Respond to this Article September 2004

America Gets Privatized

By E.J. Dionne

What would President Bush do with a second term? Let's take him at his word. Bush is engaged in a bold (and, if you disagree with him, dangerous) project to dismantle the social advances of the New and Fair Deals, the New Frontier, and the Great Society. He wants to throw more risk onto the individual, free corporations and employers from regulations that protect employees and consumers, and reduce government's role in providing retirement security. He would further cut taxes on the savings and investments of the well-off and weaken the individual's right to sue corporations and heath-care providers for malfeasance.

Or, to put this same list in Bush's terms, he wants to "empower" individuals, end "junk law suits," expand "incentives" for investment, give the elderly "ownership of their retirement," and free businesses from "unnecessary" regulation. A second Bush term would be a big deal, if not necessarily a fair one. I write these words before the president has spoken to his national convention, where his aides promise he will lay out his new ambitions. But he's already told us a lot about where he wants to go.

He proposed partially privatizing Social Security in the 2000 election campaign, and has stuck to his position. He'd take a couple of percentage points off payroll taxes that now go the Social Security fund and allow individuals to invest the amount in private accounts. The transition costs of the plan--because Bush has also promised to allow those at or near retirement to stay in the current system--would amount to about $1 trillion. Retirement costs would have to be covered, even as revenues were cut by the privatization scheme. It's not clear where Bush would find the money, though he could just add to the deficit.

On Medicare, Bush would like to replace the current system that guarantees all seniors the medical treatment they need with fixed payments to subsidize the purchase of private insurance. He has not quite said this explicitly, but this is the direction in which his rhetoric (and his conservative allies) have pointed. For the wealthy, this program would be fine; they could supplement government subsidies with their own funds. The non-wealthy would be stuck with a guaranteed minimum.

This would be sold as "choice." But under the current system, seniors actually can choose their doctors and treatments. The only "choice" guaranteed by partial privatization of Medicare would be among health-insurance companies or HMOs. Which is the "choice" that health-care consumers really want?

The cuts in taxes on savings and investment Bush is likely to seek would mark yet another step in transferring taxation from wealth to work--from investors to wage earners. An ever larger share of government revenue would come from payroll and income taxes. Bush sees this as encouraging investment.

The president is also talking about "flextime." It sounds good. Individuals could cash in overtime pay for time off. But this is also a way to weaken laws guaranteeing that those who work more than 40 hours a week get paid time and a half for their extra hours. That's why employers love the flextime idea. Yes, there may be useful ways to encourage more flexibility in the time/money tradeoff. But can one count on an administration that dislikes regulation of business to guarantee that workers would not be pressured to give up the overtime pay they are now entitled to?

Bush will present these ideas under the appealing slogan of an "ownership society." An ownership society is a great idea. It's the very thing that unions sought: Pushing up wages allowed individuals to own their own homes and send their kids to college. The GI Bill, student loans, Pell Grants, Head Start, minimum wages--all were and are designed to help individuals gain the skills, income, and power to become self-sufficient owners. Reducing government help and protection for wage earners and senior citizens is likely to retard the goal of an "ownership society."

Would the planks of this Bush program be passed? As long as Democrats hold at least 45 seats in the Senate--they are likely to win at least several more than that, perhaps even a majority--much of this Bush agenda will be stillborn. But you never know. Enough Democrats caved in to Bush on his tax-cut proposals to make them law. Maybe the privatized world Bush seeks could happen if Democrats are intimidated by his reelection. That makes the outcome of November's presidential vote very important.

E. J. Dionne is the author of Stand Up, Fight Back: Republican Toughs, Democratic Wimps and the Politics of Revenge (Simon & Schuster, 2004), a Washington Post Writers Group columnist, a senior fellow at the Brookings Institution, and a professor at Georgetown University.


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