During a campaign stop in West Palm Beach, President George W. Bush wasted no words in explaining his vision of an ownership society: “No one ever washes a rental car. When you own something, you care about it.”
And so, the theory behind the “ownership society,” whether we’re talking about health care, tax cuts or Social Security, is quite simple. When it comes to retirement planning, it says we’ll care more, and therefore be more efficient, if we own our own retirement accounts and are in charge of moving our money around between various mutual funds in order to maximize our returns, just like the rich guys.
With the plan for the partial privatization of Social Security, first proposed by candidate George W. Bush in 1999, younger workers would be permitted to invest 2 percent or so of their paychecks into private, individually-owned accounts. Economically, based on the long run performance of the market, that’s probably a better bet than the currently projected skimpy returns in the Social Security system for those just entering the workforce. And politically, it creates a whole new class of stock-owning investors — the type of people who are more likely to be red than blue.
As it now stands, only 22 percent of American households have savings invested directly in the market. Expand this investor class, argue some Republican strategists, and it’ll automatically produce an electorate that’s more likely to vote for the kind of free market-oriented, pro-business economic policies associated with GOP administrations.
That rosy scenario for Republicans is supported by the findings in a Washington Post poll last year that examined the attitudes and political leanings of Americans with money invested in the financial markets: “The Post survey found that Americans who have bought individual stocks — ‘direct investors’ — are more optimistic about the economy, more likely to identify themselves as Republicans, have a more favorable view of the GOP and are more inclined to support Bush’s reelection than are non-investors of comparable income.”
The Post poll found, for example, that “40 percent of direct investors with incomes of more than $50,000 identify themselves as Republicans, compared with 22 percent of non-investors” in the same income grouping, while “among those with incomes below $50,000, 34 percent of investors identified themselves as Republicans, compared with 23 percent of non-investors.” As a bonus for the GOP, investors are also more likely to vote than non-investors of the same income level.
As with the privatization of retirement, Mr. Bush is expected to push the idea of health savings accounts as a way to expand individual ownership of health insurance through tax-free savings, expand competition among health care providers and insurers, and establish a market force of millions of self-interested consumers who will shop around for the best deals in medical care. The theory? No one washes a rental car and no one cares about a $100 aspirin when the cost is being shifted to a third party payer.
On taxes, Bush will push to make his 2001 and 2003 tax cuts permanent, many of which are set to expire, and for tax simplification. Again, the idea is that people in an “ownership society” should be allowed to own more of the money they earn and they shouldn’t be spending hundreds of billions of dollars each year to figure out how to comply with the tortuous and convoluted rules of the tax code.
In addition, empowered by his own reelection and wider GOP majorities in both houses of Congress, Mr. Bush might well now call for an economic program that aims for tax cuts that are even more ambitious than the ones he signed in his first term and for an overhaul of the income tax system that cuts even further the level of taxation on investment income.
Currently, the top fifth of American households are picking up over four-fifths of the federal income tax tab, and a third of those taxpayers are small-business owners, the nation’s chief job creators. Along with tax relief, Mr. Bush’s “ownership society” agenda in the second term for this sector of entrepreneurs and small-business owners seeks to remove obstacles to growth and job creation by way of reining in the costs of over-regulation and over-litigation.
Overall, it’s a big agenda. As Michael D. Tanner at the Cato Institute sums it up, “Bush wants to be the Republican FDR.”
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