Senator Marco Rubio gave a big economic policy speech this week in Washington, and it is worth a read. I liked his criticism of the status quo:
instead of adjusting to the realities of this new era, many of our institutions are failing us – and none more so than our federal government.
Instead of attracting jobs to our shores through simplifying taxes and regulations, it imposes higher taxes and more regulations that push investment and innovation to other countries.
Instead of anti-poverty programs that promote work and education so our people can emerge from poverty, we pump more money into programs that have failed us for a half century.
Instead of taking steps to make higher education more available and more affordable, we pour resources into a system that is expensive, inaccessible and is graduating too many people with unemployable degrees.
And instead of modernizing our retirement programs to make them accessible to everyone, we put more money into unsustainable programs that were designed in the 1930s.
The result is that a growing number of people feel completely alienated from our government and its leaders. They feel as if no one here in Washington understands what they are facing and no one here has answers to their challenges.
So it should be no surprise that disapproval of our government and pessimism about the direction of our country have reached an all-time high. Because the inability of our leaders to respond to the challenges and the opportunities of the 21st century is denying a growing number of people access to the American Dream.
President Obama deserves credit for hosting a summit earlier this week focused on helping working families. But the ideas he offered are more symbolic than they are substantive. They do not go far enough. Up to this point, his plan to restore the American Dream has been an old and familiar one: raise taxes, create more regulations, pour more money into government programs, and accuse anyone who doesn't agree with him of not caring.
I'm less enamored of some of Senator Rubio's proposed solutions: "I have filed a bill with Senator Ron Wyden that would require schools to tell prospective students how much their graduates earn with a given degree."
That information may be valuable, but if it is so useful, then some private company may be able to make a business out of collecting it and selling it, without the government imposing a mandate on colleges to collect the information and release it. Better yet, several businesses may compete to come up with the best way of presenting the information. Is the most important information the salary one year out of college? Five years out of college? Thirty years of college? And what about measures of success other than annual earnings in dollars, like happiness, or psychic income, or the flexibility to spend time with your family?
More from Mr. Rubio:
Second, I have proposed making income-based repayment the automatic repayment method for student loans. This way, Evan's loan payments would directly correlate to how much he earns each month, removing the risk of default.
And third, I have proposed an alternative to student loans called Student Investment Plans. Students would be able to enter into an agreement with a private firm in which the firm pays for the student's education in return for a percentage of their salary for a set number of years after graduation.
I suppose Mr. Rubio's proposal for income-based student loan repayment is better than President Obama's, which would make it available only to those who work for government or non-profit organizations. But it's going to create perverse incentives nonetheless. As for "student investment plans," I'm for freedom of contract. But if I were the parent of a 16 or 17-year old entering college, I would strongly advise them to do some serious thinking and due diligence before entering into any long-term indentured servitude type agreement with any such private firm. Are the children entering these agreements going to have legal counsel to review them? Will they be able to change their minds and exit the agreement a year or two or three in? What is the penalty, if any, for such an exit? Maybe it's better than a government student loan, or better than a private student loan, but it could also be worse.
