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Posts Tagged ‘class warfare’

Today’s Times details the extensive donations that Michael Bloomberg has made to his alma mater, Johns Hopkins University — over 1 billion dollars! This is totally nutso. Yet, it is relatively common for highly selective universities to get giant donations from rich alums.

This is bad for a variety of reasons:

  1. College is probably not the best place to use your dollars if your goal is societal improvement. By the time you get to college, your life track, income, etc. is pretty much set within a narrow range of outcomes. It’s probably better to spend your money improving early childhood and elementary schools.
  2. If you assume that college is still quite important for other reasons, don’t fund Johns Hopkins (or Harvard or Yale or wherever). Your return-on-investment there is pretty bad, since these institutions coast on reputation. Why not give to community colleges instead — which are always hurting for cash and have lower attrition rates than four-year colleges? Additionally, the students that attend Hopkins or Harvard or Yale already have lots of breaks in their favor? Why not give a break to the students at the margins of success who need it more?
  3. Additionally, the highly selective undergraduate institution relies on cartelization to keep its prestige. Harvard, with its $34B endowment, could reasonably educate a lot more people than it does now. Instead, it limits who can attend with unnecessary precision. Can’t dilute the brand! If that’s the case, why keep giving so much to an institution that will do so little with your money?

So, if this is so bad, why do we do it?

  1. Sentimentality (or availability bias): Michael Bloomberg got a lot out of Hopkins; he wants to show his appreciation. He loves the place and has fond memories. As such, he wants to give money.
  2. Our tax code: By giving the money away, Bloomberg gets a legacy that he doesn’t have to lose upon death (estate tax). Additionally, he gets to deduct those donations from his massive income.
  3. Prestige: Rich people love giving away money when they can slap their name on it. (Not so much when they can’t, see, e.g., Donald Trump.) Additionally, we shower people with attention for their donations.

All these factors lead to a quite inefficient distribution of wealth to higher education. Hopkins has a $3B endowment; it educates 5,000 undergrads and 2,000 grad students a year. The University of Maryland-College Park has a $792M endowment; it educates 26,000 undergrads and 10,000 grad students a year. I can’t find statistics, but I would hazard that the parental income of a Hopkins student is higher than the parental income of a Maryland student. I would also hazard that the percentage difference in income of a student who was waitlisted at the university and got in vs. a student who did not is bigger at Maryland than at Hopkins.

Which is all a long way of saying that donations are vastly inefficient ways to redistribute wealth, and we should just tax people a lot more. I’m not saying that central planning is a better way to distribute wealth; plenty of this money could just be block-granted to states/municipalities with some strings (i.e. required income reporting, tracking students after graduation, etc.).

Philanthropy may sound good, but a system with a lot of big-dollar philanthropy probably isn’t equitably distributing wealth in the first place.

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One theme on this blog is a certain level of generational warfare, for lack of a better term. The idea that our policies have been carefully crafted to benefit the older and wealthy at the expense of the young and poor. You tend to hear people focus on the rich/poor distinction, but the age difference plays an equally important role. There’s a new article in Esquire that explores this. Here’s the opener:

“Twenty-five years ago young Americans had a chance. In 1984, American breadwinners who were sixty-five and over made ten times as much as those under thirty-five. The year Obama took office, older Americans made almost forty-seven times as much as the younger generation.”

One astounding fact it reports is that it is estimated that 85% of 2010 college graduates returned to their parents houses, carrying with them an average of $25,250 in debt. The debt I can believe, but… 85%?!?! That seems so amazingly high. Must it include people who return home briefly before heading out for a new job or opportunity? I know the market for young people is awful, but I still find 85% very difficult to believe. Or am I being naive?

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As Linus and I have stated before, most problems in America are the baby boomers’ fault, and they have left them to the younger generation to solve.

The new data on wealth for different ages only makes this clearer:

A perfect storm of economic forces has caused the net worth of of people under 35 to fall by 68 percent between 1984 and 2009 according to the Pew Research Center. It’s a bitter pill to swallow for the young and depraved given that the nation’s olds (people 65 or older) saw a net worth increase of 42 percent in the same period.

And yet, the main fiscal issues of the day are not how to help America’s youth, but how to keep Social Security and Medicare afloat and how to keep pensions from bankrupting states. I’m not saying that we should weaken any of these programs, but the focus on the boomers (and their unwillingness to pay taxes, vote for progressive candidates, or support general social improvement such as interracial same-sex relationships) is basically ruining the future of America.

We should just change the motto from “Out of many, one” to “Fuck you, I’ve got mine.”

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