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The Ownership Society

Saturday, August 14, 2004
Will wonders never cease. President Bush has recently enunciated a coherent intellectual position: that the U.S. should become an "ownership society" in which all have a concrete stake and reward in political outcomes. We should move away from socialized and towards personal risk while structuring rewards based on individual effort.

This theory is very much in line with the "investor class" discussion on the right: that the entry of the middle class into the stock market will inculcate conservative political values in main street America. Republicans believe that the New Economy will result in a conservative political realignment once enough people are invested in the market. They will reject "socialism" (read: liberalism) in favor of an entrepreneurial ethic.

Paul Krugman has rightly criticized this idea as a smokescreen for shifting (yet more) economic and political power to the very rich. Krugman notes that while a majority of Americans are now invested in the stock market, the vast preponderance of assets in the market are still in the hands of the the top 10% (don't quote me, but I think their share is something like 90%).

When I read Krugman's op-ed, I nodded up and down and thought that would be the end of it. But some conservatives just won't letter the matter drop. Here is one column critiquing Krugman's post and lauding the virtues of the Ownership Society. In his piece, the Judd argues the following:

We should, of course, return to a system where only those who actually pay taxes and have vested property interests in the state are entitled to determine how their tax dollars are spent, but Mr. Krugman, as most of the President's critics, dramatically underestimates how radical a transformation he envisions. The ownership society would make it so that everyone falls under that rubric--this is its conservative genius. The classic conservative critique of democracy is that a system which allows the majority to vote itself the money of the minority will eventually see exactly that happen. But, by transitioning from income to consumption taxes you make sure that even the poorer among us feel the pinch of too high government spending and give them a reason to oppose it. By creating personal property for them to own--in the form of Health Savings Accounts; privatized Social Security Accounts; private instead of public housing; etc.--you give them a vested interest in the stability of the society and in the growth of the economy. The ambition may be sane, but it is too make every man an elite, an owner of a personal stake in the nation.

Additionally, and it's even more surprising that Mr. Krugman doesn't get this, the ownership society is a way of getting out hands of government, where it at best lies fallow, and into the hands of the productive economy. Here's how Daniel Altman explains their vision:

[They] postulate the following chain reaction:

1. Government cuts tax rates on savings and wealth.

2. Saving by households—bank accounts, stocks, bonds, etc.—increases.

3. More money becomes available to American businesses, since they're the ones offering the bank accounts, stocks, bonds, etc.

4. Businesses spend more on machinery, software, and other capital, as well as on research and development.

5. The nation's output of goods and services grows, and technological innovation accelerates.

6. Incomes and living standards rise more quickly for several years and perhaps forever.

Sending a trillion dollars back to the wealthy in tax cuts is all well and good, but the big enchilada is obviously the enormous pool of Social Security money--real and imagined. Rather than having the government collect Social Security taxes and sit on them a prtivatized system would put tens of trillions of dollars into stocks and bonds. The increased return on those dollars is reason enough to make this change but the neoconomists believe that making all this additional money available to business will increase the rate at which the economy can grow.

That may be delusional, but if so Mr. Krugman, who folks swear was a respected economist just a few years ago, isn't offering any reasons why it is. Indeed, his argument seems to be based almost entirely on the Left's political desire to keep folks poor and atomized so that they will support redistribution of wealth. That's a sensible plan for the elites who want to run the redistribution and control lives, but it's bad for the country, including the poor.

I want to highlight the first sentence, because it is shocking: "We should, of course, return to a system where only those who actually pay taxes and have vested property interests in the state are entitled to determine how their tax dollars are spent...." What are we to make of this? Just that the writer begins by bolding suggesting that the wealthy in society should have more political power than the poor. Under his principle, there are only two choices: either we have a simple flat head tax (which would shift a massive tax burden onto the poor and middle class) or the rich should have more political influence (which will result in a dimunition of power for the poor and middle class). This is an argument no one has made since we did away with property qualifications for voting in the 1820's!

Judd doesn't stop there. He goes on to reveal that the ownership society is a device for getting the middle class to oppose government. By shifting the tax burden onto the lucky duckies (and cutting social services they expect), the broad mass of people will decide government is their enemy.

Why is this a good thing? Why, because the dimunition of government will result in economic growth, of course. Judd cites the basic supply-side argument that putting wealth into the hands of the elite will enable them to use it most efficiently, generating growth that will raise middle incomes.

Of course, this theory is just silly, because it presumes that a) elite wealth leads to economic growth, and b) that aggregate growth results in higher middle incomes. These two points are at the very center of today's economic debate. It also ignores the global economy, which enables this elite to invest somewhere else.

But I will leave the economics discussion to the economists. What is most enlightening is Judd's contempt for the democratic process. He not only wants to manipulate the debate so we can move to his preferred outcome, but reveals the essential conservative discomfort with democracy itself: "The classic conservative critique of democracy is that a system which allows the majority to vote itself the money of the minority will eventually see exactly that happen."

So what have we learned about conservatives? At their best they are fools, and worst they are tyrants. They either a) confuse the interests of the wealthy and the nation, or b) don't trust democracy and will abuse it to get their way.

At least now we know what we're up against.
Posted by Arbitrista @ 4:16 PM
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