About the only licit business that I can imagine someone now stating [sic] on $500 is a food cart or door-to-door selling.
And that shows your lack of imagination. Also bear in mind that virtually all of these college students already own computers, and many already own decent suits.
You need a lot more than a suit and a computer for a tech start-up. Maybe that's all you need if you just want to develop your idea, but to take it anywhere, you need web hosting, servers, coders, developers, etc, who may not be willing to work for free. You need an office, because in many cases investors won't talk to you unless you have a physical address. Plus remember, the kids have to eat and in many cases pay rent while they're doing all of this.
You're completely ignoring the history of tech start-ups. Go look up the early history of Microsoft, Apple, Google, Facebook, etc.
Even after things just got off the ground for Bill Gates, look at what he made into one of the largest fortunes in American history:
Yes, in America one can make something of them self with a lot of hard, smart work and a bit of good fortune. This is not the land of hopeless nightmares even though that's apparently where Obama and his supporters are fine with us heading...
Romney offers the following to young folks: A better economic environment, one that is pro-growth, pro-free enterprise and encourages businesses to hire young people.
What Obama offers young people: Being stuck in their parents' basement for the next four years.
Who was president in '78 again? Hmm...
