TCS Daily

Ownership Society Will Determine Victory

By Daniel Clifton - September 10, 2004 12:00 AM

The greatest political and demographic shift over the past twenty years was not the number of new Spanish speaking residents, but rather the number of individuals who owned shares of stock. In the 1996 elections, pundits spoke of soccer moms as the key demographic. This time around, the 2004 elections will be decided by America's growing investor class.

With this in mind, President Bush spoke directly to the burgeoning investor class at the Republican National Convention by announcing his vision for America becoming an "ownership society." Bush's speech called for a new paradigm in which government policies empower, not inhibit, individuals, so that each person has more choices and control over his healthcare and retirement. Included in the vision are Health Savings Accounts (HSAs), Lifetime and Retirement Savings Accounts (LSAs/RSAs), Comp/Flex time, and Social Security Personal Retirement Accounts (PRAs). All of these plans have one important theme in common: individual ownership.

Longer life expectancies and increased prosperity are changing the way individuals approach work and retirement. At the same time, American families are having fewer children. These three variables combined are creating a demographic crunch that will force policymakers to reform the existing labor, healthcare, and retirement programs. President Bush's vision for an ownership society fundamentally reforms these existing institutions while at the same time speaks directly to exact demographic he needs to pull him over the finish line on Election Day: investors.

Forty years ago, a one-size-fits all policy left employers and government responsible for workers' retirement and healthcare, while employees remained in the same job for thirty years. This is no longer the case. The nation's shift to a knowledge-based economy has made the labor force much more mobile, in which a career now means ten different jobs over a lifetime. This changing labor force also requires greater portability of pensions and healthcare plans.

Moreover, no longer is the promise of Social Security available for younger workers. Individuals born after 1970 will not receive money paid into the system. In 1950, there were 16 workers per beneficiary, today it is just two workers per beneficiary. Keeping the status quo to pay for this demographic shift will require a 50 to 80 percent tax increase on younger workers.

As a result of these changes, labor, healthcare, and retirement philosophy has drastically shifted, with emphasis now on individuals to provide for their own finances and this view is likely to dominate in the decades ahead.

For individuals to take more control over their own finances requires boosting individual savings. LSAs and RSAs reduce the impediment to savings by removing the onerous double tax placed on individuals that save. Social Security PRAs will boost workers rate of returns from less than 2 percent to 6 percent annually, while making the program solvent. And HSAs clamp down on spiraling medical inflation while allowing workers to accumulate tax free savings that can be rolled over annually.

Twenty years ago, such a bold policy initiative could never attract voters as less than 20 percent of American households owned stock. People were used to working one job in their career and being provided with a defined benefit plan that was completely immobile. Now, more than half of all American households are actively investing on their own for their future. They accept risk when they invest in their 401(k) plan or mutual funds and have grown accustomed to managing their own finances.

The growing number of middle class families has transformed American politics. Two out of three voters in the 2004 election will be investors. Pollster Scott Rasmussen has found that this benefits Republicans as shareholders with $5,000 of investments are 18 percent more likely to vote Republican. Pollster John Zogby has found voters who self select themselves as members of the "investor class" makes other factors, such as race, sex, union membership, and income, become irrelevant. They become more likely to vote for Republican candidates. The investor class does not see a need for government intervention and does not see government as a solution to their problems.

In 2000, Bush received 51 percent of the investor class vote. If he had received 52 percent, Bush would have won the popular vote by roughly 800,000 votes. Republicans expanded on this in the 2002 midterm election collecting 58 percent of the investor vote, despite the loss of $7 trillion of shareholder wealth in the bear market. It appeared that investor voters were becoming an expanding base for Republicans.

Yet, in this election season Bush had, until recently, been polling slightly above all investor voters and actually below voters who consider themselves to be members of the investor class since the beginning of the year. If Bush lost in this key demographic, it is more than likely he would lose the election.

Since Bush started talking about the ownership society two weeks ago, investors have swung into his corner. Bush picked up a net 16 points among all investors in the past two weeks and is now up by 20 points with this demographic according to Zogby's post convention poll. Among self identified members of the investor class, Bush moved a net 12 points and has regained a double digit lead among this demographic. While some of the swing is due to a convention bounce and other factors, it is likely that Bush's ownership society platform has put this year's most powerful voting bloc squarely into his corner.

By putting forward an ownership agenda, President Bush has proposed a bold policy initiative to deal with the massive demographic and economic changes facing this country. While this is good public policy, it is also smart politics. The line in the sand has been drawn between himself and his opponent's vision for America, who favors more governmental control over the economy and personal finances. At the same time he is speaking directly to the demographic he needs to pull him over the finish line on Election Day.

Daniel Clifton is executive director of American Shareholders Association. Jennifer Forlenza is an associate at Americans for Tax Reform. Daniel can be reached at


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