TCS Daily

What Bush Needs to Do: The Ownership Society

By Stephen Bainbridge - September 2, 2004 12:00 AM

President Bush has been talking a lot lately about creating and fostering an "Ownership Society." George Melloan recently wrote an excellent WSJ ($) column on the political advantages of this policy program for the Republicans. In the course of doing so, Melloan made a very important point about the essential foundation without which such a society would founder:

"The promise by politicians to protect the sanctity of private property is not exactly a new idea in American politics. It just got lost somewhere back there when environmental radicals started dictating how private land could be used, municipal authorities started using their eminent domain powers recklessly and lawyers became birds of prey, hunting for deep pockets to pick. That has been a dangerous trend, because the protection of private property has been fundamental to American economic and political development.

"Alexis de Tocqueville in 'Democracy in America' (published in 1835 and 1840) discovered the social value of property rights: 'Why is it that in America, the land par excellence of democracy, no one makes that outcry against property in general that echoes through Europe?' His answer: 'It is because there are no proletarians in America. Everyone, having some possession to defend, recognizes the right to property in principle.'

"Indeed, the Founding Fathers planned it that way. James Madison, perhaps the most influential politician in the design of the American Constitution, wrote: 'That alone is a just government which impartially secures to every man whatever he owns.'"

In The Conservative Mind, Russell Kirk put it somewhat more succinctly: "freedom and property are closely linked: separate property from private possession, and the Leviathan becomes master of all."

The freedom to accumulate property and use it as you wish does more than merely protect economic interests. Economic liberty, of which the rights of private property are the foundation, is a necessary concomitant of personal liberty -- the two have almost always marched hand in hand. The pursuit of property has been a major factor in destroying arbitrary class distinctions, moreover, by enhancing personal and social mobility. At the same time, the manifest failure of socialist systems to deliver reasonable standards of living has undermined their viability as an alternative to democratic capitalist societies in which accumulation of property is a paramount societal goal. Accordingly, it seems fair to argue that the economic liberty to pursue and use property is an effective means for achieving a variety of moral ends.

Unfortunately, we live in a society in which neither party is fully committed to protecting private property rights. Both parties routinely infringe on property rights through taxation and regulation. At least since the Reagan Revolution, of course, the GOP has been the lesser of two evils on this score. If Bush is serious about creating an ownership society, however, he must convert the GOP into an affirmative friend of private property-promoting and protecting ownership by all.

What then should Bush's agenda be? Creating an ownership society will require a radical rethinking of the nanny state at almost all levels, but here are some key starting points:

  1. Major tax reform that shifts the focus from taxing income, investment returns, and savings to taxing consumption. Many of our tax laws currently seem designed to discourage investment and wealth creation. The double taxation of corporate profits paid out as dividends and taxation of interest on savings are just two obvious examples. Other aspects of our tax laws distort investment decisions. The difference in tax treatment of dividends and capital gains, for example, warp decisionmaking by both corporations and investors. In contrast, a consumption tax system -- relying on sales taxes, a VAT, and excise taxes -- would reward investment and, equally important, eliminate the distorting effects of the current system. Granted, you'd have to address the potential for a consumption tax to be unduly regressive. Even so, however, shifting to a consumption tax is essential if we are to reward and promote investment and ownership.

  1. Permanent elimination of the estate tax. One of the chief incentives to wealth creation is the natural desire to ensure that one's children lead a better life than you do. The confiscatory estate tax negatively impacts wealth creation, especially by small business owners and family farmers, who are disproportionately affected by the death tax.

  1. Social security reform that encourages private investment accounts. Over half of the American people already invest in the stock market. Privatization of pensions, even if partial, would make stock ownership almost universal. Every American would own a piece of the American economy, which surely would be the ultimate expression of the American dream. Instead of being at the mercy of future politicians, every American would begin building individual wealth.

  1. Protecting private property from regulatory takings. recently reported on the story of John Rapanos, a 68-year-old Michigan man who was convicted of breaking the Clean Water Act by having moved sand from one end of his own property to the other without a federal permit. As the nanny state thus extends its power to regulate how we use our own property, Kirk's Leviathan looms ever larger.

As Melloan pointed out, Bush's goal of an "ownership society" extends a long-standing American dream. It harkens back such historical examples as the Homestead Act, by which the very first Republican President empowered Americans by granting settlers 160 acres if they farmed it for at least 5 years. It is a principal argument for reelecting President Bush. Now he needs to articulate how he'll achieve the ownership society if we give him a second term.


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