An earlier version of this column incorrectly stated that the Bill & Melinda Gates Foundation pays 1.4 percent in taxes on its endowment. The tax rate applies only to the foundation's income. This version has been updated.
The second part of the bill, though, is what makes it really valuable. The United States spends billions of dollars subsidizing university education through investments in public institutions, subsidized student loans, Pell grants and a host of other programs. It spends a tiny fraction of that on subsidizing postsecondary training for the more than 60 percent of Americans who do not get a four-year degree. That’s not just unfair; it’s shameful.
These misguided priorities damage lives. Kids leaving high school are often sucked into four-year schools only to find that college life isn’t what they want or need. In 2018, 17.5 percent of all 25- to 34-year-olds were college dropouts who also had not completed a vocational or associate’s degree. These young adults had an average of more than $7,000 in student loan debt as of 2017, yet they have little ability to pay that back and accumulate money to start a family. There are far better ways to help these students launch their lives.
Cotton’s bill is a small step to making a level playing field. Financing working apprenticeship programs will help attract kids at the outset to careers they are suited for. No student debt, no wasted years lost at sea and at no added cost to the taxpayer. What’s not to like?
If anything, it’s too small. Why not tax multibillion-dollar foundation endowments, too? The Bill & Melinda Gates Foundation alone had nearly $50 billion in 2019, yet it pays only 1.4 percent of its income in taxes each year. Merely doubling that tax on foundations with endowments of more than $2.5 billion would add billions more annually in funding for kids who need on-the-job training now.
Those on the free-market, fundamentalist right will object to this. Government funding of apprenticeships inevitably means picking winners and losers, they will say. Others might contend this is a good idea, but one properly handled at the state level without federal involvement. In the abstract, these are worthy objections. But in the real world, they always lead to an unpalatable dead end: Government does nothing, public frustration rises and the left steps in with the sort of one-size-fits-all giveaways that characterize President Biden’s domestic agenda.
Conservative populist ideas such as Cotton’s address real needs and stave off socialist “solutions.” They embrace the philosophy that animated Abraham Lincoln’s Republican Party — that the proper role of government is to extend a hand to people striving to climb the economic ladder and then get out of the way. In the 1860s, that meant subsidizing farm settlement through the Homestead Act and college education through the Morrill Land-Grant Act. Today, in a world profoundly shaped by expectations created by Franklin D. Roosevelt’s New Deal and its progeny, it means direct federal government action to help extend opportunity to all. That means reasonable taxes, low levels of regulation and discrete, limited and targeted programs to provide help to those who need it. That’s not socialism; it’s conservatism in action.
Interest in this renewed acceptance of the old GOP orthodoxy is growing. Sen. Marco Rubio (R-Fla.) has been criticized by the high priests of the supply-side religion for his purportedly heretical notion of “common good capitalism.” Rubio dares to say that American bosses and investors have obligations to American workers and that the free market has to work for all who live here, not just the few. Conservatives in ivory tower think tanks may mock him, but on Wednesday, Rubio attracted an overflow crowd at the regular meeting of the Republican Study Committee. The ice that has frozen Republican economic thinking for decades finally seems to be thawing.
Republicans should enthusiastically embrace Cotton’s bill. Even better, they should enthusiastically embrace the way of thinking that made it possible.