Your argument would be all fine and good if it weren't for the fact that 20% earnings is just an absurd figure to consider over the long-term. Spending has to be consistently sustainable, while ensuring that the endowment is growing to keep pace with inflation. Which is why universities, and indeed nearly all non-profit institutions, spend roughly 5% of endowment income per year (foundations are also subject to government mandates of spending 5% a year). Spending more than that is just plain reckless. It would be a violation of the trustee's mandate to maintain Stanford's economic stability for future generations. Even with Stanford's substantial financial resources, the endowment covers a mere 20% of total yearly operating expenses, which is low by the standards of peer universities. Harvard for instance supports 31% of yearly operations through its endowment, giving it much greater long-term sustainability. By the way, referring to this as "stupid reporting" along with your rather rudimentary (and incorrect) analysis of accounting, just demonstrates an appalling lack of basic financial and economic literacy. I suggest picking up a book that explains the concept of how an endowment is designed to work. I'm sure you could gain a better understanding of how these institutions are managed.

Some sort of smoothing is required to deal with fluctuations in the economy and the return on the endowment. But, instead of spending 5.5 or some such percentage, how about spending all endowment income for academic and scholarship purposes to the extent in exceeds the amount necessary to adjust capital for inflation. Even with a three or five or seven-year smoothing adjustment, that would result in much higher spending in recent periods.