Krugman: Bush's Own Goal

[Guest guest]

> Fri, 13 Aug 2004 07:14:28 -0700

> Krugman: Bush's Own Goal

>

<http://www.nytimes.com/2004/08/13/opinion/13krug.html?hp>

>

> Bush's Own Goal

> By PAUL KRUGMAN

>

> Published: August 13, 2004

>

> 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. "

> --