Selling The Ownership Society

Bush & Co. are pitching self-sufficiency, urging voters to take control of health-care and Social Security decisions

Like the embattled hero of one of those old Ronald Reagan movies, George W. Bush is a lonely man with a tough road ahead. Facing a challenge from dissolving public support for the troubled U.S. occupation of Iraq and hobbled by an economy that is struggling to create jobs, the President will have to fight to convince voters that he deserves another term in the White House.

That battle begins in earnest on Sept. 2 at the Republican Convention in New York City, when Bush will focus attention on his central role in the war on terrorism. Arguing that Iraq is just one phase of a multifront struggle, he will strive to strengthen support for his proactive foreign policy. But Bush is also a realist. He knows that, no matter how hard he tries, he cannot make Election 2004 revolve solely around terrorism and national security. Even if he wins the debate with Democrat John Kerry over who is seen as stronger and more steadfast, Bush could still come out on the short end Nov. 2 if people think he's not up to the task of managing the economy.

Here, the polls offer little encouragement. In an Aug. 5-10 survey by the Pew Research Center for the People & the Press, 52% of Americans disapproved of Bush's handling of the economy, vs. 42% who approved. Some two-thirds rated an economy that boasts solid growth, benign inflation, and low unemployment as only "fair" or "poor." Why? Scarce jobs, soft wages, and the jolt of higher health and energy costs have created a disconnect between glowing macro indicators and kitchen-table reality.

Bush needs a shield from Kerry's charges that he's out of touch with the economic pressures buffeting the middle class. In New York, the President will take the wraps off a second-term domestic agenda built around the idea of an "Ownership Society" in which Americans would be empowered to save and invest more, playing a larger role in managing their own health care and retirement finances. By promising to fight for private accounts in Social Security and a simpler and more investor-friendly tax code, Bush will return to the big reform themes that served him well in his 2000 campaign. Given his track record for bold and surprising strokes, he may also use his convention speech to hint at an even more ambitious second-term reform agenda that would tilt the tax balance further away from investment and toward consumption.


While hardly original, Bush's Ownership Society approach is worlds away from the expanded government safety net that Kerry proposes to help strapped workers. The Democrat is making inroads with swing voters by promoting near-universal health coverage, tuition aid, and tax credits for new jobs.

Whatever else it does, Bush's throwing down the gauntlet will open one of the more striking debates of the campaign. That's because there's a philosophical gulf between liberals' evocations of social equity and the comfort of a government helping hand vs. conservatives' paeans to individualism and entrepreneurship. As he barnstorms the country, Bush promotes the virtues of ownership with near-religious fervor, seizing upon one economic number in particular that shines from a so-so record: the torrid pace of home buying. "If you own something, you have a vital stake in the future," the President said in St. Paul, Minn., on Aug. 18.

What's under the ownership umbrella? There's a renewed call, to be voiced in Bush's convention speech, for an aggressive trade-promotion agenda and for private Social Security accounts. The President also will talk up a health system built on individual -- rather than employer-provided -- insurance.

Bush is saving his biggest ownership flourish for last, however. All year his economists have debated whether the White House can commit to broad reform of the tax code as a second-term goal. Bush has now signed on and will promote the ideas of "pro-growth" reform in his address without dwelling too much on specifics. Says former Council of Economic Advisers Chairman R. Glenn Hubbard, a key architect of Bush's first-term tax cuts: "The President is a problem-solver. He's keenly interested in fixing the tax code's complexity and anti-savings bias."

In New York, Bush is expected to embrace a major tax initiative, vowing action on three fronts: He will fight to make existing tax cuts permanent; push for new individual retirement accounts that protect family savings from taxes; and direct the Treasury Dept. to outline changes that make the revenue code "fairer and simpler." That will trigger a foot-stomping celebration on the floor of Madison Square Garden, since GOP partisans equate those words with "lower and less onerous" rates.


But what is Bush's ultimate goal? The steps the President is taking to trim marginal rates and exempt bigger and bigger chunks of investment income are marching the tax code toward a long-time dream of mainstream GOP reformers -- retaining the core of the basic income tax while gradually easing the tax bite on savings and investment. Bush must tread cautiously, however, to quell voters' fears that he aims to throw out the existing tax code and replace it with a pure flat tax or national sales levy. To calm those worries, he will insist that any changes keep both the home mortgage deduction and the write-off for charitable giving.

Taken together, the Ownership Society themes resonate broadly, White House officials contend. The slogan returns Bush to the "reformer with results" rhetoric of his 2000 campaign. It permits the Texan to cast himself as a modernizer running against a Big Government liberal, as individual investing and exploding homeownership transform society. It fires up the GOP base with appeals for low taxes and property rights. And by turning the Social Security debate into a discussion of investor returns, Bush may lure young voters who have abandoned him. "The idea is to control your affairs through ownership, starting with homeownership and running to health care and retirement," says Dan Bartlett, White House communications director. "The question is: Do I trust myself more, or the government more?"

By appealing to an optimistic future, Bush hopes to take peoples' minds off the economy's not-so-swell recent past. Business leaders, at least, seem in a forgiving mood. Thomas A. James, CEO of St. Petersburg-based Raymond James Financial Inc. (RJF ), says the President deserves "very good, not outstanding" ratings for steering through the downturn. Yet he worries that Bush's optimism may ring hollow in the Rust Belt. "I admire Bush for sticking with his agenda," James says. "[But] it may not be enough." Adds Robert E. Switz, CEO of ADC Telecommunications Inc. in Eden Prairie, Minn.: "The guy stepped in after the bubble and overall did a solid job. His tax reductions worked. I rate him a solid B." What keeps Bush from acing his exams? In chorus, execs cite a $400 billion budget deficit that, war or no war, most think is too big.

Not everyone is convinced that Bush's paeans to property are an answer to future economic challenges. Liberals say that he envisions wrenching changes in the social compact. The thrust of his policies, foes assert, would be to place most of the tax burden on workers, not investors; to offload risk from corporations to individuals; and to undermine a social insurance system dating back to the New Deal. To critics, the Ownership Society is a reworked version of Newt Gingrich's 1994 manifesto -- the Conservative Opportunity Society on Botox.

The White House "has come up with a smart way to package principles that have rattled around the Right for generations," says Alan Brinkley, a Columbia University historian. But "millions of Americans can't afford to 'own' their retirement or health care, as Bush wants. They find the whole concept frightening."

Some right-wingers are also underwhelmed by the ownership chat. They complain that Bush has shunned a flat tax, imposed steel quotas, pushed for a new Medicare drug entitlement, and deviated from the conservative script for the sake of political gain. The fancy labeling effort is "all retail politics, no vision," charges supply-side economist Bruce Bartlett, a flat-tax backer. "They said, 'Geez, we've got this hodgepodge of things, we've got to sell them."'

Despite carping from the Left and Right, Bush is anxious to take his ownership blueprint on the road. After Labor Day, he'll stump hard for his agenda, trying to make the concept accessible to voters by stressing its component parts:


Under pressure from opposition Democrats and a post-September 11 market dip, Bush backed off his original pledge to create Social Security private accounts. Under the plan, middle-aged and younger workers could divert a few percentage points of their payroll taxes into 401(k)-like investment funds. Bush argued that no matter how financial markets perform, over the long haul this system will beat the 1.5% annual return that today's workers will get from the system.

Still, he never abandoned the belief that workers get a raw deal from traditional Social Security. So he'll dust off the notion on Sept. 2 without providing many fresh details. Bush will, however, assure Americans over 55 that their benefits will not be cut and stress that new accounts will be elective.

The biggest weak spot in Bush's plan is paying for the transition, which economists say could cost at least $1 trillion. With a big budget deficit, Bush has nothing in the bank for such massive changes -- which is why many Republican pols think he will continue to be thwarted. In the meantime, Democrats will surely revive their "senior scare" tactics, charging that Bush is out to destroy the retirement system.


Bush is playing both defense and offense on taxes. He will demand that Congress retain his previous rate reductions, insisting that low marginal rates and reduced taxes on dividends and capital gains spur growth and productivity. That's a challenge to Kerry. To help pay for his health-care plan, Kerry wants to hike top rates from today's 35% back to the pre-Bush 39.6% and restore higher taxes on capital gains and dividends for upper-income families.

Taking the offensive, Bush will also call for new Retirement Savings Accounts and Lifetime Savings Accounts, vehicles that let individuals stash away $5,000 a year without ever paying tax on the earnings. These ideas, while not new, are steps toward creeping reform, because they slash taxes on savings and investment. The White House claims its super-savings plans will boost growth. Critics counter that only the well-off can save enough to use the new breaks. And if Bush keeps exempting more forms of income from taxation, liberals fear he'll erode the revenue base just as Uncle Sam has to fund the Baby Boomers' retirement.

Will Bush shatter the conventional wisdom and unveil a sweeping tax plan in the Garden? He has stunned the pundits before, presenting two giant tax cuts that took Washington's breath away.

But 2004 isn't 2000. Bush now is saddled with a giant deficit, is waist-deep in Iraq, and has used up many of his chits with Congress. Advisers say the President isn't really aiming to pull the tax system out by its roots. Instead, he wants to find ways to reduce its bias against savings and investment and make filing simpler.

The bottom line: Bush will charge up his party with general talk of reform while avoiding controversial specifics -- and see how much money is in the federal till following the election. That, and the prospects for disengagement from Iraq, will determine how ambitious he can afford to be.

BUSHCARE. The Administration has no desire to match Kerry's call for a $650 billion plan to expand government and employer insurance coverage. But Bush can't go into the fall empty-handed. So he is pushing health-care "ownership," trying to move toward individual insurance rather than employer-provided coverage -- all at a modest government price of less than $100 billion. Republicans believe that individuals who buy their own coverage will slash costs by spending their health dollars more wisely.

The Bush Rx: Workers who purchase their policies would receive a refundable tax credit, up to $1,000, to help offset the cost of premiums. A second proposal would offer a tax deduction to people who combine high-deductible policies with new Health Savings Accounts. And to encourage small businesses to cover workers, Bush would let firms join insurance pools that spread risks and lower costs. The President will also try to limit his foe's advantage on the health issue by tarring Kerrycare as pseudo-socialized medicine. "We're siding with patients and docs, " says Bush campaign manager Ken Mehlman. "Democrats are siding with elites that dictate to people."


Building on his 2001 No Child Left Behind Act, which set national standards for schools, Bush wants to expand reforms to higher grades and junior colleges, stressing basic skills for the workforce of the future.

To help Americans keep up with a changing job market, he backs $3,000 personal reemployment accounts that can be spent on training and relocation. These vouchers, plus new proposals for more flexible hours, are billed as ways to give workers more control over their lives.

Does all of this add up to a compelling agenda? Republicans are convinced that Bush is on to something big. "This is not the Democrats' 'Two Americas,"' says GOP consultant David Carney. "It's a positive message that resonates beyond well-to-do-suburbanites to people who aspire to the middle class." As more Americans squirrel away savings, buy homes, and start investing, Republicans sense a gathering demographic wave that could alter politics in the GOP's favor.

Democrats belittle Bush's ownership agenda as warmed-over Hooverism. They charge that, by pushing investors out on a financial high wire without a net, Bush's policies expose millions of Americans to the risk of stock busts, housing bubbles, and fleecing by financial sharpies. "These stale old ideas will do virtually nothing to encourage ownership -- and could actually hurt it," asserts Jason Furman, Kerry's top economic adviser.

Thus, in the election, two strains of the American character will collide: risk-taking and pioneering vs. a government safety net protecting citizens from the excesses of capitalism. "Americans are optiimistic and aspire to ownership," says Darrell West, a Brown University political scientist: "But pushing the Ownership Society is still risky, because it plays to future aspirations without addressing people's current economic problems."

Over the long term, the ownership concept holds both power and promise given that it reflects profound changes in the way Americans live. George Bush's problem, though, is that he has a messy short term to traverse. As he tours the country conjuring visions of prosperity, an unanswered question hangs in the air: What if most Americans are too busy struggling to stay above water to give much thought to owning a nice boat?

By Lee Walczak, Richard S. Dunham, and Mike McNamee, with Howard Gleckman and Rich Miller, in Washington and bureau reports

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