Harvard Says It Won't Comply, as Trump Freezes $2.2 Billion
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The White House freezes billions of dollars of federal funding to Harvard as the school's administrators refuse a long list of demands from the Trump administration. Meantime, as Americans make it through another tax day, are there any lessons that can be gleaned from their suffering for the current tax debate in Congress?

Welcome. I'm Kyle Peterson with The Wall Street Journal. We're joined today by my colleagues, columnist Alicia Finley and editorial board member Kate Batchelder-Odell. The anti-Israel outbursts on American college campuses since the October 7 Hamas massacre have earned public skepticism for higher education. And now the Trump administration is reportedly investigating dozens of universities for civil rights violations.

But Harvard, despite about $2.2 billion of federal funding on the line, says it will not give in to a long list of demands made of it. The university's president said this, it will not surrender its independence or relinquish its constitutional rights. No government, regardless of which party is in power, should dictate what private universities can teach, whom they can admit and hire, and which areas of study and inquiry they can pursue.

Let's also listen to a clip of the White House Press Secretary Carolyn Lovett. The president's position on this is grounded in common sense, in the basic principle that Jewish American students or students of any faith should not be illegally harassed and targeted on our nation's college campuses. And we unfortunately saw that illegal discrimination take place on the campus of Harvard. There are countless examples to prove it, particularly with the

stunning confession by then Harvard president, Claudine Gay, who said that bullying and harassment depended on the context. The president at that time made it clear to the American public he was not going to tolerate illegal harassment and anti-Semitism taking place in violations of federal law. So the president made it clear to Harvard, follow federal law, no longer break Title VI,

which was passed by Congress to ensure no student can be discriminated against on the basis of race, and you will receive federal funding. Unfortunately, Harvard has not taken the administration's demands seriously. All the president is asking, don't break federal law, and then you can have your federal funding. I think the president is also begging a good question. More than $2 billion out the door to Harvard when they have a more than $50 billion endowment. Why are the American...

taxpayers subsidizing a university that has billions of dollars in the bank already. And we certainly should not be funding a place where such grave anti-Semitism exists. Alicia, almost two different views of what this letter from the Trump administration says.

The White House press secretary is suggesting all Harvard needs to do is follow federal law and the federal funding will be restored. The president of Harvard saying we are not going to surrender control over who we admit and who we hire to our faculty. What's your read of who has the better view of what the Trump administration is actually demanding of Harvard and potentially other universities?

Well, I would side with Harvard on this one, and I never thought I would ever say that. I agree with Harvard. But here, in this case, the administration has basically put out a laundry list of demands that have nothing to do with the anti-Israel protests or protecting civil rights of Jewish students.

In January, Harvard actually reached illegal settlements with several Jewish groups on campus, including the Students Against Anti-Semitism, and agreed to undertake some reforms, including toughening the discipline of those who harass Jewish students, adopting a definition of anti-Semitism that includes people basically saying the death to Zionists and such. And the Jewish students overall praised the Harvard administration for these reforms.

Now the administration is basically coming in saying, well, we don't think that's good enough, but we're going to put out all kinds of other demands on these $2.2 billion of funding. Harvard and all of its affiliates, including its hospitals, receive about $9 billion, including that you will now also have to adopt viewpoint or have enough ideological diversity in every single department.

which is completely untethered to what actually happened at Harvard. Some of the other demands, including the federal government will have to now audit all of its admissions and hiring data. And now Harvard will have to publish documents

the information, the rates, admissions rates for applicants and those who are rejected based on GPA, standardized test scores and disaggregated by race. So the apparent goal here seems to be to prove that Harvard is discriminating against some kinds of groups. But really, the evidence that Harvard is currently breaking civil rights laws is pretty tenuous.

Yes, I think everyone can agree that it should have done more to protect Jewish students from their harassment during the protest and it should have disciplined the perpetrators and those who were harassing. And in some cases, I guess there were cases of them actually spitting on Jewish students.

But Harvard has made a good faith effort to essentially do a lot of what the administration claims it wants. But the administration demands seem to me to be just overkill. - Kate, some of these demands are so broad

and broadly worded that it is hard to even understand, at least from my point of view, how Harvard is supposed to comply with them. So on the point about viewpoint diversity, here is a couple of sentences from this letter from the Trump administration to Harvard. Every department or field found to lack viewpoint diversity must be reformed by hiring a

critical mass of new faculty within that department or field who will provide viewpoint diversity. Every teaching unit found to lack viewpoint diversity must be reformed by admitting a critical mass of students who will provide viewpoint diversity. And I mean, it's not clear how that is supposed to work with regard to huge swaths of the university that are apolitical

Is Harvard supposed to go through and poll the astrophysicists that it employs and figure out how many of them are Republicans and how many of them are Democrats? Does viewpoint diversity mean just that, a party political spectrum? Or does it mean broader philosophy? Does it mean viewpoints within the field? Do we need to have equal astrophysicists who think that Pluto is a planet and who think that Pluto is not a planet?

And so it starts to even be hard to figure out what exactly the Trump administration wants. And honestly, it seems like from this letter that that is kind of the point. What the Trump administration wants is a Harvard administration that will say, let's get into a negotiating room. And then they will hash out some sort of thing that the Trump administration will find to its likings.

Well, I want to back up and stipulate a couple of things up front that I think are important in considering the Harvard case. I mean, the U.S. public has every right to be fed up with subsidizing Harvard. And when you look at the case of the treatment of the Jewish students in 2023 and 2024 and the lack of discipline for that and that some of those students will carry around Harvard degrees for the rest of their lives and have that credential, I think the public is reacting to something real.

I think the institutional atrophy at Harvard is significant. I'm not convinced there's any viewpoint diversity in many of the departments that are described. And I'm not sure that Ivy League institutions are preparing young people for the demands that they're going to face in the world.

So I say all that as a prelude because I think it is important to note that we are reacting to a real problem, but the bulldozer of the federal government and firing that up is not a good solution to handling it. So the question I think is if we concede that viewpoint diversity is limited at Harvard and that these tend to be dominated by progressive thinking, they tend to be dominated by graduate students who are progressives, who pass along their thinking to the next generation,

How do you get after a problem like that? For one, I don't think this hostage process is going to work. You know, the letter involves like an external auditor who will come in and sign off on whether they have met some unspecified standard. I don't think that works.

And second, I just think it is a boomerang to use the federal government this way that will just invite retaliation when a Democrat is in power and will go after a school that they don't like, that is not in favor with Democratic constituencies. And so my concern is that

conservatives who are Republicans who are worried about the institutional problems at these Ivy League schools are one, they're not going to regain influence in the institutions like they want. And two, it's just going to further poison our politics and redound against the original purpose. Alicia, surely there's some precedents, legal precedents about what strings a president by himself can put on federal funding and

What's your read of this if this dispute between Harvard and the Trump administration goes to the courts? Well, the precedents in this case involve not just the federal government, but governments in general. And the Supreme Court has held for almost 50, 60 years that, and I'm just going to quote the Supreme Court's Perry Rees Snyder opinion in 1972, that

even though a person has no quote-unquote right to valuable government benefit, and even though the government may deny him the benefit for any number of reasons, there are some reasons upon which the government may not rely. And that is the government may not deny a benefit to a person or on the basis of that forage his constitutionally protected interests.

And that is essentially what the administration is doing. It's saying, we don't like what you're teaching the people you are hiring, the people you are admitting. So we're going to withhold $2.2 billion in federal funds. Now, again, Harvard does not have a right to those funds. But the reason that the administration is withholding them is because essentially they don't like their opinions or their viewpoints. And that's a First Amendment violation.

Now, the court has also said that any kind of conditions on government benefits or any kind of conditions that a government imposes on certain benefits or funds must be essentially roughly proportional and related to that benefit.

Now, the conditions that the government is imposing on Harvard's funds, mostly research funds, have nothing to do with the research or this alleged civil rights violations. Now, maybe Harvard, of course, does have an obligation to obey civil rights laws, but the government actually produces no evidence to say that it hasn't been. I mean, we do know, of course, as we were discussing that, you know, its handling of the protests was...

reprehensible and did arguably violate the Jewish students' civil rights. But usually what happens is when there is a complaint about civil rights violations at a college, education department's office of civil rights undertakes an investigation. They then produce a report on their findings and then seek to negotiate some kind of resolution that addresses the complaint.

In this case, the administration has just blown through the investigations and they're not apparently doing that at any colleges. They're basically just threatening them by saying, if you don't agree with these very vague sweeping demands, we're going to cut off your funding. Now, that's a violation of due process. And as Harvard has argued, another point is.

is that when the government wants or intends to impose conditions on any kind of benefit or funding, Congress must do that and it must make them clear so the grant recipients know what they are agreeing to. In this case, Congress did not spell out any of these conditions that the administration is trying to impose. So the administration is trying to unilaterally and retroactively pull back these grants. And I think there's also a potential legal challenge based on the major questions doctrine.

And that is any kind of politically or economically significant action must require clear authorization from Congress. Now, is this an economically or politically significant action, you know, withholding grant funds from Harvard? Well, to the extent that you're doing it across the board and there are political impacts and real life impacts that we can get, real world impacts that we can get into later. Yes, it is a major action.

And our Congress should authorize or actually spell out what the conditions are on these grants. So universities don't belatedly have the rug pulled out from underneath them. Hang tight. We'll be right back in a moment.

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because Americans lose when politicians choose. Learn more at GuardYourCard.com. Welcome back. On the point about real-world impacts, the journal has a news story about some of the medical research that is going on at Harvard's institutions, including a project to try to detect ALS or Lou Gehrig's disease early via blood tests. One immunologist at Harvard T.H. Chan School of Public Health

trying to figure out if there's a way to get a tuberculosis vaccine. Here's a line from this story. It says the researcher is considering laying off staff and euthanizing research monkeys involved in vaccine studies because she isn't allowed to use the funds for their care and feeding.

And Kate, I think there's two points that strike me here. One is that if the federal government is spending money for a specific purpose, you hope that it's a purpose the public would support and the federal government thinks is important. And so I worry about cutting off money for a

tuberculosis moonshot if the point of the money is to fund a tuberculosis moonshot and hopefully make some real breakthroughs that can save lives and help people in the U.S. and around the world. And two, on the point about whether this is related or germane to what else is happening across campus at Harvard, some of these people in these research institutions

probably haven't seen an undergraduate in years. They have nothing to do with the humanities departments, with the encampments that were on these campuses. Often, I think probably the hard sciences people at some of these institutions of higher learning wish that the people across campus would knock it off and quit creating problems that are then bouncing back and boomeranging and hitting them. But it does raise the question of if this is the precedent that any federal funding going to a college is

for any reason, can be cut off for something that is unrelated and not germane, it does raise the question of what the next Democrat in the White House might do and say, we're going to cut off the tuberculosis funding because we think you need more emphasis on climate science or whatever the case may be.

Well, I thought Alicia raised a good point I'd like to expand upon, which is where is Congress? Has anybody called recently to see if the lights are still on on Capitol Hill? And I say that because, like I was talking earlier about how there's pretty broad agreement on the center-right Republicans that there are institutional problems in higher education that need to be addressed.

And one of them is that there are huge amounts of student loans that flow to these schools. And these schools often use all of that money coming in to raise their prices. And that is why if you want to go to Harvard Law School, that's going to run you $80,000 a year in tuition before you even get to housing or anything else. So

There is so much Congress could do to reduce the federal government's footprint in these institutions, but there is absolutely no appetite to do it. They could also try to make these schools more accountable for what these students end up, whether they end up paying back their loans, for instance. They could look at the way these schools are accrued.

accredited, which has been a Republican priority for some time. We're talking about cancer research, which is so important that we should make sure those grants are being paid out to the best researchers. You could debate, for instance, how much overhead these labs should be allowed. That's been one question. So I am not against, by any means, Congress taking a look at that

and deciding to pass laws that change how involved the federal government is in colleges. The concern I have to the point you got about, you know, retribution and escalation when another political faction takes power is just that I think what we have here is just pure leverage. And it is, I found this gun, I'm going to hold it up, as opposed to working under our system to fix the real problems that exist.

Alicia, at that point, what could Republicans focus on if they wanted to make a dent in this problem? One idea I've seen raised is capping loans, federal loans for graduate studies. So stop subsidizing all these grad students that often

Many of them are rabble-rousers on these campuses. I think that's right. There used to be a cap on how much debt the graduate students could borrow from the federal government. Republicans back into the 2000s actually uncapped that, which has encouraged these colleges to add graduate programs and everything from...

sustainability to the Middle Eastern studies departments. And there are actually about twice as many graduate students at most of the Ivy League campuses than there are undergrads. And actually 90% of the federal student loans that Harvard pulls in are actually for graduate students, not undergrads.

Undergrads in some ways are a product. And what I mean by that is Ivy Leagues pay out more in financial aid than they bring in student loans for the undergrads. It's really the graduate students who are the profit centers for these universities.

And so I think if you were to at least cap federal loans for graduate students, maybe at a total of $100,000, I mean, the private loan market could still make up a difference for, as Kate says, some law degrees and medical degrees are much more expensive, but then you would have actually some kind of

underwriting. And so you'd probably have very many fewer graduate students getting loans in the first place and going to these schools. And to that point, another thing I've raised is the municipal tax exemption for these universities. So Columbia, Harvard, and others can float tax-exempt debt. That means there's no tax on the interest for the investors in these bonds, which allow them to borrow at

Rates that are below the treasury rate, and they're considered essentially safe investments. But this allows them to expand a lot of these programs, build new buildings for these new departments, for these graduate students, as well as the administrative load. So there are a lot of subsidies that Congress could target if they had the political will.

But even in 2017, when there was consideration actually paring back the municipal tax exemption for higher education for these colleges, Republicans blinked. They got an earful from these colleges about all these stories about, oh, no, we won't be able to do this and that if you eliminate this and it's going to end up hurting students. I think Republicans need to buck up. Hang tight. We'll be right back in a moment.

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Welcome back. Let's save a few words for the sad holiday Americans marked on Tuesday, April 15th. That is tax day. And I can't be the only person who was frantically on the phone in the last week or so with H&R Block. And Kate, I got to wondering whether there are any lessons learned

that we can learn from our current dismal tax code about the debate that is now going on among Republicans in Congress. And one that struck me is simply the point about compliance. So much money being spent on complying with the tax code, preparing taxes, filing taxes.

I found an estimate from White House data. This is a Tax Foundation blog post in 2024. It says the latest figures is that Americans will spend more than 7.9 billion hours complying with IRS tax filing and reporting requirements in 2024. They say that this is the equivalent of about a city the size of Los Angeles doing nothing but full-time work on proportionality.

and filing people's tax returns. Meantime, our colleague James Freeman in one of his columns this week flagged a letter, an amusing letter that Donald Rumsfeld sent to the IRS in 2014. It begins this way, "Dear Sir or Madam, I've sent in our federal income tax and our gift for tax returns for 2013. As in prior years, it is important for you to know that I have absolutely no idea whether our tax returns and our tax payments are accurate.

And he goes on to say that he hopes in his lifetime that the U.S. would simplify the tax code. So, Kate, I mean, that would be one thing that I think Congress ought to keep in mind as they start to think about some of these other carve outs for tips and overtime and car loans that they want to add into that tax code.

Oh, goodness, Kyle. Yeah, there's a whole list of them. And also, you know, potentially applying the corporate tax rate to lower for companies that invest in the United States. The no taxes on TIPS 1 would be a big headache for those who are filing their taxes. I would also say, Kyle, so if Congress does nothing, the 2017 tax cuts for individuals expire at the end of the year. So that is the forcing function that is getting Republicans to get their act together on this reconciliation bill.

And while a lot of what they're doing is simply extending the bill, I mean, one thing Congress did in 2017 is double the standard deduction. And that, for instance, made much fewer people itemizers where you have to go through and deduct specific credits and deductions. It gave people a cleaner path for paying their taxes below that first limit.

chunk of income. So it may not be getting radically better, but it could get a lot worse if Republicans fail to extend the tax cuts. But to your point, hopefully simplification will be on the menu as they try to think about what to add to the bill. There's unfortunately some talk of, you know, like a millionaire's surcharge that would kind of effectively raise the top tax rate.

That is absolutely the wrong direction to go in, especially as tariffs are starting to make the economy a little bit disrupted, as they say. That is an argument for getting as many pro-growth items into the tax bill as possible. But yes, not many people look forward to tax day. But hopefully if Republicans get it together, they can at least make it at the margins better for next year.

That point about the debate on raising the top rate also struck me, Alicia. So just to check in again on the official figures in 2022, the top 1% of earners paid about 40 and a half percent of all income taxes. Now there are other taxes that are paid by lower income people, including the payroll tax. But as far as the income tax goes, and that's what the debate on this top rate is in Congress right now, the top 1%

pays 40.5% of that load. The bottom 50% pay about 3% of income taxes. So that is the context, I think, to keep in mind, Alicia, when we hear about this debate in Congress about adjusting these rates in this tax bill.

Right. And part of the reason that they pay so much is because the top rates, we do actually have a heavily progressive tax system now. Yes, the capital gains rate is something around 23.7 percent. So that's lower than the top income tax rate, 37 percent. But they also have much more capital gains than the lower earners.

The other reason for that is there are all kinds of income transfers through the tax code. The child tax credit, earned income tax credit, these Affordable Care Act premium subsidies, they're all paid out through the tax code that can essentially eliminate somebody, the lower earners and middle classes tax liability.

And so what some Republicans are now talking about is actually increasing those, which I guess would achieve their goal of making the rich foot a larger share of the U.S. income tax. But there you have to consider the Laffer curve.

and which is when you raise the top income taxes, then you may actually receive less revenue because some of the higher earners will then try to shield their income, or maybe they won't cash out as many capital gains. And so you may actually end up getting less economic

growth, which will also result in less revenue. So I don't think that this is going to be a big revenue generator, as some Republicans supposedly think. One final thought is on where all of the money goes. In 2024, the federal government spent about $7 trillion in

raised just over $5 trillion in taxes and borrowed about $2 trillion. And Kate, nearly half of all of that spending is on Medicare, Medicaid, Social Security. The share of the budget that is discretionary, controlled by Congress, keeps shrinking all the time as those entitlements grow. And so that, I think,

is the reality and why it's difficult to imagine getting to any sustained fiscal situation in the U.S. without doing some kind of reforms to those entitlement programs. They simply eat up about half of the spending currently. Well, and that's the big opportunity of the reconciliation bill coming through Congress right now is to put some rational reforms into Medicaid.

which is a fast-growing entitlement. You can't touch Social Security through the Senate's reconciliation process, and there's no coalition yet to do that. But the House has said, you know, we need to cut about $880 billion out of Medicaid over 10 years. And that sounds like a lot of money, but it really isn't. And it could be achieved by, given how large the program is, it could be achieved by

merely slowing the growth in the program. And Congress can do that without cutting benefits for the traditional people who need the program, like pregnant women, the disabled. Congress can do that by cleaning up some ways that states try to draw down more federal dollars. They can do that by refocusing the program away from the adult prime age men that were given the benefit under the Affordable Care Act and more toward those, like I said, poor, low-income people

families, pregnant women. This is a real opportunity. It's not just a tax bill. It's a real opportunity to impose some restraint and get that program focused back on the populations that it was supposed to serve. Thank you, Kate and Alicia. Thank you all for listening. You can email us your own Tax Day Horror Stories at pwpodcast at wsj.com. If you like the show, please hit that subscribe button, and we'll be back tomorrow with another edition of Potomac Watch.

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