Wednesday, October 22, 2008

George Will on College Endowments and the Government Bailout

On October 23, 2008, the Washington Post published as interesting take by George Will on the connection between the government bailout of private companies and Senator Grassley's call for colleges with huge endowments to be required to pay out 5% of those endowments annually.  Here is a telling excerpt from the article:

Hundreds of billions of dollars that the political class would have liked to direct for its own social and political purposes have been otherwise allocated. That allocation, by government fiat rather than by market forces, must reduce the efficiency of the nation's stock of capital. Which in turn will reduce economic growth, and government revenue, just as the welfare state -- primarily pensions and medical care for the elderly -- becomes burdened by the retirement of 78 million baby boomers.

As government searches with increasing desperation for money with which it can work its will, Willie Sutton Moments will multiply. Government has an incentive to weaken the belief that the nation needs a vigorous and clearly demarcated sector of private educational and philanthropic institutions exercising discretion over their own resources.

So the frequently cited $700 billion sum is but a small fraction of the cost, over coming decades, of today's financial crisis. The desire of governments to extend their control over endowments and foundations is a manifestation of the metastasizing statism driven by the crisis. For now, its costs, monetary and moral, are, strictly speaking, incalculable.

For the entire article, see "Willie Sutton Goes to Harvard" in the October 23, 2008, issue of the Washington Post.


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