[Mb-civic] NYTimes.com Article: Bush's Own Goal

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The article below from NYTimes.com 
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Bush's Own Goal

August 13, 2004
 By PAUL KRUGMAN 



 

A new Bush campaign ad pushes the theme of an "ownership
society," and concludes with President Bush declaring, "I
understand if you own something, you have a vital stake in
the future of America." 

Call me naïve, but I thought all Americans have a vital
stake in the nation's future, regardless of how much
property they own. (Should we go back to the days when
states, arguing that only men of sufficient substance could
be trusted, imposed property qualifications for voting?)
Even if Mr. Bush is talking only about the economic future,
don't workers have as much stake as property owners in the
economy's success? 

But there's a political imperative behind the "ownership
society" theme: the need to provide pseudopopulist cover to
policies that are, in reality, highly elitist. 

The Bush tax cuts have, of course, heavily favored the
very, very well off. But they have also, more specifically,
favored unearned income over earned income - or, if you
prefer, investment returns over wages. Last year Daniel
Altman pointed out in The New York Times that Mr. Bush's
proposals, if fully adopted, "could eliminate almost all
taxes on investment income and wealth for almost all
Americans." Mr. Bush hasn't yet gotten all he wants, but he
has taken a large step toward a system in which only labor
income is taxed. 

The political problem with a policy favoring investment
returns over wages is that a vast majority of Americans
derive their income primarily from wages, and that the bulk
of investment income goes to a small elite. How, then, can
such a policy be sold? By promising that everyone can join
the elite. 

Right now, the ownership of stocks and bonds is highly
concentrated. Conservatives like to point out that a
majority of American families now own stock, but that's a
misleading statistic because most of those "investors" have
only a small stake in the market. The Congressional Budget
Office estimates that more than half of corporate profits
ultimately accrue to the wealthiest 1 percent of taxpayers,
while only about 8 percent go to the bottom 60 percent. If
the "ownership society" means anything, it means spreading
investment income more widely - a laudable goal, if
achievable. 

But does Mr. Bush have a way to get us there? 

There's a
section on his campaign blog about the ownership society,
but it's short on specifics. Much of the space is devoted
to new types of tax-sheltered savings accounts. People who
have looked into plans for such accounts know, however,
that they would provide more tax shelters for the wealthy,
but would be irrelevant to most families, who already have
access to 401(k)'s. Their ability to invest more is limited
not by taxes but by the fact that they aren't earning
enough to save more. 

The one seemingly substantive proposal is a blast from the
past: a renewed call for the partial privatization of
Social Security, which would divert payroll taxes into
personal accounts. Mr. Bush campaigned on that issue in
2000, but he never acted on it. And there was a reason the
idea went nowhere: it didn't make sense. 

Social Security is, basically, a system in which each
generation pays for the previous generation's retirement.
If the payroll taxes of younger workers are diverted into
private accounts, there will be a gaping financial hole:
who will pay benefits to older Americans, who have spent
their working lives paying into the current system? Unless
you have a way to fill that multitrillion-dollar hole,
privatization is an empty slogan, not a real proposal. 

In 2001, Mr. Bush's handpicked commission on Social
Security was unable to agree on a plan to create private
accounts because there was no way to make the arithmetic
work. Undaunted, this year the Bush campaign once again
insists that privatization will lead to a "permanently
strengthened Social Security system, without changing
benefits for those now in or near retirement, and without
raising payroll taxes on workers." In other words, 2 - 1 =
4. 

Four years ago, Mr. Bush got a free pass from the press on
his Social Security "plan," either because reporters didn't
understand the arithmetic, or because they assumed that
after the election he would come up with a plan that
actually added up. Will the same thing happen again? Let's
hope not. 

As Mr. Bush has said: "Fool me once, shame on - shame on
you. Fool me - can't get fooled again." 

http://www.nytimes.com/2004/08/13/opinion/13krug.html?ex=1093415629&ei=1&en=c1ac4c484c7e4a1b


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