Thursday, October 16, 2014

How the Ivy League rips off America and contributes to economic inequality

Here is a report from Robert Reich in about the tax breaks benefiting Ivy League schools.

Imagine a system of college education supported by high and growing government spending on elite private universities that mainly educate children of the wealthy and upper-middle class, and low and declining government spending on public universities that educate large numbers of children from the working class and the poor.
You can stop imagining. That’s the American system right now.
Government subsidies to elite private universities take the form of tax deductions for people who make charitable contributions to them. In economic terms a tax deduction is the same as government spending. It has to be made up by other taxpayers.

Those tax breaks to wealthy donors far eclipse the modest aid to poor students at public universities like Pell grants.

For example, the University of California at Berkeley has more Pell eligible students than the entire Ivy League put together.

So public universities are the ones responsible for educating the economically disadvantaged - but are shorted on funds to do it.

... the average annual government subsidy per student at a public university comes to less than $4,000, about one-tenth the per student government subsidy at the elite privates.

Why does all this contribute to economic inequality in the US?

... perhaps the far higher per-student subsidies received by elite private universities are justified because they’re training more future leaders who will be in a position to reduce the nation’s widening inequality.
Unfortunately, there’s not much evidence for that proposition. According to a study by sociologist Lauren Rivera, 70 percent of Harvard’s senior class submits résumés to Wall Street and consulting firms. In 2007, before the global financial meltdown, almost 50 percent of Harvard seniors (58 percent of the men, 43 percent of the women) took jobs on Wall Street.
Among Harvard seniors who got jobs last spring, 3.5 percent were headed to government and politics, 5 percent to health-related fields, and 8.8 percent to any form of public service. The percentages at the other Ivies are not much larger.

So the public subsidies of elite private universities supports future financiers and future hedge fund managers and future billionaire CEOs.  I have to conclude that your tax money and mine is being spent to increase economic inequality.

Disclosure: Reich is a faculty member at the University of California, Berkeley.  Cal Berkeley is also my graduate alma mater.

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