Harvard president Drew Faust spoke at the ROTC commissioning ceremony, a controversial act on a campus where hostility to all things military is entrenched orthodoxy. The question hanging in the air was: will she tarnish a celebratory moment by taking the opportunity to denounce “Don’t ask, don’t tell,” or perhaps irritate the anti-military crowd by not mentioning the issue of gays in the service at all? Answer: neither. She finessed the issue with a deft bit of rhetoric: “The freedoms we enjoy depend vitally on the service you and your forebears have undertaken on our behalf. Indeed I wish there were more of you. I believe that every Harvard student should have the opportunity to serve in the military, as you do, and as those honored in the past have done.”
In comparison, Faust’s speech the next day to the Harvard Alumni Association, was defensive and a bit clunky. In deploring the chorus of politicians and critics who want the super-rich university to pay the equivalent of a hefty tax from its $34 billion endowment, Faust made the point that some of that money is restricted to certain causes, like the acquisition of meteorites and plants that reproduce by spores. This raises the question of how big a dent in the $34 billion is caused by the annual hunt for meteorites and exotic plants. Faust didn’t say. She did mention that a third of the university’s annual $3 billion operating budget is supplied from the endowment.
The implication was that raiding the endowment each year is necessary to meet annual costs. But Jim Manzi, entrepreneur, executive and blogger at The American Scene points out that Harvard makes money through investment returns on its General Investment Account, which currently includes about $6 billion of investible assets in operational accounts in addition to the $34 billion endowment, and that money doesn’t get reported as income. Last year that investment income came to more than $7 billion. Manzi writes: “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.” Look for the campaign to tax Harvard and other wealthy universities to gain momentum.
Harvard and other elite schools deserve criticism for how they choose to spend their money, but not because they hoard it, but rather that much of the money that they do spend is spent poorly. I would rather have that money invested in productive assets and ably managed than spend on some new unproductive boondoggle.