Stop being polite and start getting real
On elite universities and early retirement
Welcome to Known Unknowns, a newsletter that has finally found a monopoly it wants to break up.
Break Up the Ivies
I agree the President has gone too far with his war on elite universities. I also agree that blocking foreign students is possibly his most economically destructive policy yet. But, come on. The universities are hardly blameless here. It wasn’t just the post-October 7 craziness—there’s been more than a decade of canceled speakers, safe spaces, loyalty oaths, discrimination in hiring and admissions, and forcing the more unsavory aspects of DEI on every department. Did they really expect the spigot of taxpayer money to keep flowing?
I wrote for Bloomberg about the research issue. During the second half of the 20th century, the federal government largely supported research at our best universities. And this became a big part of American exceptionalism in a number of ways. The idea was that research at universities would be insulated from politics. How’s that going?
And this gets to the problem: universities blew it. They had one job (or two)—produce world-class research and protect it from politics. In exchange, they got enough taxpayer support to become some of the richest and most powerful institutions on the planet. Granted, these are hard things to do. But did they really have to impose the worst excesses of the arts and humanities on scientific research? No, they did not.
Universities didn’t just tolerate some wacky professors—they made their insane ideas university policy. Their research function had become critical to their own success, and country’s, yet university leadership was irresponsible and reckless. So now cutting off grants to research is economically self-destructive—even if the universities totally deserve it.
What shall we do? I think we should consider breaking them up. Take Columbia (where I have multiple degrees): the medical, engineering, and business schools could form a new entity and keep doing important government-supported research, and let the college, arts and humanities and social work school do their activism thing on their own. If research is so important—why are we letting them run things?
I know it sounds extreme. But preserving our great research tradition will require more than just half-hearted oaths to uphold neutrality while universities still preserve the administrative complex that created this mess.
Long Bonds
Long-term bonds may be the least popular asset these days. I hear people on financial news shows talk endlessly about moving to the short end of the yield curve. And I get it—with unstable (but probably rising) rates and a good possibility of inflation, who wants duration risk?
We all should. This is another lesson in why you need to be thoughtful about what is risk-free. If you’re saving for a long-term obligation (like your retirement, or if you’re a pension fund), you really need duration—because what you’re saving for faces the same risk as long-term yields. We’re all short duration, so why are we running from it?
I could write a book on duration and why we get so confused by it. I guess it’s not intuitive. But given the duration of their pension obligations, foreign governments especially should be buying longer-duration Treasuries (if they want to buy them at all). Yet they’re also short duration. Maybe various regulations bias everyone to short duration—another policy error! This may be as bad as when we decided to rack up lots of debt when rates were near zero and finance it all with short-term debt.
We’re All Going to Work Longer
When it comes to the national debt, we are all avoiding the elephant in the room—and that elephant is entitlements. Somehow, it became politically brave to ignore this looming debt bomb. We Pension Geeks aren’t here for that. We live to put a value on liabilities and then freak out when we don’t have the assets (or future tax revenue) to pay for them. It’s what we do. There’s nothing brave or politically insightful about pretending math doesn’t exist.
And here’s another truth bomb: we can’t just raise taxes on higher earners to pay for it. We also can’t just make Social Security more efficient. Nope—we’ll all have to pay more and get less. Again, math.
I argue we need to take a look at the early retirement age. We’re inching up the normal age, which is already controversial. But lots of Americans retire at 62—something we make fun of the French for. That can’t go on. I know, some people can’t physically keep working. But that is not a reason to encourage everyone to retire early—we have a disability program or can allow for some hardship allowance.
And yes, age discrimination is real. I got many emails about it that were heartbreaking. It’s a big problem—one I have some ideas for. But it is also not a reason to actively encourage early retirement.
Until next time, Pension Geeks!
Allison
I just love your statement that we're all short duration, even though we don't act like it.
As a metaphor, it maps beautifully onto politics. Elected officials are “short duration” by design: most are up for re-election in 2 or 6 years, and their incentives are to deliver quick wins, like tax cuts, stimulus checks, or new subsidies. The political equivalents of corn chips—they feel good now but are gonna rot the fiscal teeth over time.
Meanwhile, long-duration policies—like fixing the debt, reforming Social Security or rebuilding infrastructure—have upfront costs and delayed rewards. They don’t poll well. They’re “low-yield, high-maturity”: necessary, but politically unattractive.
Thanks for a great metaphor.
Break the universities into three parts: the teaching enterprise, the research enterprise, and the other service enterprise (primarily the clinical medical function which is huge). Let each stand on its own financial feet.
Universitates omnes in partes tres dividendae sunt.