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Billionaire David Koch last year gave $100 million to MIT. Over the past five years, billionaire Eli Broad has donated over $650 million to MIT and Harvard.

Have Broad and his billionaire brethren become, with all this beneficence, the saviors of higher education? They certainly think so. Donations from “entrepreneurial philanthropists,” Broad said recently, can deliver “greater value” than any government investment.

The rest of us might want to think a bit more on what really happens when billionaires call the tune in academia, or anywhere else. This week's Too Much focus on affluence in higher ed just might help in that rethinking.

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Citigroup, the second largest U.S. bank, lost an amazing $9.8 billion in last year's last quarter, and someone is going to have to pay for that red ink. But not anyone sitting in an executive suite. Citigroup is instead hiking consumer credit card rates, as are most other U.S. banking giants now reeling from wheeling and dealing in subprime mortgages. Meanwhile, the Washington Post reported last week that Wall Street financial houses have shelled out $33.2 billion in year-end 2007 bonuses. The top seven, a group that includes Citigroup, lost $55 billion last year speculating on mortgages. Bank vice-presidents who deal directly with mortgage-backed securities did, to be sure, take a hit in the latest bonus round. Their year-end checks dipped into the $300,000 to $400,000 range . . .

What's the going rate for gravity? Who knows? Zero gravity, on the other hand, now has a price tag: $200,000 for five minutes. That's what tycoon Richard Branson will be charging for a trip on his just-unveiled SpaceShipTwo, a “cross between the space shuttle and a corporate jet” slated to begin suborbital joy rides in 2009. The Economist magazine sees plenty of redeeming social value in Branson's latest business venture. The “rich risk-takers who have seen the fragile Earth from above,” says the prestigious journal, might become “an influential cohort of environmental activists.”

Recession? What recession? Reuters reported last week that business is still booming — in the luxury yacht industry. Shipyards that specialize in yachts as long as football fields are enjoying “enormous demand,” says Pieter Koenders, a Dutch maritime executive who sees “no impact whatsoever from the economic situation.” The world’s largest yacht owned by a private citizen remains the Rising Sun, a 453-footer that, in 2004, set software CEO Larry Ellison back over $200 million. You can fit a good bit into a boat that size — 82 rooms and a movie theater, for starters — but not everything. The Rising Sun’s basketball court has to double as a helicopter pad . . .

Not all mega millionaires lust for football field-sized yachts. Some simply enjoy football first-hand, and, these days, they know who to call: TSE Sports & Entertainment, a New York company dedicated to the care and feeding of sports fans who wear power suits. TSE entertained about 1,000 swells at this past Sunday’s Super Bowl in Phoenix. A typical TSE luxury package — a “five-star hotel, limo service, choice game seats,” after a private jet ride to the game — will run about $20,000. Of course, some suits would rather rent private homes than fight the crowds in hotel lobbies. One neatly appointed Scottsdale abode last week rented for $250,000 . . .

Tax avoidance by the wealthy and corporations annually costs the British treasury about $50 billion, the Trades Union Congress charged last week, the equivalent of $2,000 a year “for everyone at work in the UK.” But wealthy corporate execs in the United States have a leg up on their British counterparts. On a good chunk of the taxes they do have to pay, top U.S. execs get ordinary shareholders to foot the bill. Major U.S. corporations regularly reimburse CEOs for the taxes due on the perks they pocket. These reimbursements, called “gross-ups,” are grossing out shareholder activists. The AFSCME public employee union is filing shareholder resolutions to curb the practice at six major corporations. Says AFSCME's Rich Ferlauto: “It's abhorrent to have a CEO not paying taxes on their golf club memberships. What makes them so special?”

Inequality
by the numbers

CEO pay:
the scorecard

Good reads
for your bookshelf

Quote of the Week

“How can they give this guy so much money? I've never had a weekend off in 10 years, and I just got my first bonus ever.”
Steve Lacey, a maintenance worker reacting to the $100 million pay package awarded to Bruce Wasserstein, the CEO at Lazard Ltd., the Wall Street fixture whose affiliated private equity group runs the New York senior living center where Lacey works. January 31, 2008

New Wisdom
on Wealth

Dan Jacoby, Cheap credit results in more than economic crisis, Seattle Post-Intelligencer, January 30, 2008. A Unversity of Washington analyst explores the inequality that makes for our “underlying” economic problem.

Pam Dailey, No booyah for Bucknell? Standard-Journal (Milton, Pa.), January 30, 2008. Jim Cramer, TV's Mad Money investment guru, is urging Americans to demand “that the extremely wealthy stop trying to shirk taxes.”

Eliza Thomas, Embarrassment of Riches, Whole Life Times, February 2008. Why we have too many “really, really rich people for our own good.”

How would a smart nation go about getting the most bang for the higher education buck? By smothering a handful of universities with more money than they could ever possibly put to sound educational use? Or by spreading resources around, to give every student a shot at a quality education?

Any reasonable nation, of course, would choose the latter course.

The United States has chosen the former.

Not consciously, to be sure. Americans have never gone to the polls and cast their ballots for a enrich-the-few approach to higher education. But the United States has taken that route anyway.

And the result has now become too embarrassing to ignore. The enormous wealth now pouring into elite U.S. private colleges and universities — at a time when average families are struggling to afford rising tuitions at budget-cutting public colleges — is finally beginning to become a political issue.

The Senate Finance Committee late last month asked the nation's wealthiest colleges and universities to turn over data on everything from what they give out in student aid to how much bonus cash their investment advisers are collecting.

How wealthy have higher ed's wealthiest become? The industry's  scorekeeper, the National Association of College and University Business Officers, now counts 76 higher ed institutions with endowments worth at least $1 billion.

But the bulk of this endowment wealth sits with a few handfuls of elite schools — the Ivies, Stanford, MIT, the wealthy liberal arts colleges that together educate less than 100,000 of America's 20 million postsecondary students. 

Harvard's endowment now holds $34.6 billion. Overall, the 22 richest higher ed institutions hold more wealth than the entire rest of the 785 institutions the college business officers are currently tracking.

What's generating this concentration of wealth at higher ed's summit? The concentration of wealth at America's summit. The more that wealth in the United States concentrates in elite pockets, the more the wealthy contribute to the nation’s elite universities. 

America's rich don't give to soup kitchens. They give to dear old alma mater. In 2007, notes the Chronicle of Philanthropy, the gifts America's top 50 philanthropists gave to higher ed “far outpaced” the gifts these 50 deep-pockets gave “to other types of charities.” 

What have elite institutions done with all this money? Have they welcomed more students from families of limited means? 

Hardly. Over the last decade, undergrad enrollment at the Ivies, MIT, and Stanford has actually dropped, by 1.4 percent. And elite schools are filling their fewer seats with more students from the upper reaches of America's income distribution.

Roger Lehecka, a former dean at Columbia, and Andrew Delbanco, an administrator there now, recently noted that “between 2004 and 2006 — an era of enormous private wealth accumulation — 27 of the 30 top-ranked American universities” actually experienced a net decline in their percentage of low-income students.

So where, if not to expanded access, are the billions in elite endowments going? They're going into projects that better fit the priorities of wealthy funders. Elite institutions are building up a storm, erecting lavish new facilities that trumpet, naturally enough, the names of their funding benefactors.

At Princeton, one new student residence, named for retiring eBay CEO Meg Whitman, offers rooms with “triple-glazed mahogany casement windows.” Stanford, adds Business Week, “spent $4 million to restore” an equestrian center that “now provides a place for undergraduates to house their own horses.”

The donors who make all this possible get more than the satisfaction of watching students frolic and horses gallop. They get tax deductions. States and the federal government, in turn, collect fewer tax dollars, a shortfall that translates into fewer revenue dollars for public colleges and universities. 

The elite colleges, meanwhile, get preferential tax treatment. 

Foundations, to maintain their tax-exempt status, must spend at least 5 percent of their endowment value every year. The administrators of college and university endowments face no such requirement.

Harvard, for instance, spent just 4.3 percent of its endowment in 2006. By not having to spend 5 percent, the university saved “$245 million in one year alone.”

U.S. Senator Charles Grassley of Iowa has been suggesting that schools like Harvard ought to be held to the same 5 percent standard that applies to foundations. 

The elites, not surprisingly, don't think much of that suggestion, and they've begun taking preemptive action. Both Harvard and Yale have recently announced plans to spend more on student aid. At Harvard, families earning up to $180,000 will now pay no more than 10 percent of their incomes in tuition.

But moves like these, critics charge, will only serve to make higher education more unequal. To compete for students from upper-middle class families, public schools will now have to increase aid to these families — at the expense of poorer families.

The biggest winners in the elite university status quo? Probably the money managers who've been steering more and more endowment dollars into hedge and private equity funds. One bond trader, working with Harvard endowment dollars, pocketed $35 million.

In sum, elite colleges and universities aren’t just perpetuating an unequal America. They're actively driving inequality ever wider.

Robert Peston, Who Runs Britain? Hodder & Stoughton. 360 pp.

Britain and the United States have experienced remarkably — even eerily — similar political and economic trajectories over the past three decades.

In 1979, UK voters put into office a conservative “free market” ideologue, Margaret Thatcher, who promptly went on the offensive against the public policies that had helped Britain become sharply more equal in the years right after World War II.

In 1980, U.S. voters elected a conservative free marketeer, Ronald Reagan, who promptly unleashed a nearly identical offensive against the policies that had helped the United States, right after World War II, also become substantially more equal.

Margaret Thatcher’s party — and policies — would remain dominant in Britain into the 1990s. Ronald Reagan’s party and policies would remain dominant, in the United States, into the 1990s.

The first Democratic Party president of the post-Reagan era, Bill Clinton, would inherit a nation where income and wealth had shifted significantly to the top of the economic ladder. Clinton’s years in office would not reverse that shift.

The first Labor Party prime minister of the post-Thatcher era, Tony Blair, would inherit a nation where wealth had also shifted significantly into already wealthy pockets. Over his years in office, that intense concentration of wealth — at the top — would continue.

The end result: The United States and Britain today stand as the two most unequal nations in the developed world. Both have witnessed what Robert Peston, the business editor at Britain’s BBC network, calls the “triumph of the super-rich.”

Peston’s new book, Who Runs Britain?, both chronicles that triumph and asks a basic question about it: “Why should any of us care?”

Does the wealth of the super-wealthy, Peston asks, really make a difference in the lives of the rest of us? His answer: most certainly — in any number of ways, some as everyday and palpable as the shortage of decent affordable housing, some as abstract as the health of our democracy.

The increasingly less democratic society that Peston describes on his side of the pond will strike many Americans as utterly familiar.

“For years,” Peston notes, Britain’s two major parties have been “too afraid of the super-wealthy” to campaign for seriously higher taxes on the rich. One reason: Politicians fear that the wealthy moguls who run the media might paint them “as somehow ‘anti-success.’”

A precious irony. No society that winks at wealth’s concentration, Robert Peston helps us understand, can ever be successful.

Stat of the Week

Just over 80 percent of U.S. households worth at least $30 million plan to increase their outlays for luxury goods and services in 2008, according to a new poll conducted by Elite Traveler magazine and Prince & Associates. The results, notes Elite Traveler editor Douglas Gollan, confirm “that the Super Rich remain insulated from the economic woes that have forced even the mass affluent consumer confidence levels to an all-time low.”

Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954. Office: Suite 3C, 777 United Nations Plaza, New York, NY 10017. E-mail: editor@toomuchonline.org.