American Dreams (13 page)

The widening gap between the cost of a college education and its utility in the modern economy has sparked a raging debate about whether we're sending too many young Americans to college today. Particularly with regard to the poorest Americans, a kind of fatalism has taken hold. We shouldn't fill their heads with dreams that they can't possibly achieve, some say. Not everyone is cut out for college, the pessimists add. And our system is encouraging students to go into debt pursuing college degrees when the odds are that they will not succeed.

There is truth here. There are good jobs that don't require a college degree—certainly not a traditional four-year degree from a residential college. And college
is
too expensive. Student debt
is
too high. But none of that argues for giving up on the dream of higher education that millions of American parents have for their children. It argues for transforming our current higher education system. Only a groundswell of creativity and technological change will lead to dramatic reductions in the time and expense of getting the education necessary to get ahead. That groundswell of creativity and innovation is possible if we have the political courage to bring it about.

American higher education today is an entrenched monopoly protected by government policy. Think Ma Bell before the breakup. Like all protected monopolies, colleges and universities set their own prices and are resistant to innovation and change. They use the power of government to keep competitors out and protect their monopoly power.

Education expert Andrew Kelly of the American Enterprise Institute tells the story of an experiment in online education that was killed by the higher education monopoly. In 2008, Tiffin University, a small private college in northwest Ohio, partnered with Internet start-up Altius to create Ivy Bridge College. The goal was to provide students with a flexible online associate degree that would be transferable to a number of cooperating four-year institutions. At less than half the cost of Tiffin's brick-and-mortar courses, the price was right. Ninety percent of Ivy Bridge students received Pell Grants. The program was a huge success. From just sixty-five students its first year of operation, enrollment exploded to sixteen hundred students by 2011. The next year, Ivy Bridge was honored with a Next Generation Learning grant from the Gates Foundation, one of only thirteen awarded nationwide. But one year later, in 2013, Ivy Bridge closed its virtual doors and went out of business.
26
What happened?

Before any institution of higher learning—be it a university, a community college or an online entity like Ivy Bridge—can be recognized as a degree-conferring institution, it has to be approved, or “accredited,” by an independent regulatory board. There are six of these regional accreditation boards, each in charge of higher education institutions in different regions of the country. They were created after World War II for generally good reasons—chiefly to make sure that the flow of federal dollars under the GI Bill went to legitimate educational institutions. In the early 1950s, their role changed. From being a voluntary stamp of educational merit, accreditation became mandatory in order to receive federal financial aid. As federal aid grew, the power of the accreditation agencies grew. Their seal of approval eventually became the difference between life and death for colleges and universities.

In short, the accreditation agencies control the market for higher education. They decide which institutions get to call themselves a college or university or even offer a for-credit course. But, as Kelly notes, their power is based on a conflict of interest. Not only were these accreditation agencies created by existing colleges and universities, they are funded and staffed by them as well. They are like Coke and Pepsi getting together to determine who gets to sell soda. The result is that, when they review schools, they tend to favor established institutions and shut out competition from new, innovative and more affordable providers—providers like Ivy Bridge College. Although Ivy Bridge received initial high marks from its accreditation agency, the same agency shut it down after it showed signs of success. The Obama Department of Justice even got into the act, launching an investigation of Ivy Bridge for “false claims.”
27

At a time when technology should be transforming higher education, the accreditation process is standing in the way. There is a lot of excitement (not to mention anxiety) in the world of higher education about the potential of something that goes by the ungainly acronym MOOC. MOOC stands for “massive open online course,” and these courses are now all over the place. For-profit companies like Coursera, Udacity and edX have been around for only a few years but have already attracted millions of users. These courses are filling an obvious need, but we still live in a world in which college credentials carry the day and colleges have zero incentive to grant credit for the successful completion of a MOOC as long as they are protected by the accreditation process. Even when colleges offer their own online courses, they charge brick-and-mortar prices to students learning from their living rooms. A
U.S. News & World Report
survey found that of four hundred colleges polled, 60 percent charge the same tuition for online courses as for in-person courses. Thirty-six percent charge more.
28
Why?
Because they can
.

Lessening the burden of student debt and finding innovative new ways to pay for college are important, but broad, innovative pathways to higher education for all Americans will not be found until we reform this broken and biased system. It's not rocket science. Free online learning is already a reality. Why couldn't a student, after completing an online course, test into college credit for it? She could pay a small fee to take a standardized test that, if passed, would allow the course to count toward a college degree. We already do this for high school students who take AP courses. They pass a test that allows them to count these courses toward their degree at most colleges.

To make “testing in” a reality at the college level, Congress could establish a new, independent accrediting board to ensure the quality of these free courses and make the credits transferable into the traditional system. The board would factor in input from the private sector and would allow students to qualify for some type of federal aid to cover any potential costs. By allowing online college courses to go toward a degree, we could create what would virtually amount to a debt-free college education.

First, though, we have to break the higher education monopoly. There are already some unique and powerful proposals for reform out there. Members of both parties are beginning to realize that for every day we delay bold accreditation reform, our education system leaves more Americans behind to languish in a dwindling market of low-skill jobs. Utah Senator Mike Lee has proposed allowing states to take control of the accreditation process. His proposal would ensure quality control in higher education while allowing the fifty states to compete for innovative and affordable educational institutions and online courses, even apprenticeships and technical programs that could count toward a degree. And to his credit, President Obama has also proposed changes to our higher education accrediting system.

We also need to take a cue from Google and look beyond our attachment to the college credential. There is a nearly infinite number of ways for an individual to learn and master a trade. We need to develop ways employers can easily recognize and trust to certify that individuals have certain skills.

For example, an aspiring cook may have mastered his or her craft from books and free online tutorials, or perhaps from the training of a parent who is a certified chef—or who simply cooks up a mean
ropa vieja
after years of preparing it for the family. These people should have the opportunity to prove their abilities and gain the certification necessary for employment without spending tens of thousands of dollars at a formal culinary school.

We could jump-start and create private sector confidence in this practice by creating a pilot program to hire such workers in federal agencies. The agencies would identify occupations where employees could have learned skills from nontraditional sources. The pilot program would then systematize the hiring of these individuals over a five-year period, allowing the results to be tracked and reported back to form the basis for future policy. We have little to lose and much to gain from finding new ways to connect Americans with good jobs.

I suspect we will find that, in many fields, the source of an employee's education is far less important than many previously thought. Those who have the skills and the aptitude to be successful in a job deserve the opportunity to be considered for employment, even if they learned the trade from a nontraditional source.

This new postindustrial economy offers great promise, but it has also created widespread economic insecurity. Millions live one broken-down car, one destructive storm, one serious illness away from financial collapse. People who have worked their whole lives in one industry have watched their jobs disappear. Parents are heartbroken knowing their children have done everything they were told they needed to do to succeed but now can't find a job in the field they studied for.

Our higher education system has long been hailed as the best in the world. It must be said that today, in many ways, we are coasting on that reputation. The fight for a quality higher education for all is the fight for the American Dream itself. It is the fight for the idea that no one should be held captive by the circumstances of his or her birth. Winning this fight should be among our most urgent priorities. At stake is our very identity as an exceptional nation.

More than that, at stake is the security of millions of families and the future of millions of young lives.

For Kristi, the University of Central Florida alumna who owes more today than the day she graduated, the frustration she feels about being in debt is overshadowed only by the guilt she feels about continuing to be a burden on her parents. She doesn't pay rent, but she helps out whenever she can. Still, she knows she's deferring their dreams as well. Both would like to retire, but they can't. Not now. Not until Kristi is able to start her life.

 

T
he Census Bureau has a great data visualization graphic that says a lot about who's winning and who's losing in America today. It's a map of the United States with lower-income counties in white and higher-income counties in green. A sliding bar across the bottom begins at $18,000 in median annual income and ends at over $110,000. As you slide the bar to the right and move into progressively higher income categories, the map turns from green to white. It's fascinating to watch. As the map becomes increasingly white, green islands of high income pop up along the coasts, around Chicago, a few good spots in Texas, of course. But when you've finished sliding the bar all the way to the top of the income scale, the whole country is white, with one small island of wealth—right smack on top of Washington D.C.
1

While the rest of the country has been mired in the Great Recession and the Recovery That Wasn't, Washington D.C. has been booming. Thirteen of the thirty richest counties in America form a circle around Washington D.C.; six of the richest counties are directly adjacent to the nation's capital.
2
For the politicians, lobbyists, consultants, federal workers and contractors who live in these wealthy environs, life is pretty good. The price of the average house is on its way to a million dollars, restaurants are packed and yoga studios are plentiful. But what may be the biggest perk for the D.C. moneyed class is the fact that their children attend some of the best suburban public schools and private schools in the country. For their parents, school choice is a given. They have the means either to move to the right suburb near the right school or to pay the $20,000 to $30,000 annual tuition for a private school.

The same cannot be said for the residents of Washington D.C., who have been left behind by the big-government boom. Despite consistently spending more per student than almost anywhere else in the country, D.C.'s public schools are racked by violence and low achievement. Maybe that's why all recent presidents with school-age children (with the exception of Jimmy Carter) have exercised their choice and sent their kids to private schools. President Obama and Vice President Biden are no exception. Their children and grandchildren attend a private school in Washington whose tuition hovers around $30,000 a year.

To give D.C.'s poor and middle-class parents at least a shot at the choice of schools our leaders enjoy, in 2004 the GOP-led Congress created a federally funded scholarship called the D.C. Opportunity Scholarship. But President Obama and his allies in Congress have fought to kill the scholarship since he became president. For the past couple of years, supporters have managed to just barely maintain funding for the program despite the fact that recipients have shown academic gains and parents overwhelmingly love it.

At a time when income inequality is the topic of so much discussion in Washington, it's interesting, to say the least, that so much of the inequality being condemned coincides with proximity to government. And of course, it's not just an income divide; it's a power divide. There is a real disconnect between Washington D.C. and the average American county. More and more, it is the folks in the gleaming Capital City who are determining the fates of Americans in the struggling hinterlands. Kristeen is a typical example. She is a single mother of two who lives in Gainesville, Florida, far from the towering construction cranes that gild the nation's capital right now.

For Kristeen, getting by is an everyday, dawn-to-dusk, never-ending challenge. She has two young daughters: Lexi, who's six, and Jada, who's four. Because she has to work, day care is an absolute necessity. And at a cost of $235 a week, Kristeen says paying for it is like signing over her paycheck. It doesn't leave enough leftover for rent, her electric bill, car insurance, gas, food or any of her other daily expenses. So she's had to rely on government assistance. She is grateful for the help, but what she really wants is a better job so she can provide for herself and her two girls.

When Kristeen tucks her daughters in at night, she thinks about their futures. And she thinks about her own past. Growing up, she was never led to believe that an education was within her reach—some people even called her selfish when she enrolled in online classes to better herself after high school. Like so many parents, she's determined that her daughters have the things she never had. Not just the material things, but the independence she feels she has forfeited by being forced to accept government assistance. She wants Lexi and Jada to form their own strong opinions and convictions, to set goals for their futures and then act to achieve them, to be anything their dreams inspire them to be.

But something is looming on the horizon that causes Kristeen more anxiety than even her financial struggles. Soon Lexi and Jada will be forced to attend a public school that does not meet Kristeen's standards for their educations. It's nearby, but she knows it won't give them the education they need to escape the day-to-day grind that she deals with—a struggle she wants more than anything else for them to escape. This fact has left her feeling completely helpless. Kristeen doesn't know any wealthy or well-connected people. There are no Wall Street or Washington D.C. internships in Lexi's or Jada's future. And her job at a dog boarding facility brings in just $370 a week after taxes. Kristeen has no choice.

For millions of Americans like Kristeen, an economy that is not producing good jobs, an education system that is not preparing students for those jobs available, and poverty programs that trap people in dependence all come together in a very real daily struggle that transcends politics. It is simple math that dictates Kristeen's life, not campaign promises or ideological debates: How can she continue to make $370 a week and cover her bills and make a better future for her children? The answer is, she can't. She is not a victim, nor is she a “taker.” She wants more than survival for her family. But no one in Washington of either party is helping her, least of all President Obama. He was elected on the promise that he stood with people like Kristeen but has presided over a system that has benefited the wealthy and connected.

When conservatives talk about policies that will create jobs, promote economic growth and increase opportunity for Americans, we often start with tax reform—and for good reason. Our tax code is too complicated, punishes productivity and is full of loopholes and carve-outs created by special interests. A simpler tax code with lower tax rates would do more than just about anything else to create jobs and unleash America's potential.

But when
reform
conservatives consider the tax code, we see the need to do all these things and more. The most important cultural and economic institution in America—the family—doesn't have lobbyists on Capitol Hill; it doesn't have lawyers pressuring government for special treatment. And you know what they say about tax policy in Washington: If you're not at the table, you're on the menu. So it's no surprise that our tax code actively discriminates against families raising children. In all our justified talk of tax reform, conservatives have emphasized pro-growth policies but somehow overlooked pro-family policies. We need to do both.

The case for a tax code that is both pro-growth and pro-family plays out in millions of homes of parents raising children every day. Americans like Kristeen are doing something more than raising their children; they're making an investment in all of our futures. They're bearing the enormous cost of raising the next generation—the children who will be the taxpayers of tomorrow and who will support the generational entitlements like Social Security and Medicare that we all benefit from.

Before there were retirement security programs, people depended on their children to take care of them in old age. Today, with Social Security and Medicare, the incentive to rely on children for retirement security is less. For some people, it's nonexistent. They can afford to have no children and still know that our retirement security programs will be there for them. That's okay. But it's parents raising children who are producing the taxpayers who will pay for those entitlements, and that costs money. Our tax code, however, doesn't account for this investment. The result is parents effectively pay into our generational entitlement programs twice: first when they pay their own taxes, and second when they pay to produce the next generation of taxpayers. Utah Senator Mike Lee, with whom I have worked to produce a new, pro-growth, pro-family tax plan, calls this feature of our current tax code the “parent tax penalty.”

Take the example of two families, one with children and one without. Say they earn the same incomes and pay the same amount in payroll taxes to support Social Security and Medicare. Both receive identical benefits, but the couple with children also has to spend $300,000 per child (the government's lowball estimate of raising a child, which doesn't include child care, college or the wages many moms forego to raise children). It's these children, as future taxpayers, who will eventually pay for the benefits received by both families. The difference between the investment made and the benefits received is the parent tax penalty.

The plan Senator Lee and I have proposed would restore some semblance of fairness to our tax code for families raising children by recognizing the investment they make. It would simplify the tax code by consolidating the current seven income tax brackets into just two: 15 percent and 35 percent. However, the centerpiece of the plan is a new $2,500 tax credit for each child under sixteen. The current code offers a $1,000 per child tax credit that phases out at higher incomes, as well as a tax deduction for each dependent child, which just reduces the amount of your taxable income. Our new tax credit will actually reduce the amount of taxes owed by $2,500 for each child. The sum of this expanded Child Tax Credit is limited to the total of income and payroll tax liabilities and it is charged after all other tax liabilities and after all other tax credits. This design is intended to offset the payroll tax liability of parents, because payroll taxes finance the entitlement system.

Not only would this plan have the American virtue of treating all taxpayers more equally, it would provide real, immediate relief to middle- and working-class parents. With these reforms, a married couple with two children who make the median national income of $51,000 would get a tax cut of about $5,000 per year. That's not enough to pay for braces and summer camp, but it is a nice offset to the cost of day care to allow a mom to work more hours, or to compensate for lost wages so she can work less.

Some critics on the right have argued that cutting marginal tax rates and the payroll tax instead would have bigger pro-growth effects on our economy. There are at least two answers to this. The first is that the Child Tax Credit is but one part of the broader Lee-Rubio pro-growth tax reform plan that will reduce tax rates for individuals and businesses, end special interest tax loopholes and dramatically simplify the tax code. As I describe in Chapter Two, businesses would pay a lower flat tax and have the ability to expense or immediately write off the cost of every investment they make in their company. The Lee-Rubio plan would also eliminate the double taxation of capital gains and dividend income. These pro-growth reforms would increase productivity, unleash economic growth and raise real wages for middle-class workers.

In addition, the Lee-Rubio reforms have the virtue of being achievable. There are good pro-growth economic cases to be made for a flat tax or lowering marginal rates even further instead of offering a new child credit. But at a time when corporate profits are reaching record highs and wages are stagnating,
3
I know of no plausible political scenario in which such reforms could be enacted by Congress. Our pro-growth, pro-family tax plan, in contrast, is realistic and achievable. Our plan combines pro-family and pro-growth tax changes that can be embraced by all Americans—and actually made into law.

Another criticism concerning tax plans that reduce or even eliminate the tax burden of some Americans is that they will increase calls for more government spending because fewer Americans are having to bear the costs. This line of reasoning is reminiscent of the “47 percent” controversy in which Mitt Romney's opponents accused him of casting a large portion of Americans as “takers” who want big government but don't want to have to pay for it.

There is some intuitive logic to the idea that reducing the tax rolls while expanding government benefits is a bad idea. People who never expect to see their income—and thus their taxes—go up could be tempted to support more government spending. But providing tax relief for parents raising children is a very different proposition. As former U.S. Treasury official Robert Stein put it, our plan “does not simply reduce the tax rolls based on income. Instead, it reduces the tax rolls based on
parenting
” (emphasis mine).
4
Of course, raising children is a temporary condition—although lots of folks with grown children still living in their basements might disagree with me. Children grow up, parents lose the tax credit and their taxes go up. Parents know this, which means they are less likely to support more government spending while their taxes are—temporarily—reduced.