[Mb-civic] Mr. President, Let's Share the Wealth By DAVID BROOKS

[Michael Butler]

 The New York Times
February 8, 2005
OP-ED COLUMNIST
Mr. President, Let's Share the Wealth
By DAVID BROOKS

President Bush said he was open to other people's ideas on how to fix Social
Security, so I hope he'll listen to mine.

My idea starts with a blunt political observation. Personal accounts - as
they are currently envisioned - are going to be hard to pass. Every
important Democrat opposes them. Jim McCrery, the Republican who is chairman
of the House Social Security subcommittee, says the president's plan will
have to fundamentally change if it is to have a chance.

So my idea is this: If the president's current version of personal accounts
stalls, he should consider another version - one that is more likely to win
broad support, and that achieves all the goals of an "ownership society."

The personal accounts I'm thinking of would be inspired by a proposal called
KidSave, which was floating around in the late 1990's. KidSave was
championed by Bob Kerrey when he was a Democratic senator from Nebraska, but
in its different iterations it attracted support from a range of Democrats
(Lieberman, Moynihan and Breaux) and Republicans (Gregg, Grassley and
Santorum).

Under one version of KidSave, the government would open tax-deferred savings
accounts for each American child, making a $1,000 deposit at birth, and $500
deposits in each of the next five years. That money could be invested in a
limited number of mutual funds, but it couldn't be withdrawn until
retirement.

Over decades, it would grow and grow, thanks to the wonders of compound
interest, so that by the time workers retired, they would each have a
substantial nest egg, over $100,000, waiting for them.

The KidSave idea was an early venture in what has become a broad
intellectual movement that goes by an infelicitous name: asset-based
welfare.

The idea behind asset-based welfare is that we are living in the midst of a
social revolution. It used to be that only the rich owned financial assets
like stocks. But over the last 20 years, the number of American households
with money invested in the stock market has more than tripled.

But people in the bottom half of the income scale don't get to join in to
take advantage of compound interest. They don't get a share of the growing
national economy. They don't get the psychological benefits of ownership.

All around the world, diverse writers are trying to spread the benefits of
asset ownership. The Peruvian economist Hernando de Soto would like to help
squatters get legal ownership of the homes they've built. In Britain, Tony
Blair has created accounts like the ones proposed in KidSave. In this
country, there are proposals for education and training accounts.

The idea is that just as the Homestead Act turned people into pioneers, we
would turn more people into capitalists if we distributed capital more
broadly. We would encourage savings. We would increase social mobility,
ameliorate the wealth gap between rich and poor, and give people more
control over their own lives.

The Social Security problem is a chance to enact this kind of thing on a
decisive scale, with the KidSave proposal serving as a framework for a new
vision of personal accounts.

We could start by indexing Social Security benefits to prices, not wages, so
the system wouldn't go broke. Then we could give everybody under a certain
age KidSave accounts. This money could either supplement the reduced Social
Security benefits, or individuals could divert some of their payroll taxes
into their KidSave accounts, trading guaranteed benefits for more ownership.

We'd have to take care of today's 20-somethings, who are already too old to
benefit from the new accounts, but this proposal would lead to less red ink
than the president's current plan. And let me commit an act of heresy: it
would be smart for Republicans to forgo making the Bush tax cuts permanent
in exchange for these kinds of accounts. The Bush cuts are going to be
repealed by the next Democratic president anyway, but these accounts, once
created, would be forever.

They would be the first step in a broader ownership agenda. They would pave
the way for education accounts and expanded medical savings accounts. They
might pave the way for other asset-based programs designed to give young
people a better start in life, not just secure their retirement. They would
cut across left-right polarities and prove an irresistible political force.

Even in this age of political deadlock, I can't believe that too many would
be against a plan to give savings accounts to poor kids.

Copyright 2005 The New York Times Company | Home | Privacy Policy | Search |
Corrections | RSS | Help | Back to Top