Giving Up Federal Funds Would Do Harvard Good

On April 11, the federal government threatened to halt funding to Harvard unless it agreed to dozens of demands, including auditing the views of students and faculty and changing admissions and hiring processes to ensure “viewpoint diversity.” The University declined to accept these demands, stating it “will not surrender its independence or relinquish its constitutional rights.”

The administration responded by freezing $2.2 billion in funding and threatening another $1 billion targeted for health research. This has created a legal battle over whether the government can legally condition funding on such demands. Harvard should, and may, prevail on the legal questions.

We believe, however, that the University should also prepare to give up federal funds entirely.

As libertarians, we suspect the world would be better off without government funding of research — but we set that aside here. In this case, Harvard would actually serve its self-interest by giving up federal money.

Even if Harvard wins its legal battle over existing federal funds, which is uncertain, the risk of future interventions remains; another administration could reinterpret the ruling to allow additional demands or convince Congress to shrink research funding.

Accepting federal funds also makes Harvard vulnerable to interventions that predate the current administration. For example, the Supreme Court ruled in 2023 that Harvard cannot employ race-conscious admissions, basing its decision in part on civil rights law that regulates institutions receiving federal funding.

Eschewing federal money would free Harvard from burdensome and intrusive investigations. The administration alleges, for example, that Harvard made “incomplete and inaccurate” disclosures of foreign funding and must release all related records, but Harvard would not have to disclose foreign funding if it did not accept federal funds.

Similarly, the House Oversight Committee would have a limited legal basis to demand that Harvard turn over potentially thousands of documents — including internal communications — on 10 broad topics but for Harvard’s receipt of federal funds.

Giving up federal funds would plausibly improve Harvard’s public image. Some of the vitriol directed at the University occurs because Harvard is partially government-funded, and many taxpayers disagree with the University’s statements and policies. Without federal funds, taxpayers would have less reason to care, cooling political tensions and helping Harvard maintain its reputation.

Despite these benefits, forgoing federal funds would be costly and disruptive for Harvard. Its endowment is large — $53.2 billion — but only about $9.6 billion is unrestricted. Similarly, Harvard could borrow against the endowment, but that merely postpones the reckoning.

The University could replace some of the money with donations from industry and individuals; its stance against the Trump administration has already sparked a modest surge in donations, and doubling down might galvanize donors even more. This would help Harvard eliminate the small federal component of its financial aid packages.

Any remedy would take time, though, and it would not replace all the lost funding. Harvard could redirect funds to preserve “cutting-edge medical, scientific, and technological research,” but less essential programs would have to shrink. Thus, giving up federal dollars is far from a perfect solution, but it is the only way for Harvard to maintain its freedom.

If the University foregoes federal funding, it must also prepare for other ways the government might intervene. On April 16, for example, the administration moved to revoke Harvard’s tax-exempt status. The University will likely sue, but even if victorious, the precarity of its tax exemption will remain.

The University could avoid this uncertainty by becoming a standard corporation. Its income taxes would likely be low, at least early on, because it would operate at a loss (although it would face greater sales, state, and property taxes). Moreover, it would gain the freedom to spend its income however it wished.

The government may intervene in ways Harvard cannot avoid. Members of Congress have proposed raising the endowment tax, and the administration is threatening to revoke Harvard’s ability to host international students. These policies are unwise and would harm Harvard, but they are independent of accepting federal funds — if anything, the public may be more opposed to these measures if Harvard does not accept federal money in the first place.

The current feud between Harvard and the Trump administration is not unexpected. It is the latest climax in a trend of growing federal intervention in Harvard’s affairs. In January last year, increasingly intrusive government investigations led one of us to argue that Harvard should give up federal funding. The government’s latest actions — and the threat to Harvard’s independence — make this measure more urgent than ever.

Jeffrey A. Miron is a Senior Lecturer on Economics. Jacob P. Winter ’24 is a high school government and economics teacher and a research associate at the Cato Institute.