Paul Krugman

Princeton, New Jersey

A new Bush campaign ad pushes the theme of an "ownership society," and concludes with President George W. Bush declaring, "I understand if you own something, you have a vital stake in the future of America."

Call me na´ve, but I thought all Americans have a vital stake in the future of the United States, regardless of how much property they own. (Should we Americans go back to the days when states, arguing that only men of sufficient substance could be trusted, imposed property qualifications for voting?) Even if Bush is talking only about the economic future, don't workers have as much stake as property owners in the economy's success?

But there's a political imperative behind the "ownership society" theme: the need to provide pseudopopulist cover to policies that are, in reality, highly elitist.

The bush tax cuts have, of course, heavily favored the very, very well off. But they have also, more specifically, favored unearned income over earned income - or, if you prefer, investment returns over wages. last year Daniel Altman pointed out in The New York Times that Bush's proposals, if fully adopted, "could eliminate almost all taxes on investment income and wealth for almost all Americans." Bush hasn't yet gotten all he wants, but he has taken a large step toward a system in which only labor income is taxed.

The political problem with a policy favoring investment returns over wages is that a vast majority of Americans derive their income primarily from wages, and that the bulk of investment income goes to a small elite. How, then, can such a policy be sold? By promising that everyone can join the elite.

Right now, the ownership of stocks and bonds is highly concentrated. Conservatives like to point out that a majority of American families now own stock, but that's a misleading statistic because most of those "investors" have only a small stake in the market. The congressional Budget Office estimates that more than half of corporate profits ultimately accrue to the wealthiest 1 percent of taxpayers, while only about 8 percent got to the bottom 60 percent. If the "ownership society" means anything, it means spreading investment income more widely - a laudable goal, if achievable.

But does Bush have a way to get us there?

There's a section on his campaign blog about the ownership society, but it's short on specifics. Much of the space is devoted to new types of tax-sheltered savings accounts. People who have looked into plans for such accounts know, however, that they would provide more tax shelters for the wealthy, but would be irrelevant to most families, who already have access to 401(k)s. Their ability to invest more is limited not by taxes but by the fact that they aren't earning enough to save more.

The one seemingly substantive proposal is a blast from the past: a renewed call for the partial privatization of Social Security, which would divert payroll taxes into personal accounts. Bush campaigned on that issue in 2000, but he never acted on it. And there was a reason the idea went nowhere: It didn't make sense.

Social Security is, basically, a system in which each generation pays for the previous generation's retirement. If the payroll taxes of younger workers are diverted into private accounts, there will be a gaping financial hole: Who will pay benefits to older Americans, who have spent their working lives paying into the current system? Unless you have a way to fill that multitrillion-dollar hole, privatization is an empty slogan, not a real proposal.

In 2001, Bush's handpicked commission on Social Security was unable to agree on a plan to create private accounts because there was no way to make the arithmetic work. Undaunted, this year the Bush campaign once again insists that privatization will lead to a "permanently strengthened Social Security system, without changing benefits for those now in or near retirement, and without raising payroll taxes on workers." In other words, two minus one equals four.

Four years ago, Bush got a free pass from the press on his Social Security "plan," either because reporters didn't understand the arithmetic, or because they assumed that after the election he would come up with a plan that actually added up. Will the same thing happen again? Let's hope not.

As Bush has said: "Fool me once, shame on - shame on you. Fool me - can't get fooled again."