Money-laundering is the art of taking money illicitly gained and cleaning it so that it cannot be traced back to its source and is therefore free and clear.  In the television show Breaking Bad, Walter White and his co-conspirators purchase cash-based businesses such as the A1A Car Wash to launder their profits from cooking perfectly blue crystal meth.

Crystal meth is illegal and the profits obviously in need of laundering.  Sometimes, though, even legally gained money might need to be laundered.  What if the government gave you a contract to do one thing, and you wanted to buy something else with the money?  Then you would need to obfuscate the origin of the money — i.e., launder it.

At one point in time, elite private universities were probably mostly in the education business.  They accepted tuition and fees and provided an education in return.  Today, that is not the main business at these schools.  Rather, they have become elite at a different endeavor: diverting money intended for one thing to buy what they want.  It may not be polite to call it this, but if it is different from money-laundering, it’s not very different.

Let’s take one example: Columbia University.  We all love Columbia, that bastion of sanity and ethics.  Columbia is a private university.  In the 2020–2021 school year, Columbia received 1.1 billion dollars in grant money from the U.S. government.  That is almost exactly equal to the $1.1 billion Columbia received from tuition and fees.  So, at private schools like Columbia, students pay no more than we do for their education.

Why?  Grants are awarded by the government for different purposes.  Many of these grants support research in a variety of disciplines that are of interest and importance.  And even if the research isn’t very interesting or important, at least we — Americans — have agreed to fund basic research so the money spent on it is out in the open.  But what is not above board is that the universities take a good chunk of this money as overhead.

How much is this overhead?  In fact, a majority of the grant money!  According to a recent report from the Heritage Foundation, they take 64 cents on every dollar.

Overhead is the university equivalent of the A1A Car Wash from Breaking Bad.  The money theoretically goes to equipment and lab supplies and so forth.  Some of it does, particularly in the sciences.  But most of this money is simply diverted to the university.  The money looks as though it is going to pay for actual overhead, and some of it actually does, but the rest is siphoned off.  Its origins — you and me — are obscured.  It is a money transfer from the middle class to the liberal elite.  According to Heritage, Ivy league schools alone took 1.8 billion of your dollars as overhead in 2022 alone.

Do elite private universities need to take your money? Columbia University has an endowment of 13.8 billion dollars.  Princeton has an endowment of $34.1 billion.  Harvard has an endowment of $50.7 billion.

The overhead policy is designed to let the liberal elite get richer without having to earn it.  It is a regressive policy of the most extreme kind.  The middle class, with good intentions, finances basic research.  Then most of that money gets laundered and given free and clear to the rich.  The people who OK this system and oversee it are the same people who get rich by it.

Sometimes a grant is awarded to a researcher who works off campus.  In that case, he has no campus lab expenses at all.  One might think that no overhead would be taken in those cases.  Yet that logical assumption would be wrong.  Columbia, for example, takes almost 30 cents on the dollar even on research done completely off campus.  That is 30 cents on every dollar just for including the name “Columbia.”  And even that is not enough for Columbia — the federal government sued Columbia in 2016 for fraudulently charging on-campus overhead (62 cents on the dollar) for off-campus work.

It perhaps might have crossed your mind by this point that the less a professor needs a lab, the fewer the real expenses are, and the more money there is to launder.  That means grants given to non-science disciplines would have more to steal.  But non-science disciplines have a harder time getting large grants.  I wonder if DIE doesn’t serve as a wonderful way around this problem.  DIE departments are bulldozers when it comes to getting grants.  And best of all, DIE departments don’t really do research.  That means they are giant piñatas for universities: they are loaded with our money, with minimal actual expenses, and therefore ripe for the beating.

It’s a perfect scheme.  The government takes money from the middle class to fund basic research.  Basic research is funded, sometimes for the better and sometimes not.  But the price for the research is set at 2.5 times the actual cost.  This allows the university to pocket the excess.  If the university gives back a few of those dollars in student scholarships (to its future rich), that makes it look more charitable and less like a bunch of thieves.  And yet...

Oversight at any funding agency is by academics who have profited in the past and will profit in the future on this scheme.  This overhead business is no side business of the elite private university.  It has become the primary business.  The students are just part of the cover.

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