships to war veterans?

They claim they want a diverse student body -- which is why they let so many rich FOREIGN students in.

Why not have at least a few American students who have been on a fucking battlefield? Who knows -- we might get a higher quality set of Presidential candidates one day.

Posted by Don Williams | May 13, 2008 1:30 PM

Potential large-sum Harvard donors ought to consider giving, instead, to 2nd or 3rd quartile schools.

The money will make more of a difference, improving education for students who, for whatever reason, couldn't get into Harvard

And the sum given will look far more impressive at a school accustomed to smaller donations, than it would at Harvard. You could get a building named after you at, say, Drexel, for a donation that might get your name on a water fountain at Harvard.

Posted by Jon H | May 13, 2008 1:31 PM

right, the "tax-exempt debt" refers to the fact that (I believe) not-profit institutions can sell bonds whose interest is tax-free to the bondholder, like municipal bonds.

Well that seems odd. I don't think that [festival profits] should be taxed.

I think it's much like Harvard's dilemma: sure, these sorts of things aren't taxed, but one large amounts of money are being generated from it, the taxman takes notice, and suddenly a "festival fundraiser" starts to look a lot like a "commercial enterprise."

Posted by Tyro | May 13, 2008 1:34 PM

"Harvard is a lone exception."

I don't think so. The problem goes beyond universities and also includes 'non-profit' hospitals: http://online.wsj.com/article/SB120726201815287955.html?mod=WSJBlog.

(sorry that I cannot find the entire article on line.)

Of course, universities are not hedge funds and neither are non-profit hospitals. The question is whether non-profit hospitals deserve their tax advantages when they compensate their executives at eight figure levels and do not deliver services to indigent patients in their communities.

Posted by Bill Gardner | May 13, 2008 1:38 PM

like municipal bonds.

They are, in fact, municipal bonds.

Posted by Marshall | May 13, 2008 1:39 PM

"And they only put that aid in place in the past few MONTHS -- to forestall action by the US Congress."

I doubt that was the real reason. I suspect the real reasons were

1) Because other elite private schools were doing so;

2) To go after the tiny percentage of super-smart, non-affluent applicants who have accepted free rides to flagship state universities over admittance to Ivies.

"And why the fuck can't the Ivy League use their tax-free endowment fund to offer some scholarships to war veterans?"

How do you know they don't, Don Williams? And why are you so angry and bitter? Did you get a thin envelope from Harvard years ago?

It seems like you resent any person or institution with money, as if your lack of money is due to some conspiracy against you. Why don't you get off your ass and try to make a little money yourself? It's not too late. Getting some measure of financial success will feel better than the fantasies of Schadenfreude you indulge in with your lefty-populist politics. A President Obama isn't going to turn Haim Saban into a pauper for you, and the odds of an apocalypse wiping out everyone's wealth and making you -- the guy with guns and heirloom seeds -- the rich guy are exceedingly slim.

Posted by Fred | May 13, 2008 1:44 PM

They are increasing the amount of money they are using as well. Remember, Harvard's mission is not only education, but also research. The research capabilities at Harvard have grown tremendously over the last few decades, and provide a critical social good.

If you believe their endowment is necessary to support their mission, that is a perfectly reasonable defense. I don't think I agree, but I think this argument starts with the claim that the endowment is unnecessarily huge.

Harvard is a lone exception. Even the other Ivies do not have that level of endowment. There is no way we can do anything about this without a tax that says "Harvard, and only Harvard".

Uh, this is just not true, right? As long as the tax only applies to assets exceeding a particular amount or a ratio of annual expenditures, it can be easily applied to only Harvard, or only school's totally not in danger of bankruptcy, without being the least bit unfair. That's the whole idea of progressive taxation.

Posted by mpowell | May 13, 2008 1:54 PM

Fred,

Oh, I think the odds of that type of apocalypse happening are pretty good. WIthin the next century, I should say it's almost a certainty. But go on believing that capitalism, liberalism, and all their decadent progeny will last forever, if that makes you happy. (It also makes you pretty dumb, but that's your problem). I believe that the day will come when American capitalism falls just like Rome, Babylon, and every other evil empire.

I'm always amused how right wingers assume that those of us who oppose capitalism do so out of resentment....because clearly, if we _could_ succeed by being as greedy and self-interested as Fred, we already would have done so. Fred is incapable of idealism himself, so he assumes everyone else must be as cynical as he is. I would try explaining to him that not everyone is interested in ammassing as much money and toys as he is, but what would be the point. Evil is always incapable of understanding good.

Posted by Hector | May 13, 2008 1:59 PM

From a pragmatic/progressive point of view, it probably makes more sense to think about what good deeds Harvard should be persuaded to spend its money doing, rather than thinking about how its sources of income could be shut down and/or its portfolio taxed.

maybe harvard should spend some of it's endowment making more of the secret harvard knowledge more easily available to any joe schmoe with internet access. something like this:

http://ocw.mit.edu/OcwWeb/web/home/home/index.htm

it seems clear which is the better institution in cambridge.

Posted by jack florey | May 13, 2008 2:01 PM

Re Fred's comment "It seems like you resent any person or institution with money, as if your lack of money is due to some conspiracy against you. Why don't you get off your ass and try to make a little money yourself? It's not too late. Getting some measure of financial success will feel better than the fantasies of Schadenfreude you indulge in with your lefty-populist politics "
-----------
Ah, the typical Republican ad hominem whenever someone criticizes how the wealthy rig the rules of society for their benefit. It's merely envy.
Shut up mule and pull the plow.

Next Fred will be arguing that I cling to guns and religion because I'm bitter.

You will note that Fred himself did not bother to raise the issues I raised. Because t would never OCCUR to Fred to even Question whether granting privileges to the privileged is in society's best interest.

Nor does Fred have a clue re my financial situation. But his ad hominem lets him divert the discussion away from having to actually justify Harvard's privileges. Same for the Republican Party's or Wall Street's.

Away from having to actually show whether everything is indeed for the best in this best of all possible worlds.

I hope Harvard does indeed give aid to some war veterans. Because the Republican Party, the Republican President and the Republican members fo Congress which lied those kids into an unnecessary war doesn't think the survivors deserve any help:
http://www.suntimes.com/news/nation/945347,gi051208.article

Posted by Don Williams | May 13, 2008 2:02 PM

"it seems clear which is the better institution in cambridge."

A lot of the courses on there are pretty f'n useless, as they don't include much meat. A few have lecture video, but they're the exception.

Posted by Jon H | May 13, 2008 2:05 PM

right, the "tax-exempt debt" refers to the fact that (I believe) not-profit institutions can sell bonds whose interest is tax-free to the bondholder, like municipal bonds.

Ah, thanks. Didn't know that.

If you believe their endowment is necessary to support their mission, that is a perfectly reasonable defense. I don't think I agree, but I think this argument starts with the claim that the endowment is unnecessarily huge.

Well, it's hard to know what "unnecessarily huge" means. It has been earning outsized returns in recent years -- as basically all alternative-investment vehicles have -- but those are almost certainly not sustainable. I think that if Harvard did not have an intention of using the money, it would not spend so much effort continuing to raise money. A ridiculous amount of time and effort are spent by the university on fundraising -- something to which there would be absolutely no purpose if they did not intend to use the money they already have. Surely an expectation that they will not forever achieve 20%+ returns is part of this. The point made above, about there not being one giant "endowment" but hundreds of earmarks for various projects and departments, also complicates things.

Posted by right | May 13, 2008 2:07 PM

"There is a college affordability problem--but it's not a Harvard problem. Tuition is rising fastest at low-cost public institutions (most of which have no endowment to speak of) because of stagnant or declining state support. These are the institutions that actually serve needy populations."

Well said, Jake H. Who cares if Harvard or other rich schools (speaking as a graduate of one) offer free/very low cost tuition to some students? The vast majority of HS students won't be going to Harvard. But they need just as much help financing their education at a state university or private college that doesn't have such a big endowment.

Posted by CParis | May 13, 2008 2:10 PM

That's Matthews! Matt, did you live there? I was a Lionel man, and Josh Patashnik spent his freshman year in Pennypacker.

Posted by Cliff Mason | May 13, 2008 2:25 PM

Just look at Britain's House of Lords if you want to see what an evolutionary dead end that would be.

The House of Lords which purged most of its hereditary peers in 1999? Most members of today's House of Lords are Life Peers.

Back in the days when you had mostly hereditary peers, at least some of them were a lot more aggressive in challenging the government's actions than today's Peers are.

Posted by Marty Busse | May 13, 2008 2:25 PM

I wonder how much it actually costs to buy your way in. I would say not much in real terms. A girl from my high school who was a legacy crept in off the Harvard waitlist last year. My guess is that someone in the family donated enough to get noticed. The immediate family is well-to do but not rich. I would guess that someone made a net contribution of $100k, whether all at once or in installments. This is not much when you consider that the cost of admission if you are not on financial aid is $200k. So it probably costs 50% more to pay if your folks help you cheat your way in.

Posted by Robert | May 13, 2008 2:29 PM

Robert, back in the 90s, word on the street was that, without the benefit of a legacy, getting your child into Harvard would cost you a donating in the 7-digit range. Of course, most rich families with academically-mediciore children have better financial instincts than that and decided that Sarah Lawrence would be just fine for Taylor or Brittany.

Posted by Tyro | May 13, 2008 2:33 PM

There's a very easy way to impose a tax on Harvard and only Harvard: have Massachusetts impose a tax on all ivy league universities located in Massachusetts. Every single one of them. On a federal level, you could impose a tax on all academic institutions with endowments over $30 billion. (See, e.g., the MLB's luxury tax on team payrolls, if you want a sports analogy.)

Whether it'd be wise is another matter.

Posted by phil | May 13, 2008 2:37 PM

I've noticed no one in this thread has disagreed with Yglesias' original point that NOBODY SHOULD DONATE ANY MORE MONEY TO HARVARD. Something we can have a universal consensus on at last.

Posted by Korha | May 13, 2008 3:02 PM

1) Re Marty Busse's comment "The House of Lords which purged most of its hereditary peers in 1999? Most members of today's House of Lords are Life Peers. "
--------------
And the hereditary peers let themselves be purged? Regardez again my point: "evolutionary dead end"

2) Re Marty's comment "Back in the days when you had mostly hereditary peers, at least some of them were a lot more aggressive in challenging the government's actions than today's Peers are."
----------
Well, Conservative Lord Mancroft was certainly "aggressive" in challenging the laws against use of cocaine and heroin.

But I can't tell whether his characterization of
Royal United Hospital Nurses as "“grubby, drunken and promiscuous” was spoken with aristocratic disdain or with comradely admiration.

Ref: http://www.timesonline.co.uk/tol/news/politics/article3462808.ece

Posted by Don Williams | May 13, 2008 3:11 PM

That's Matthews! Matt, did you live there? I was a Lionel man, and Josh Patashnik spent his freshman year in Pennypacker.

I lived in Matthews! Great dorm. Ah, memories.

Posted by right | May 13, 2008 4:04 PM

Re Tyro's comment "Robert, back in the 90s, word on the street was that, without the benefit of a legacy, getting your child into Harvard would cost you a donating in the 7-digit range. "
--------
Phillips Exeter no longer has the tight relationship with Harvard Admissions that it had 100 years ago. However, it does seem to place some of its graduates in Harvard (and Princeton) at above average rates -- but not in Yale.

Fred , of course, would argue that you shouldn't trust the word of an envious commoner like myself:

http://matthewyglesias.theatlantic.com/archives/2008/02/early_ed_watch.php#comment-1432785

Posted by Don Williams | May 13, 2008 4:08 PM

I meant, of course, getting your child a guaranteed slot into Harvard without various academic and legacy credentials. I don't want to egg on Don Williams.

Seriously, Don, get over it: I got turned down from Yale and my life turned out ok. Plenty of my friends went to Harvard, and they're hardly all the "social elite" unless you define that as "the people who came to my drunken parties."

Posted by Tyro | May 13, 2008 4:15 PM

Starsky: Look, Huggy, we're trying to get to the bottom of this Harvard admissions case.

Hutch: C'mon -- we know the word is out all over Bay City that Taylor and Brittany didn't even get wait-listed!

Huggy Bear: Well, word on the street is that you have to drop some 7-figure cash on the H-place in order to get a kid in, these days. But you didn't hear it from me.

Posted by Pesto | May 13, 2008 4:16 PM

Re Tyro's comment "Seriously, Don, get over it"
------------
I don't understand. I never applied to Harvard -- they were not(and are not) strong in engineering. I applied to MIT --and I was accepted.

I have to admire this neat trick used by Harvard's advocates. If someone questions whether Harvard should provide more to US society to justify its tax-exempt status, then that person could only be doing so only because he was once rejected by Harvard??

That seems like a cheap rhetorical device to me. Is that taught in the second year of study or do you have to reach senior status?

Posted by Don Williams | May 13, 2008 4:54 PM

Of course, we've been avoiding the REAL issue here:

Should any place which employs Alan Dershowitz get a tax break?

Posted by Don Williams | May 13, 2008 5:00 PM

Hector,

Just out of curiosity, is it just American capitalism that is doomed to failure, in your imagination? What about Brazilian capitalism, Japanese capitalism, etc.?

Posted by Fred | May 13, 2008 5:47 PM

Don Williams,

Your anger and bitterness always seem to circle back toward rage against wealthy individuals and institutions. It doesn't make any sense. You are angry that the super-rich are donating their money to universities such as Harvard, where some of that money funds scientific research, some goes toward the medical school that treats indigent patients, some goes for scholarships to poor students, etc. Why? Would you rather the super-rich didn't donate money to universities, museums, hospitals, etc.? Would you rather they just bought more toys with the money?

It's a blessing for the rest of us that the super-rich compete with each other for status by donating money to institutions like these.

And as for your claim about the "privileged rigging things for the privileged", there's been some rigging going on since time immemorial, at all levels of society (e.g., the unionized tradesman getting his son or nephew a union card, etc.). But most billionaires got rich because they were smarter, harder working, more persistent, and luckier than the rest of us; most didn't inherit billions. Even your bête noire, Haim Saban, is self-made. The man was forced out of his home in Egypt when he was 12 years old. He wasn't a child of privilege. He got his hands dirty as a farmer and a soldier in Israel before starting his own business, than achieving bigger success in France and later the U.S. America is full of men like that. If they want to donate money to Harvard or any other school, more power to them. Why discourage charity?

Posted by Fred | May 13, 2008 6:19 PM

Can't believe I'm saying this, but Fred has a point.

Posted by Steve B. | May 13, 2008 7:59 PM

Fred,

I would assume that what Don Willaims 'would rather' is that we didn't have super-rich people in the first place. For that matter, I agree with him.

And no, you don't have a point, but then I didn't expect you to.

Posted by Hector | May 13, 2008 8:12 PM

1. I find it rather amusing about how so many commentors here are beating up on Harvard. How about a little variety. How about beating up on Stanford or Yale or Penn for a change. Those are pretty good schools too.

2. I don't know about Cal Tech but Rice Un. in Texas also has no tuition.

Posted by SLC | May 13, 2008 8:27 PM

Hector,

If Don Williams wants to live somewhere where there are fewer super-rich people, he can try one of your "community of saints" paradises like Cuba, Myanmar, Zimbabwe, etc.

By the way, you haven't answered my question: do you predict the downfall of capitalism globally (i.e., in Brazil, Japan, etc.) or just in the U.S.?

Posted by Fred | May 13, 2008 8:27 PM

Fred
1) Even if you accept that massive income inequality is good -- which I don't -- and that the "country should be run by those who OWN it ", you have to admit that our plutocrats have been screwing the pooch in their 7 year money hunt.

2) Even the most greedy and autocratic of Europe's aristocrats accepted "noblesse oblige" -- that if you get great rewards you have some obligations to make things run smoothly.

3) By contrast, our billionaires are running this country into the ground. Even the ones who are not crooks are staying silent -- and doing nothing -- while the crooks go to town.

4) I hear all this bullshit about what Harvard is giving this country and I don't see it. When Bush told this country that Sept 11 occurred because "they hate our freedom" , every professor in Harvard's International Studies Department had to have known that was BULLSHIT.

5) But did they speak up and tell the country that?
Did they suggest how we approach the Islamic world in order to isolate and destroy Al Qaeda? No. Because they put their little rice bowls first.

6) Aside from Stephen Walt, what other Harvard professor has stepped up and pointed out the malign effect that AIPAC, Haim Saban,etc are having on our Middle Eastern policies?

7) Did any Harvard economist point out that Bush's tax cut for the rich was going to create jobs in China --not in America? For that matter, has any Harvard economist shown that he gives a shit whether Americans are employed or not? Or is Harvard's motto "He whose bread I eat his song I sing?"

8) Our government exists to "promote the general welfare". If our elites can't handle that job, then it's time to take their money and power away from them.

Posted by Don Williams | May 13, 2008 9:02 PM

Smart Plutocrats realize that it's better to be even so so rich in a healthy Republic -- than to be filthy rich in a corrupt, vicious oligarchy that will be destroyed by its own irresponsible greed.

Ask George Soros.

Posted by Don Williams | May 13, 2008 9:06 PM

Re Fred's comment "If Don Williams wants to live somewhere where there are fewer super-rich people, he can try one of your "community of saints" paradises "
-------------
Oh, I'm not going to MOVE, Fred. You're having another attack of what Greenspan called "irrrational exuberance".

I merely want a 70 percent marginal tax rate on all income over $200,000. To pay off those IOUS your "Fiscal Conservatives" Ronnie, George I and George the Lesser ran up.

PS And NO tax shelters. First one tries gets a bunk in the pen with a 300 lb guy called Lover Boy.

Posted by Don Williams | May 13, 2008 9:17 PM

Places like Harvard exist partly for education, yes, but the real return is in scientific (and other) research. Considering that a decent chunk of the endowment will be used for life-sciences and engineering expansion at H, the return becomes a bit clearer.

Also, Caltech and Rice *do* have tuition, though lesser than many other private institutions. Entirely tuition-free places are relatively rare, but include Cooper Union and the newly established Olin.

One could, for example, consider the Medical School at Harvard which produces a staggering amount of output (competing with Johns Hopkins for pre-eminence, in a manner of speaking). The modern research university uses its endowment for research expansion. Let's remember that while H has ~6500 undergrads, it has some ~13000 graduate students as well.

Posted by jack | May 14, 2008 2:44 AM

Re jack

It is my information that Rice Un. is tuition free or at least used to be.

Posted by SLC | May 14, 2008 6:39 AM

Re Don Williams

Not all the billionaires started out that way. Mr. Fred mentions Hiam Saban. How about Bill Gates, Michael Dell, and Larry Ellison, all of whom can put Mr. Saban in their closets? None of them came from billionaire families. They would seem to fill Mr. Freds' bill of men who made their bread the old fashioned way; they earned it.

Posted by SLC | May 14, 2008 6:53 AM

Don Williams,

"I merely want a 70 percent marginal tax rate..."

That would take us back to the 1970s, when there were fewer super-rich Americans, and less 'inequality', but the average American was a lot worse off and the economy was crappy. Why would you want to go back to that? Spite?

Posted by Fred | May 14, 2008 1:23 PM

Don,

Well, the government launched a propaganda war against them, the sovereign backed the government, chunk of the peers also backed the government, and the lords spiritual joined in, too.

So I don't know what they could have done-the historical precedent, since 1911, is that in a dispute like that, where the House of Lords is so clearly in opposition to the will of the majority, the Sovereign will create enough new Peers to pass whatever the measure is.

I'm not sure why the fact that every sovereign since 1911 has basically done whatever the PM of the day told them to do supports the conclusion that a hereditary aristocracy (which you can have without having a monarch) is automatically an evolutionary dead end.

Btw, the idea that European nobility really believed in noblesse oblige, which you push elsewhere in comments to Matt's original post, would also be an argument in favor of an hereditary aristocracy.

Posted by Marty Busse | May 14, 2008 1:55 PM

Re Fred's comment "when there were fewer super-rich Americans, and less 'inequality', but the average American was a lot worse off and the economy was crappy. Why would you want to go back to that? Spite? "
-------------
The economic problems in the 1970s were not due to marginal tax rates -- the economy did well in the 1950s and 1960s under a similar regime.

Rather the economic problem in the 1970s was the knockoff effects from OPEC's manipulation of the oil supply and prices. A problem that our elites --living in luxury -- have not even STARTED to Fix 35 YEARS LATER.

Maybe if their wealth was taken from them -- if they had to freeze in winter and catch the bus -- it would focus their fucking attention, no?

Posted by Don Williams | May 14, 2008 2:45 PM

Re Marty Busse's comment "Btw, the idea that European nobility really believed in noblesse oblige, which you push elsewhere in comments to Matt's original post, would also be an argument in favor of an hereditary aristocracy. "
-----------
I disagree.

You always have an aristocracy --Rule of the Few -- of one form or another. Just as you have a Monarch --Rule of the One -- and a Democracy --Rule of the Many -- as well. The problem is to keep them balanced so they all feel motivated to exert themselves and earn their keep. Go back and read your Aristotle.

What I object to is a Degenerate Aristocracy -- one that's gotten lazy and corrupt because it's managed to rig the game -- to get rewards without achievement, privilege without responsibility. Real aristocrats work hard for a living.

And few REAL aristocracies are hereditary. Even the ones set up so nominally don't work that way in practice if they last. In the old days, morons were either exterminated in battle or had a knife stuck in their back by a smarter, more energetic younger son.

Our President Bush is the strongest argument I know AGAINST allowing power to be inherited. His father is worthy of respect. The son ...well.

Posted by Don Williams | May 14, 2008 2:57 PM

Don Williams,

"The economic problems in the 1970s were not due to marginal tax rates -- the economy did well in the 1950s and 1960s under a similar regime."

As has been pointed out to you before, the rest of the world was in rubble post-WWII, hence the 1950s boom. The boom continued with the massive guns & butter spending of the 1960s. The high marginal tax rates (particularly those on investment) did contribute to the economic malaise of the 1970s. Reverting to those tax rates today would make us a lot less competitive with other first world economies.

"A problem that our elites --living in luxury -- have not even STARTED to Fix 35 YEARS LATER."

The liberal politicians you back have consistently opposed increased use of domestic sources of energy: they don't like coal, even though we have an enormous supply of it; they have kept 85% of the outer continental shelf off-limits to energy exploration; they oppose nuclear energy, etc.

Posted by Fred | May 14, 2008 3:05 PM

Re Fred's comment "The liberal politicians you back have consistently opposed increased use of domestic sources of energy: they don't like coal, even though we have an enormous supply of it; they have kept 85% of the outer continental shelf off-limits to energy exploration; they oppose nuclear energy, etc. "
-----------
1) I admit some liberal groups believe in the Tooth Fairy -- they want to be Masters of the Universe, tell everyone what to do in their utopia, yet accept no responsibility for results. Those who have to meet a payroll, month after month, and show a profit rightfully demand
a better plan.

2) But there is more to it than what you depict. I grew up in a coal-mining area -- I would be happy if some way was found to use clean coal. But the environmental problems -- the mercury poisoning from burning it the way we do at present --are real.

3) re exploitation of our offshore supplies, I fail to understand the Republican push to exploit those emergency reserves. They are gaining in value every day and will be urgently needed decades from now as Peak Oil persists. The Alaskan Deposits, in fact, are part of the US Navy's Reserves. Meant to ensure our ships don't go dead in the water if Middle Eastern oil is ever cut off.

4) The opposition to nuclear energy was caused by the industry itself. Three Mile Island actually melted down. If it had progressed further , a steam explosion could have ruptured the containment and spewed highly radioactive fallout across Pennsylvania. If the nuclear industry knew what it was doing, it would not be necessary for Congress to limit that industry's liability in the event of Three Mile Island type fuckups.

5) But you KNOW that none of the above is the problem. The nuclear reactor designs of 30 years ago were crap --but why haven't better ones been made? Some proposed solutions to the energy problem aren't perfect --but why aren't we working hammer and tong to improve those solution s-- or to find better ones.

6) You KNOW the reason. The free market mechanisms that would fix this problem are crippled by government. If people had to pay the FULL PRICE for Middle Eastern oil at the PUMP -- $40 per GALLON -- then venture capitalist would be creating energy startups like crazy.

Instead, we have this chickenshit $3.50 at the pump -- and soak people for the rest on their income tax. Or steal $3 Trillion out of Social Security/Medicare Trust Funds to make up the difference.

7) But the Republicans had control of Congress for 12 years -- and control of the White House as well for about 6 years overlap. And what did they do? NOTHING. They spent shit on alternative energy research/programs.

8) Bush and CHeney sold us cheap energy heroin for years -- and now they tell us that we're "addicted to oil" as they jack up the price.

Posted by Don Williams | May 14, 2008 6:08 PM

And although Bush/Cheney spent nothing on alternative energy research, they were happy to spend $Trillions on Middle East military operations to grab oil deposits. Along with thousands of lives.

Tell me again: Why exactly do we lock up drug kingpins?

Posted by Don Williams | May 14, 2008 6:13 PM

And yes --I agree. Bill Clinton was no fucking better and Hillary would sigh and spread her legs the first time an oil lobbyist showed her a $100,000 check.

Posted by Don Williams | May 14, 2008 6:16 PM

Don Williams,

"But the environmental problems -- the mercury poisoning from burning it the way we do at present --are real."

Google up Great Point Energy. There are other companies like this that have developed ways to use coal while keeping environmentalists happy (the downside, of course, is that you give up some of the energy content of the coal, so essentially you pay more for less energy).

"I fail to understand the Republican push to exploit those emergency reserves. They are gaining in value every day and will be urgently needed decades from now as Peak Oil persists. The Alaskan Deposits, in fact, are part of the US Navy's Reserves. Meant to ensure our ships don't go dead in the water if Middle Eastern oil is ever cut off."

Do you realize how long it takes to get oil pumping from a new field? Years. The prudent thing to have done would have been to start drilling in ANWR ten years ago, when Bush first suggested it, and start locating fields offshore back then as well. We could have pumped all the oil into the strategic petroleum reserve, and we'd have a bigger supply cushion now.

"The nuclear reactor designs of 30 years ago were crap --but why haven't better ones been made? "

Better ones have been made, but they just haven't been built here, because of the regulatory/litigation headwinds.

"If people had to pay the FULL PRICE for Middle Eastern oil at the PUMP -- $40 per GALLON -- then venture capitalist would be creating energy startups like crazy."

We get more oil from Canada and Mexico than we do from the Middle East.

"Or steal $3 Trillion out of Social Security/Medicare Trust Funds to make up the difference."

How again does one steal from these trust funds?

"But the Republicans had control of Congress for 12 years -- and control of the White House as well for about 6 years overlap. And what did they do? NOTHING."

The RINOs and Dems blocked them from opening more of the OCS or ANWR to drilling.

"They spent shit on alternative energy research/programs."

There's plenty of private sector money and government subsidies for alternative energy (why do you think Al Gore became a partner at Kleiner Perkins?). The problem isn't a lack of alternatives, but a lack of alternatives that are anywhere near as cheap as coal, oil, nat gas, and nuclear. As a populist, you ought to think twice about policies that force feed expensive alternative forms of energy on you. It would be a huge regressive tax on the lower class, for whom energy costs are a larger share of their income.

Posted by Fred | May 14, 2008 10:35 PM

Re Fred's comment "There's plenty of private sector money and government subsidies for alternative energy (why do you think Al Gore became a partner at Kleiner Perkins?). The problem isn't a lack of alternatives, but a lack of alternatives that are anywhere near as cheap as coal, oil, nat gas, and nuclear."
-----------
1) Fred, I'm not talking about stupid ass shit like wind generators -- which require a lot of energy to smelt the metal to make them.

2)What we need is an energy supply roadmap. Something which lays out our projected energy (including transportation needs ) for the next 50 years, existing supplies, near term alternative supplies, and future high-payoff but high-risk alternatives. We will also need something similar for the EU, China, Russia and other major consumers in order to identify overall demand and its impact on supply/prices.

3) I don't think we should allow 1 million immigrants/year , for example, until we can show a SUSTAINABLE way to accommodate them.

4) Next, we need a list of proposed solutions and a robust debate on their pros/cons. If people are advocating two-faced positions (e.g, supporting massive immigration but blocking,via environmental regulations, the necessary development to accommodate those immigrants, then we should rub their noses in their deceit. Publicly.)

5) But that debate needs to be complete and honest about full costs. None of this "profit by dumping the externalities off onto the dumb public bullshit." E.g, the huge subsidy the oil companies get by charging us only $3.50 /gal at the pump (to drive alternatives out of business) and then having their whoring surrogates soak us for around $37/gal on our income tax for the military operations needed to protect their overseas holdings.

6) When I spoke of alternatives , I wasn't taking about hippy-dippy stupid ass shit. (Solar cells might be a possibility, however --needs study). I was talking about tripling the research budget for advanced physics in order to develop advanced nuclear technology. Maybe fusion someday. But a massive program comparable to our Cold War military buildup.

7) This area has been a major fuckup. A defense contractor, TRW, was given the contract to develop the Yucca Mountain depositry for nuclear waste. They spent 10-15 years before someone pointed out that the rock they're carving out has micro-fractures that would allow plutonium waste to migrate over thousands of years. I'm not getting into the pros/cons -- but decades should not have been lost on our ONE single depositry for nuclear waste because of incompetence. I know some of the people who worked on that program.

8) The fact that there has not been anything like the above roadmap shows what a major failure our political system is.

Our elites only focus on how to make profits this year. They have NO sense of stewardship.

9) Their attitude seems to be that after they shit in this country enough to destroy it, they will load some chests of platinum on a Gulfstar jet and escape to ...somewhere. I don't know exactly. Mars, maybe.

I'll be away the rest of today.

Posted by Don Williams | May 15, 2008 9:28 AM

PS For a review of the Yucca Mountain fiasco -- and for why Senator Reid should be shot in the nuts -- see http://en.wikipedia.org/wiki/Yucca_Mountain

Not sure what Reid's solution for electricity generation is -- have a million illegal Mexicans run on a BIG treadmill?

I suspect it will be Governor Gray's approach -- fuck around until the blackouts hit and then threaten to arrest someone.

Posted by Don Williams | May 15, 2008 9:46 AM

PPS
If you had a national energy roadmap, you could challenge people like Reid by pointing to the public need and demanding that they either come up with 500 Megawatts/year of electricity from another REALISTIC, COMMERICIALLY FEASIBLE SOURCE -- or that they shut the fuck up.

But conversely, you should be able to justify environmental pollution (coal-burning electrical plants) only when there is no other reasonable alternative.

Posted by Don Williams | May 15, 2008 9:57 AM