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Government by Confiscation

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The NIH’s notice to unilaterally revise indirect cost rates on grants to 15% reads as though it were written by someone who barely understands what indirect costs are and how they are computed, which suggests it was imposed on them from without, as are many agency policies throughout the federal government. While it is unquestionable that the presidency sets policy throughout the executive branch, there is a reason why we rely on knowledgeable professionals in the civil service to advise on such policy. Moreover, the setting of policy cannot contravene federal laws, regulations, Congressional appropriation, case law, and most fundamentally, the obligation of contracts.

The notice in question relies on a specious, unprecedented reading of federal regulations (2 C.F.R. 200.414) that would give any agency the right to unilaterally ignore the federally-negotiated indirect cost rate agreement, which legally binds the federal government, and replace it with a de minimis rate, effectively defrauding institutions of reimbursement of real costs per the terms and conditions of existing contracts. The agency even claims that they would have the right to apply such a reduction retroactively to the beginning of an existing award, and reclaim indirect costs already paid in previous years. Quite apart from its illegality on multiple fronts, the mere pretense of having such a right is to claim to be beneath the most basic principles of honesty and integrity in abiding by one’s word, which a contract is supposed to formalize.

Such thorough dishonesty has long been a hallmark of Donald Trump’s business practices. Stiffing his contractors and subcontractors, even in violation of signed agreements, as a mere negotiating tactic to strong-arm weaker parties into accepting pennies on the dollar, is well-documented in Trump’s business career, via numerous legal disputes. A most thorough exposé of his amoral practices was given by his long-time fixer, Michael Cohen, in the book Disloyal. No one should be shocked by its contents, as it well accords with the public persona of Trump, which people excuse because they agree with him on one or another issue, thinking they are using him when they are the ones being used.

Having decades of experience in this domain, I am well positioned to appreciate how thoroughly ignorant Elon Musk and others in the Trump administration are in this matter, when they characterize indirect costs as some kind of surcharge by which universities rip off the federal government. In fact, indirect cost, which is to say the added cost of administration and facilities that is attributable to supporting research, is painstakingly audited every one to three years by the negotiating agency (DHHS or the Office of Naval Research). In fact, even the negotiated rate, often around 55%-65% of direct costs for universities (with certain excluded categories), and higher for hospitals, does not cover the full real cost of supporting federally-sponsored research. Large institutions cover the difference with internal funds. They can accept lower indirect rates from non-profit foundations (a small fraction of most research portfolios) only by cost-sharing with internal funds, so most institutions require investigators to provide such sources themselves. The actual indirect cost recovery rate ends up averaging 40% of directs or less, so a large institution may already be subsidizing federally-funded research on the order of $100M/yr or more.

A reduction to 15% would require a level of cost sharing that would be unbearable for many small to mid-size institutions, forcing them to refuse NIH funding. If the intent is to punish big universities, it will actually hurt small institutions more, but Trump has never truly cared about small businesses, as his own business practices prove. Elon suggests universities should use their endowments, proving he has no idea how endowments work. You can only spend the revenue, not the assets, or it’s not a true endowment. The revenue in most cases (2%-4% of assets depending on market) is already obligated to pay for the salaries of faculty beyond the NIH salary cap (reduced in 2012 and returned to that level only in 2022). Again, this “solution” would not help small institutions, but there is no evidence Musk cares about the consequences of his supposed “efficiency,” which should mean doing more with less, not less with less. Moreover, since 2008, NIH alone among federal agencies has refused to pay inflationary 3% increases, at first as a crisis measure, and now as a permanent fiction that inflation does not exist.

Indirect costs are so named because they cannot be directly attributed to a particular grant, but they are directly attributable to research operations as a whole. Federally-funded projects require added space, utilities and infrastructure, especially IT. They also require considerable administrative effort to maintain audit compliance for all transactions and reports. Ironically, NIH imposes more administrative burden on recipients than any other federal agency, yet they would illegally demand that this administrative work be uncompensated. It is already inadequately compensated. Since a cap of 26% of direct costs was imposed in 1991 on the administrative portion of indirect cost rates, real administrative burden has increased over the decades due to dozens of new regulatory changes, so the real cost of research administration is closer to 30%-35%. These are not mere secretaries or clerks. They are more like bookkeepers who must also have vast regulatory knowledge to ensure proposals, reports, and finances are all compliant. Grant administration is notoriously understaffed and overworked; draconian cuts will mean layoffs, worsening the problem possibly to the point of dysfunction. Small businesses actually tend to have higher negotiated rates, since they lack the efficiencies of scale that large universities have.

An intelligent examination of indirect cost rates might consider reducing the facilities portion and increasing the administration portion, since universities might be reasonably expected to shoulder more of their facilities costs, and the current model with capped administrative expenses may create perverse incentives to overbuild infrastructure (though this is speculative). NIH very recently recognized that recipients are undercompensated for administrative costs, by increasing the indirect cost base on subcontracts from $25,000 to $50,000. Its sudden new claim that universities are overcharging is a willful lie.

The 15% rate is based on no new analysis whatsoever; it was simply the lowest rate that they think they can legally get away with. This is naked confiscation, or more bluntly, theft. The felonious behavior of Donald Trump was not limited to his Stormy Daniels payments (which were exposed only because he initially stiffed his fixer Michael Cohen on his holiday bonus, necessitating later payments), for hundreds of small contractors have attested to his refusal to make legally obligated payments for no other reason than to apply leverage and force them to accept lower payment. Cohen correctly identified this as the tactics of a gangster.

The United States government enjoys what authority it has only insofar as it is grounded in the rule of law, for it makes no claims to an immanent right to rule, as did absolute monarchs. When a government willfully acts without any regard for the rule of law, not only in this but in many other matters, it loses its authority and right to command obedience. I have only spoken on the matter that happens to be within my expertise, and perhaps this will only be persuasive to those with similar knowledge. But I do not delude myself that he is acting incompetently only in my domain of knowledge; there is little reason to doubt that such infantile recklessness, matched with an uncritical and unmerited confidence in one’s own judgment, pervades all of his rash orders.

Many of these orders may be stopped by the courts, but a thief does not cease to be a thief simply because he is prevented on several occasions. The most serious concern is not how many illegalities will stand, but the fact that the chief enforcer of federal laws sees illegality as a fair means to any end, even going so far to condemn and discredit judges who rule against him. The dictatorship which seemed like a delusion when it was described only by those on the left is now already a practical reality, at least as far as the compliant Congressional majority is concerned. Even if they should change their position later, they may find there is no longer a state apparatus willing to implement their will.

Putin’s Strategic Blunder

When Vladimir Putin invaded the Ukraine in 2022, he effectively ended Russia’s rise as a power broker in Eastern Europe and in the world at large. This stunning unforced error made it impossible to sustain any pretext of being a member in good standing of an emerging multipolar world. Had he merely attempted to secure the Donbass region, he might have attained realistic strategic goals without alienating anyone besides the left-of-center Westerners who already demonized him. Instead, he attempted to conquer all of Ukraine, or equivalently, to depose its government and replace it with a client state. To understand why he risked so much for so little, one need only take his Russian nationalist ideology at face value, and dispense with the myth of a master strategist favored among conspiracy-minded right wingers who yearned for a powerful adversary to the Western liberal order.

For two decades, Putin had cultivated an image of being a rational authoritarian intent on restoring Russia to her place among the great powers, though this time in a way that relied more on soft power, especially economic power in the energy sector. Germany and other nations would never have placed themselves in a state of energy dependence on Russia unless they had to some degree accepted Russia as a rational actor and member of the international community. Russia even postured as a counter-balance to the sometimes misguided military interventionism of the United States in the Middle East and Eastern Europe. Putin exploited misgivings about U.S. imperialism, affecting to be defending himself against an encroaching NATO.

In 1990, while negotiating the admittance of a unified Germany into NATO, the U.S. made repeated assurances to the USSR that NATO would not expand eastward. While much of the liberal media calls this a myth, it is in fact well documented. After the dissolution of the USSR, this commitment was abandoned and Russia was in no position to oppose it. The Czech Republic, Hungary and Poland joined NATO in 1999. A more controversial expansion occurred in 2004, with the inclusion of the former Soviet Baltic States (Estonia, Latvia, Lithuania), along with Romania, Bulgaria, Slovakia and Slovenia. Since then, Albania and parts of former Yugoslavia joined. In 2008,
NATO expressed its intent that Georgia and Ukraine should also become members.

Admittance of the Baltics and former Warsaw pact states to NATO was at the insistent application of these nations, who wished to orient themselves with Europe and have protection against Russian domination. It is already telling that Russia has so few willing allies. Russia, still following a “spheres of influence” concept of international relations, desires satellite states for its own good, but the U.S. and EU offer tangible benefits, not mere subordination, to their allies.

It is eminently reasonable for Putin to be mistrustful of NATO expansion, though the fact remains he is able to offer only a stick and no carrot to both Georgia and Ukraine, invading the former in 2008. No one outside of Russia seriously envisions a land invasion of Russia from eastern NATO countries, which have fewer than 2000 NATO troops each. The expansion rankles Russia not because it provides a real existential threat, but because the mutual-defense pact frustrates any possible designs of using military power against its former satellites and Soviet republics. This is a problem only because Russia is utterly wanting in soft power.

Putin tried to present Russia as integrated in the world’s political and economic power structure, through membership in the G8, friendly relations with some U.S. and European heads of state, collaborations with NASA, joint energy projects, and some diplomatic and counterterrorism efforts in the Middle East. Hosting the Winter Olympics (2014) and FIFA World Cup (2018) reinforced this image of a new, modern Russia that attained power through economic, diplomatic and cultural influence.

The West, however, takes economic battles no less seriously than military conflicts. When Ukrainian president Viktor Yanukovych rejected an EU association agreement in late 2013, it resulted in public protests by the Euro-friendly opposition. U.S. politicians professed solidarity with the protestors, and covertly the State Department was interfering to achieve its desired goal of ousting Yanukovych, as evidenced in a leaked State Department phone call. Vice President Biden is mentioned on this call, as he was involved in Ukraine policy, and shortly after the April 2014 revolution his son Hunter joined the board of Ukraininian energy company Burisma Holdings. Infamously, President Trump’s first impeachment resulted from his 2019 demand that Ukrainian President Zelenskyy investigate the Bidens’ dealings in Ukraine. While the leftist media repeats incessantly the absurd fantasy that Trump is some kind of Russian agent, we are to ignore the dirt on the hands of the left meddling in Ukraine. By invoking the childish word “whataboutism,” they hope to defuse any accusation of hypocrisy. We do not pretend that the sins of the left excuse those of the right; we commit no logical fallacy by pointing out the insincerity and immorality of both parties. On the contrary, it is rationally essential to grasp that the left is every bit as ruthless and amoral as the “authoritarians” they oppose, so we understand this as a power conflict rather than a moral conflict.

Russia’s invasion of Crimea in 2014 was an understandable reaction to the overthrow of a pro-Russian Ukrainian goverment in favor of a more European-oriented one. Crimea is predominantly (67%) Russian in ethnicity and holds naval strategic importance. As much as the hypocritical West professed outrage at this violation of Ukrainian sovereignty, they continued to do business with Russia, though they used this act as an excuse for sanctions against their competitor.

Putin believes that Ukraine is a “made up” nation, as it was historically a part of Russia. Indeed, Kievan Rus was Russia, and the distinctions among the ethnicities we now call Russian, Ukrainian and Belarussian emerged gradually, and none has greater claim than another to be more authentically or originally Russian. The notion of Ukrainian nationalism did not arise until the 19th century, and the name Ukraine was not favored over Little Russia until the 20th century. The Ukraine SSR’s borders did not align with ethnic geography; this was partly by Soviet design to suppress ethnic nationalism, and partly the result of the annexation of Poland by agreement with Germany. Thus the post-Soviet state called “Ukraine” had an ethnically Russian east and ethnically Polish west.
Ukraine is an “invented” nation, as indeed all nations are, but it is no less real on account of its novelty. Ukrainian national identity, existent even before the dissolution of the USSR, strengthened over the next two decades. Putin’s invasion was at least a decade too late if he expected it to be welcomed by a significant fraction of the population. If anything, by this act he has done more than anyone to solidify Ukrainian national identity for good.

The integration of Ukraine with European culture had been ongoing for many years, which is why the reaction of Europe to the invasion has been so decisive. This was an attack on a European country, where people from all over Europe attend university, live and work. The invasion could hardly be seen as anything but a proximate attack on Europe itself, and a shameless discarding of all the norms required for membership in the European community. By this act, Putin revealed himself to be a brute, not a European. The attempted conquest of Ukraine was the equivalent of defecating on the floor, swiftly casting aside any veneer of civilization.

The thorough miscalculation by Putin before and during this war should lay to rest any myth about him being some master strategist. Apart from his false belief that Ukrainians in any significant numbers share his myth about Russian nationalism, he seemed not to think that Europe would impose any serious repercussions on Russia. Most significantly, the actual prosecution of the invasion has been inept, and exposed the poor logistical capabilities and tactical incompetence of the Russian military. What was once its greatest strength, sheer force of numbers, has also evaporated, as most of the truly combat-ready units have already been committed. It is Russia, not the U.S., which most frequently makes unsubtle reference to its nuclear capabilities, in admission of its conventional military weakness.

Worse, Russia has few reliable allies, as even China has maintained ostensible neutrality, and purchases Russian natural gas only at a steep discount. Western sanctions are incapable of sinking Russia, for its natural resources will always find a market. Financial sanctions failed to ruin the ruble, which actually rebounded above pre-war levels by May 2022. Nonetheless, Russia’s soft power is limited. By 2023, Europe has weaned itself off of Russian energy sufficiently for energy prices to become manageable, though still well above pre-war levels. Economically, Russia needed Europe more than Europe needed Russia. The replacement of integration with confrontation harms Russia, which was much more powerful as a competitor than as an enemy of the West.

The political, economic, and military weaknesses of Russia, to some extent exposed by the invasion and to some extent created by it, may come as a disappointment to those who saw Putin as some Clausewitzian mastermind who could outmaneuver the West, holding in check its more noxious postmodern cultural influences. A Christian nationalist who stood firm against sexual nihilism and other perceived decadences appealed to many on the right, and even today there are some conspiracy-minded conservatives who like to think Putin is playing some incomprehensible long game. On the contrary, it is likely due to his impending mortality that Putin decided to think short-term and resolve the Ukraine issue decisively and swiftly, solidifying his perceived destiny of the restorer of a Russian empire. This best explains why he has thrown caution to the wind, squandered whatever good will he may have built up in the past, and now commits extensive forces to a much more limited goal of securing territory that was already sympathetically Russian.

The biggest indictment of Putin’s supposed genius is the poverty of what even a victory might have achieved. A conquered Ukraine would be an unmanageable and fiercely resistant country, reverting to autonomy the moment that military occupation ceases. The economic benefit would be more than offset by the cost for years to come, and there was no realistic prospect of holding most of the country for more than a few years. Winning allies by naked conquest is no longer practicable, even if it were ethical, as Russia should have learned from recent failures of American intervention. Putin failed to perceive that Ukraine is for the most part no longer Russian and will never return to the Russian sphere by mere force.

As Russia’s true allies are limited to Belarus and some Central Asian republics, there is no realistic prospect of Russia regaining superpower status, if that means the ability to project power globally. Russia’s population crisis has accelerated, with now less than half the population of the United States, and the annexation of Ukraine, with its own demographic crisis, would hardly have helped matters. A cold realist would have recognized that the most profitable trajectory for Russia would be as a regional power integrated in a multipolar international community. Putin’s imperialist pretensions only succeeded in weakening Russia, making the world less multipolar than it would have been otherwise.

How Vaccines Help the Immune System

Much of vaccine hesitancy is grounded in the supposition that one is better off relying on one’s “natural immunity.” This in turn supposes that there is some dichotomy or antithesis between “natural” and “artificial” immunization. In fact, vaccines operate by introducing an inert virus or protein into the bloodstream, so that the immune system can respond and learn to create antibodies. It is actually the immune system doing the “work” of immunization. The role of the vaccine is to introduce a harmless version of the pathogen, so that immunity can develop in this safe environment, and the immune system will be better prepared if the real thing comes. The alternatives would be to (1) hope that one is never exposed to the pathogen or (2) get exposed to the new pathogen and hope that the immune system can deal with it effectively on the first try. The choice is not between “artificial” or “natural” immunity, but between a prepared and unprepared immune system.

COVID-19 is now endemic, so it is a statistical near-certainty that everyone will be exposed to it at some point in their lives. Since it is a novel pathogen, our immune systems are not prepared for it with any specificity. For the unvaccinated, the risk of hospitalization and death varies greatly by age and existing health conditions. Even those who are not hospitalized, however, may suffer lasting “long COVID” effects. These include neurological disorders, respiratory damage, and increased risk of blood clots. Thus COVID-19 presents a substantial health risk to most unvaccinated adults.

You could say that you are willing to assume this substantial risk, or that, in your particular case (e.g., due to young age), the risk is objectively small. It makes no sense, however, to be sanguine about the risk associated with COVID exposure while at the same time being fearful of the risk associated with the vaccine, which does nothing but introduce an inert spike protein into the bloodstream, albeit indirectly. It makes no sense to be fearful of the inert spike protein while having no fear of exposure to the real thing. In fact, all the side effects of vaccines, including the serious effect of blood clotting, are effects associated with COVID-19. This only makes sense, because the inactive ingredients of the vaccine are harmless in their minute quantities, so whatever side effects result would be from the spike protein and the immune response to the same.

The mRNA vaccines (Pfizer and Moderna) work by introducing mRNA into muscle cells, instructing the body to create the spike protein. The mRNA itself, being quite fragile, disintegrates within a few days. The spike protein can remain for a few weeks, as the immune system takes time to develop a response. The Johnson & Johnson (Janssen) vaccine uses a piece of virus DNA (incapable of replicating) with instructions to create the spike protein. This adenovirus method has been in use since the 1970s. The mRNA method, though newly implemented, has been studied for decades. It has not been used previously not because it is unsafe (the mRNA does nothing but code for the inert protein), but because there has been no practical need. The difficulty and cost of storing mRNA is offset by the need to produce vaccines in unprecedented large quantities in a short time.

The COVID vaccines are different from most vaccines only in that they introduce the protein indirectly by genetic instructions, though even this is not truly novel, since DNA has long been used in adenovirus vaccines. Most vaccines operate by introducing the inert pathogen directly. They are not “medicines” or “artificial chemicals,” but pseudo-pathogens introduced to stimulate the immune system to prepare a defense. This is why the side effects of all vaccines are generally similar to the symptoms of the disease to be prevented.

The only lasting products of the COVID vaccines are the antibodies produced by the immune system. The mRNA/DNA disintegrates in days, and the spike protein is gone in a few weeks. These are all “natural” substances that operate according to well-understood biochemistry that regularly occurs in the body.

There is some evidence from Israel suggesting that the immunity (measured in antibody levels) resulting from exposure to COVID in the unvaccinated is greater than that provided by vaccination. Even if this is true, it is not a worthy comparison, for this ignores the substantial health risk involved in being exposed to COVID while unvaccinated. The greater immunity achieved is only subsequent to going through COVID, and it is not possible to know in advance if one will get a severe case or long-term symptoms. It would not be surprising if exposure to the real thing indeed provides better immunity than exposure to a pseudo-pathogen, but this is achieved only after a failure to prevent the disease. The same Israeli study notes that immunity is further enhanced by vaccination following exposure. This finding shows that “natural” and “vaccine” immunity are not antithetical, but complementary.

Early claims about the efficacy of the mRNA vaccines proved to have been overstated, at least with regard to preventing infection. Some of this has to do with the more infectious delta variant, and some has to do with the degradation of immunity levels over time, becoming substantial at six months. A regimen of once or twice annual boosters seems likely. Nonetheless, the vaccines do remain highly effective at reducing severe cases and the long-term health effects associated with these. It would obviously be more prudent to obtain this immunity before one enters the high-risk age group.

In short, without getting into the propriety of legal mandates and the rights of the individual versus those of society, we can see a unilateral prudential benefit to vaccination, at least for adults. All of the risks associated with vaccines are objectively small, and even if they were not, they are necessarily no worse than the risk assumed by not being vaccinated, once it is understood that COVID is endemic and that the vaccines operate solely by introducing inert pathogens, letting the immune system do the work of developing a defense.

By now, practically all of us know someone who has had COVID, perhaps including an unvaccinated person with a severe case and an elderly vaccinated person with a mild case. Some of us may have noted how immunity to infections drops after six months, and those with boosters fare better when exposed in large unmasked gatherings. We cannot reasonably pretend that the health risk is negligible, nor that outcomes are not materially affected by vaccination. Hopefully, a demystified understanding of the quite ordinary processes by which vaccines operate will help remove hesitancy in more people.