Letter: Woeful economic advice

Hugh Baran’s column “Budgets good and bad” (March 3) displays a lack of critical thinking about the financial issues Yale faces.

Baran believes Yale’s budget cuts are a “choice,” that Yale has an “allegiance” to relying on endowment distributions that unnecessarily lock up the endowment funds, and that the University has “$17 billion to spare.” It is difficult to conceive of a more fiscally irresponsible way of thinking about the budget. To realize the absurdity of Baran’s financial ideas, one need do no more than consider two very simple questions: Why does Yale depend on endowment money, and, given that it does, why does Yale not spend more this year?

First, Yale must rely on the endowment to fund part of the budget because otherwise it would have to find alternate sources of income, and the only such sources are tuition and gifts. Tuition should not be raised, because doing so would bring undue hardship onto Yale students and their families, especially low-income families. This then leaves gifts as the remaining source of income, but Yale alumni already give generously. The only reason Yale has a $17 billion endowment is their continued generosity. Can we really press our benefactors, beleaguered by their own problems, any harder?

Second, since the endowment must be a primary source of revenue for Yale, it must be preserved through a smart spending rule. We simply cannot spend more than we are spending right now. If Yale followed Baran’s advice, tens of millions more dollars would be consumed this year, and future classes would suffer. For instance, Yale might fall victim to the strings that large donors can attach to their gifts. We must not narrow-mindedly focus on the present without regard for the Yalies and Yale employees who will come after us.

Baran asks rhetorically whether we will “stand up” for a budget that mimics the government’s current big spending. Well, unlike the government, which can tax its citizens, Yale cannot tax its community. False analogies, and uninformed financial advice, will not help Yale resolve its financial woes.

Daniel Graves

March 4

The writer is a senior in Ezra Stiles College.

Comments

  • robert999

    If Yale depends on endowment to help defray tuition costs, why are tuition costs essentially equal to schools that have far less endowment?

  • Obvious

    To robert999,

    Because Yale provides extensive financial aid to low to middle income families.

  • Anonymous

    And because Yale SPENDS WAY MORE per student than schools that have far smaller endowments. Do you really think maintaining the Yale campus, recruiting world class faculty, etc costs the same per student as elsewhere?

  • Yale 08

    Robert999,

    Tuition costs in this country rise because of the inflationary effect of government issued student loans.

    It is simple:

    More money chasing after scarce goods (college degrees).

    The Federal student loans cause the tuition prices to rise.

    Slash the federal student loans, and rely more on institutional aide and you will see tuition prices drop across the board.