"OWNERSHIP," PRESIDENT BUSH told the Republican national convention last August, brings security, and dignity, and independence." It is an assertion few Americans would dispute--and one that we should welcome. For it turns out that Bush's proposed policies would frustrate his stated goal.
Bush's version of an ownership society is both ideological and tactical. His political strategists believe that a society of self-consciously individual owners can wean Americans from their political support for social outlays. If people see their financial well-being as reflecting mainly their own nest eggs, they will think like investors. Political support will evaporate for Social Security, redistributive taxation, public education, and other collective enterprises that require us to think like citizens. If people "own their own health plans," as the president also proposed, there will be less need for inclusive social mechanisms such as Medicare.
Bush's pollsters are convinced that as shareholders, people are more likely to vote Republican. His former chief economist, Gregory Mankiw, recently wrote, "After workers develop an equity stake in corporate America, they will start watching CNBC and the Nightly Business Report. Their view of how they relate to the economy will fundamentally change. Bush understands this, and it is one reason he talks about an 'ownership society.'"
But in reality, America's long tradition as a society of owners has been substantially the result of activist government--making social investments, taking regulatory initiatives, and shielding individuals from economic risks beyond their personal control. Today's conservative program for an ownership society, by contrast, transfers hazards back to individuals at a time when people are already bearing increased risks. Bush has done us a favor by putting this idea in play. It invites us to devise a program for a true ownership society, built on broadened social investment. Reclaiming a proud tradition, we could broaden America's middle class by once again expanding education and homeownership, resuming the march toward secure retirement income and health care, and raising the real incomes on which a middle class depends.
IN THE EARLY AMERICAN REPUBLIC, ownership was mainly agrarian. Government activism on behalf of broad ownership began with Thomas Jefferson, who crafted land-tenure laws to favor free-holders rather than absentee speculators. The United States, unlike Europe, could have a radically egalitarian land-distribution policy without overthrowing a feudal class because the land, conveniently appropriated from the natives, was "free."
Nineteenth-century ownership initiatives included the Homestead acts and land-grant college legislation, both under President Lincoln, and the abortive efforts of the Freedmen's Bureau to give emancipated slaves their "40 acres and a mule." As an agrarian society gave way to an industrial one, government stepped forward with a diverse variety of measures to broaden what today's economists would call "human capital": agricultural extension, public kindergartens and high schools, "Americanization" programs for (mostly poor) immigrants, and taxpayer subsidies of state colleges and universities. All these contributed to wealth broadening; all were redistributive, because in their absence most of their beneficiaries would have gone without.
The paradox is that every one of these investments used public outlays to foster what felt like self-reliance. Far from reflecting a "nanny state," they promoted a sense that people were making it on their own. Yet without these early social investments, America would be far less of an ownership society today.
With the New Deal, government dramatically expanded interventions to broaden ownership and pool risks. Home-ownership is the most explicit badge of membership in the middle class. The U.S. government invented the long-term, self-amortizing mortgage by agreeing to insure and purchase such mortgages; it created a secondary mortgage-market, subsidized mortgages for new homeowners, and protected Depression-ravaged farm owners from foreclosure. …