WASHINGTON DISPATCH/L.A. TIMES Tax Plans Target an 'Investor Class' GOP sees the 'ownership society' as a conservative bloc. But the segment's existence isn't clear-cut.
By Peter G. Gosselin Times Staff Writer December 23, 2003
WASHINGTON — With the U.S. economy finally growing and Saddam Hussein in captivity, the Bush administration is turning to the coming presidential contest and its new Big Idea for the election year — speeding the nation's transformation into an "ownership society."
The president highlighted the notion last week in signing a bill to help 40,000 low-income families annually make down payments on homes. "This administration," he declared, "will constantly strive to promote an ownership society in America."
As he spoke, Treasury officials tinkered with proposals for a new generation of tax-break-driven savings accounts, administration allies in Congress pushed plans to partially privatize Social Security and GOP activists pored over voting data that they claim shows the formation of a new — and conservative — "investor class."
"This is the most important new demographic group in a generation and courting it will assure Republican dominance of American politics for decades," said Stephen Moore, president of the conservative Club for Growth in Washington.
Perhaps. But before the "ownership society" takes on an election-year life of its own, it is worth examining a few key struts to the argument that this is what America is, or could shortly become.
Claim 1: We're all capitalists now.
The single most cited statistic in the ownership society argument comes from the Federal Reserve's Survey of Consumer Finances. It shows that the percentage of families who own stock has rocketed in the last two decades from less than 20% in 1983 to more than 50% in 2001.
The implication is that the country is already well on the way to a new, privatized future and the president's proposals would simply hasten the process.
"What we have is the emergence of the first mass class of worker-stockholders in history," said Richard Nadler of the Republican Leadership Council. The change, he said, is altering what kinds of decisions Americans make ("more market-based") and how they vote (Republican).
But there are some important caveats to the advocates' case. The years they pick to measure the recent ownership trend coincide with one of the most powerful bull markets of the 20th century. If ever there was a time during which stock holdings should soar, it would be then. In addition, most polls suggest that it is only direct ownership of stock, and not indirect ownership through mutual funds and the like, that has much of an effect on people's political attitudes. And Fed figures show that direct ownership has barely budged during the last two decades.
Finally, wealth — whether of stock, houses, cars or almost anything else of material value — is spectacularly and increasingly concentrated among the top tier of households. So too, arguably, would be the benefits of the president's proposals.
Claim 2: The road to the ownership society is paved with tax breaks.
Chief among the proposals that Bush is apt to push in the coming campaign will be two tax-protected savings accounts that the administration unveiled, but quickly dropped, this year. The first is a new "retirement savings account" to which individuals could contribute $7,500 a year and from which they could withdraw funds tax-free after age 58. The second is a "lifetime savings account" to which people could contribute similar amounts and from which they could withdraw funds any time for any purpose.
Yet the nation has a lot of experience with tax-break-driven accounts intended to solve big problems or recast society, and their record is decidedly mixed. Take 401(k)s.
Advocates contend that the tax-favored accounts have been a tremendous success because they've become the dominant way that Americans prepare for retirement besides contributing to Social Security. The accounts have attracted trillions of dollars in savings, especially from those in the top quarter of the nation's economic pile.
But 401(k)s have done essentially nothing to extend retirement coverage to more people. Statistics show about half of the nation's workforce had no retirement savings except Social Security when the accounts were created two decades ago, and about half have nothing else now.
And recent studies show that 401(k)s have done comparatively little to improve the retirement security of most who have them. Boston College economist Alicia H. Munnell recently estimated that even in the case of people in their late 40s or early 50s, the median balance of 401(k) and IRA accounts combined is only $37,000, or enough to provide a couple hundred dollars a month extra in retirement.
" 'K' plans have not solved the fundamental problem of providing adequate retirement income for most Americans," said J. Mark Iwry, a Clinton administration Treasury official and Brookings Institution pension expert.
It's far from obvious why these proposed new tax-break accounts will do any better.
Claim 3: There's no reason to pay attention to the stock market bust of 2000 and the corporate and investment scandals of the last two years.
On the face of it, pushing the notion of an ownership society just when prominent institutions such as the New York Stock Exchange and the mutual fund industry are gripped by allegations of fraud seems risky.
But many GOP strategists figure it's a way for the president to take the political offensive by reaching out to key constituencies such as young voters, who tend to think they can't rely on government programs such as Social Security and will have to make their own financial way.
And it could help divert attention from scandals such as Enron Corp. by depicting a sunny future in which almost everybody owns a piece of the rock and portraying Republicans, rather than Democrats, as their zealous protectors.
The message, as conservative firebrand Grover Norquist recently put it, would be: "Republicans will pollute the earth and club baby seals to make stock prices go up." The real danger for Bush may be that in focusing on ownership, he highlights the gulf between what Americans want and what many have. That could get voters wondering whether they really have gotten that much out of their recent encounter with the investment world.
"Voters don't think of their savings as a means of being a mini-capitalist. They want to know: Does it provide for my family? Does it protect me in retirement?" said Ruy Teixeira, a fellow at the liberal Century Foundation and Center for American Progress.
By contrast, Teixeira asserted, Republicans "don't think about how much you have, just so … you're part of the ownership class. Who cares if it's not enough?"