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Higher education has historically helped to stabilize economies In times of financial uncertainty, but the threats of President Donald Trump to freeze the financing and status of tax exemption at Harvard University shakes this model, according to Evan Horovitz, CEO of the Center for Analysis of the State Policy of Tufts. Horowitz said Fortune The possibility of redundancies contributes to fears of economic instability in the Boston region.
President Donald Trump’s feud with Harvard University has some local experts who are not only afraid of the financial health of the university, but also for the wider community in Boston.
The Trump administration plans to freeze $ 2.2 billion in federal funding in contracts and university grants, and according to numerous reports, it will try to cancel the status of tax exemption from the institution. Escalation further dispute, Trump threatened to withdraw an additional $ 1 billion in funding for health research, Wall Street Journal reports on Sunday. This move is in response to Harvard’s refusal to comply with a list of requests from the administration, which included the supervision of the federal government on the acceptance and processes of hiring of the university.
“The federal assistance engraving of institutions such as Harvard, which enriches its habitat bureaucrats with tax dollars from the fight against US families, is yet to do so,” said White House spokesman Harrison Fields Fortune in a statement. “Taxpayer funds are a privilege and Harvard does not meet the basic conditions needed to access this privilege.”
Harvard, with a $ 53.2 billion donation, is the largest university in the country. It employs about 20,000 people – the sixth largest employer of Massachusetts residents – and has a deep connection with local hospital networks and research institutions. Administration abbreviations have threatened to emphasize critical medical research and to rattle the security of the workplace of staff and teachers hired with university investment funds.
Attracting status and tax financing would lead to “reduced financial assistance for students, abandoning critical medical programs and lost innovation opportunities,” according to Harvard spokesman Jason Newton.
“Illegal use of [a revocation of tax-exempt status] Broader would have serious consequences for the future of higher education in America, “he told Fortune in a statement.
“Spiral effect of wealth”
The uncertainty of Harvard’s funding has the potential to pull out the local economy. In past times of economic instability, higher education has acted as a stabilizing power for university dense regions such as Boston, as young people are looking for diplomas to improve work prospects. For example, enrollment from the University and College has increased from 18.2 million to 20.4 million between the fall of 2007 and the fall of 2009, according to the National Bureau of Economic Research. Now, however, due to the permanent threats of the Trump administration to withdraw funding from elite universities, higher education is no longer a reliable source of economic security, according to Evan Horovitz, CEO of the Center for Analysis of the State Policy of TUFTS University.
“This is the turning of the standard model for us and a rather unfamiliar twist,” Horowitz told FortuneS “We rely on [higher education institutions] For stability. This time they are agents of instability. “
Along with the aggressive Trump tariff plan, which has sparked concerns about recession, Harvard’s financing cuts have contributed to the “wealth spiral effect”, Horovitz said. Even the perception of threats to the main employer in the area is enough to shake economic confidence.
“It has a self-fulfilling character in which people feel that they are doing worse before they start to cope worse, and this only encourages them to return to their expenses, for their economic activity, which, of course, weakens the local economy and guarantees the results they are afraid of,” said Horovitz.
Boston’s high bets
For Boston, an area known for its high -income residents, bets are particularly high. The city is ranked on the eighth rich in the country by number of millionaires, according to a 2024 report by Henley & Company, and neighboring Cambridge has established itself as an oasis for young, wealthy Americans. These high winners play a huge role in the economy: people who make at least $ 250,000 a year represent nearly 50% of all costs in the United States, according to a February report by Moody’s Analytics.
Although Horowitz believes that only the threat of cuts can have a fee for the local economy, Harvard is inseparable from the wider community in Massachusetts, which means that tangible shifts can have a pulsating effect. About $ 574 million from $ 1.02 billion in the amount of scientific costs in the fiscal 2018 were spent on salaries and purchases of goods and services in Massachusetts, according to a Harvard report in 2023 on local and state impact. In 2023, the university pumped over $ 9.2 billion at risk in 78 biotechnology companies, $ 8.5 billion of which went to 62 companies with Harvard Connections.
Harvard’s great resources and impact also bring with them an elite reputation, which contributed to attracting more wealthy young people, as well as highly educated personalities and their families seeking prestigious jobs at the University, Bruce Kimbol, Professor of Education in Ohio, said Bruce Kimbol, Professor of Professor of In History of Education at Ohio at Ohio State University, Bruce Kimbol said, Professor of Education History at Ohio at Ohio State University at Ohio at the University of Ohio at Ohio University at Ohio State University at Ohio Ohio at Ohio University in Ohio at Ohio University in Ohio, FortuneS
“All universities in Boston receive a dividend from the fact that people want to live in Boston and when spouses are hired, they bring with them a well -educated husband,” Kimbol said.
“You can say that there is a large dividend for the whole Boston region because of these universities – not only for their employees, but also for the spouses and families of these employees,” he added.
This story was originally presented on Fortune.com