The Ownership Society

The NY Times ^ | 122003 | David Brooks

[Archangelsk]

The Ownership Society By DAVID BROOKS

ot long ago, a man who runs a construction company came to the White House to meet with a senior Bush administration official. He talked economic policy, then was asked how his business was going.

He said things were going well. Orders were up. He'd revamped his I.T. system, and he'd re-engineered his production process so he'd been able to reduce his work force to 7,200 from 9,800.

You can imagine the reaction as he dribbled out this final bit of good news. For here in a nutshell is the administration's problem. The economy is doing well, but because of enormous productivity gains, it is not yet producing enough jobs to sharply reduce unemployment and ensure President Bush's re-election.

This situation means that the name Arthur Okun is once again reverberating off White House walls. Okun, an economist, is the author of Okun's Law, which predicts how fast the economy has to grow to reduce unemployment. Back in the early 1990's, economists expected that the economy had to grow faster than 2.6 percent to create jobs. Today, because of productivity gains, growth rates have to be much higher.

"This is going to change the entire economy," one senior Bush official observed. "How do we deal with it?"

There are essentially three answers to that question. The first is the pure free-market answer, which says the market will take care of itself. Productivity gains will eventually lead to job creation, and workers will learn to adapt. The second is the unions' answer, which is that the job picture is stagnant because of unfair global competition. Rewrite the trade rules, and jobs will be more secure.

The third response has been championed most ardently by centrist organizations like the Democratic Leadership Council: embrace the more productive and fluid economy, but make sure government aggressively moves to give workers the tools they need to cope.

Over the past three years, the Democratic Party has shifted behind the unions' approach. When Dick Gephardt and Howard Dean are asked about manufacturing job losses, they talk first about unfair trade. The Bush administration, meanwhile, is embracing its own version of the centrist Democratic approach, occupying the ground abandoned by the leftward-veering Democrats.

In his State of the Union address, the president will announce measures to foster job creation. In the meantime, he is talking about what he calls the Ownership Society.

This is a bundle of proposals that treat workers as self-reliant pioneers who rise through several employers and careers. To thrive, these pioneers need survival tools. They need to own their own capital reserves, their own retraining programs, their own pensions and their own health insurance.

Administration officials are talking about giving unemployed workers personal re-employment accounts, which they could spend on training, child care, a car, a move to a place with more jobs, or whatever else they think would benefit them.

President Bush has a proposal to combine and simplify the confusing morass of government savings programs and give individuals greater control over how they want to spend their tax-sheltered savings. Administration officials hope, in a second term, to let individuals control part of their Social Security pensions and perhaps even their medical savings accounts.

The Ownership Society idea allows Bush to be centrist and conservative at the same time. It is centrist because it means actively using government to solve problems. In 2000, Bush declared: "I do not believe government is the enemy. But I do not believe government is always the answer. At its best, it can help people find the tools they need to build for themselves. At its best, it gives options, not orders." The Ownership Society platform is designed to update that message for 2004.

But the platform is culturally conservative. Talking with staff, Bush emphasizes that he wants to use these policies to move from an "anything-goes culture" to a "responsibility culture." By giving individuals control of their own retraining, their own savings and their own homes, he hopes to inculcate self-reliance, industriousness and responsibility.

With events like the State of the Union address, an incumbent president has the power to change the subject and reshape the domestic debate. The Bushies haven't done it yet, but they are about to.

[Archangelsk]

Administration officials are talking about giving unemployed workers personal re-employment accounts, which they could spend on training, child care, a car, a move to a place with more jobs, or whatever else they think would benefit them.

I hope this is Brooks just blowing more smoke out of his horses arse because if this becomes reality George W. Bush has lost my vote. The question every FReeper should ask is, "and just who is going to pay for this liberal pipe dream?".

[babble-on]

I've never heard of this proposal, so I can't be sure, but I think it might make more sense if it were expressed differently.

What if, instead of paying money into a government run unemployment insurance system, you paid money into a self-directed unemployment savings account owned by you, yourself. Then if you ever lost your job you would have tax free access to that money.

I know that's not what Brooks is saying, but he may have worded it wrong. I can't see this administration saying that all you need to do is lose your job and the government will buy you a new car. At least I freaking hope not!

[Miss Marple]

You are more correct than Brooks is. The way I understood the proposal, a worker would be given X amount for unemployment in a lump sum. The worker could use it for training, re-location, child care, etc. to help find a new job. The quicker he found a new job, the larger the amount that would be left in his account to do with as he wished.

[MoralSense]

I think you've all misunderstood the concept. This is a version of the 401(k), the IRA, the flexible spending account, or the cash balance pension account. The money comes from a worker's own salary, and may be matched by an employer at a certain level, and there may be some government matches involved, too. But the worker controls it, outside the bureaucratic system, spends it where he wants, or doesn't spend it at all. It will also be investable tax-deferred.

This is a whole lot less expensive than unemployment insurance, government job retraining, or any other government program, and should also provide a tremendous boost to the economy.

[expat_panama]

you paid money into a self-directed unemployment savings account owned by you, yourself

This is a good step in the right direction, but let's go further.  A 'self-directed' account is really a government controlled account.  The idea behind IRA's, medical savings accounts, and the like is to enable to feds to make sure we use are money wisely.   Maybe I could just send them a note from my mother saying that I use my money wisely, and then they just lower my taxes across the board and leave me alone.

[expat_panama]

because of enormous productivity gains, it is not yet producing enough jobs to sharply reduce unemployment

In the first place, unemployment is down- and Dubya's unemployment is way lower than Clinton's , and the BLS says that

Series title:        (Seas) Employment Level
Labor force status:  Employed
Type of data:        Number in thousands
Age:                 16 years and over

employment is higher than ever.   OK, this is passionate stuff so emotions are louder than numbers, but it's the numbers that say whether we eat, not the yelling. 

In the second place how come it's ok for us to have a car that uses less gasoline, a coat of paint that lasts twice as long, but it's not ok for a factory to use less labor?  We can cut costs but no one else can?

[Forgiven_Sinner]

Perhaps this is just wishful thinking, but it seemed to me that these are not new monies, but redirected monies. Employers and employees already pay unemployment tax and SS tax and Medicare tax--simply take this money and put it into worker owned accounts. For Medicare, you could pool all the accounts into one big pot of money to be used to pay off medical claims across the country.

[Clint Williams]

Administration officials are talking about giving unemployed workers personal re-employment accounts, which they could spend on training, child care, a car, a move to a place with more jobs, or whatever else they think would benefit them.

I want one o' them accounts. Some good parties would benefit me nicely.

[Miss Marple]

I am going to see what I can find out on the White House web site. I think I read something about this some time ago.

[Agnes Heep]

What if, instead of paying money into a government run unemployment insurance system, you paid money into a self-directed unemployment savings account owned by you, yourself.

You don't need a government mandate for this--just do it yourself. I sock away about $200 per month for just such a contingency.

[Miss Marple]

Nope, it is money from the feds in addition to the regular unemployment insurance. I would prefer it the way you said, but that isn't what it is. I don't think we should do BOTH unemployment insurance and these accounts.

Information is on the White House web site here.

I think you are thinking of medical savings accounts, which are our own money. This is different and I am not thinking it is such a good idea unless they use the workers' own money at some point. Otherwise I think it will end up being a boondoggle.

[ClearCase_guy]

We can cut costs but no one else can?

You raise good points. I think we're at a point of economic transition. And we've been here before. As one example:

In the early 19th century, most people in Britain were subsistence-level farmers. Famines had become infrequent, but they still occured. People were cold, hungry, poor and short-lived. And they liked it that way!

The industrial revolution started up and people could get jobs in factories -- jobs that paid actual money! Meanwhile some farm machinery allowed land-owners to produce more food with less workers.

Reaction -- farm workers destroyed machinery in the name of "Captain Swing" and craftsmen destroyed industrial machinery in the name of "Ned Ludd".

Why did the lowly workers do this? They thought the future would be worse for them, not better. But they were wrong. It's true today as well. The transition is a little painful, but we ARE going in a good direction.

[gcruse]

Productivity gains will eventually lead to job creation

I'm a laissez-fair free trader, but this is ridiculous.  Productivity means doing more with fewer hands.  That will not create jobs.  On the contrary it eliminates the unneeded hands.  'Eventually' is a nebulous fog to absorb the silliness of the statement.  Other factors will create jobs.  Productivity gains are creative destruction, but destruction nonetheless.

Bush emphasizes...[by] giving individuals control of their own retraining, their own savings and their own homes, he hopes to inculcate self-reliance

LOL  I need Bush to give me control over my savings and my own home?  Just when did Lady Liberty drop her robe and book in favor of leather and a whip, anyway?

[wizardoz]

The third response ... embrace the more productive and fluid economy, but make sure government aggressively moves to give workers the tools they need to cope.

Paid for by......? Bobos in Paradise? We need more free-market advocates in high places.

[wizardoz]

Just when did Lady Liberty drop her robe and book in favor of leather and a whip, anyway?

Wow. I suddenly know what I want to see replace WTC at ground zero. Facing East.

[gitmo]

I am greatly offended by the concepts of 401K, special flex spending accounts, etc. Why the heck do we need the government's permission to save? For whatever purpose we see fit? They set up special circumstances where they will "permit" Americans to save without Government Plundering. It is a method of stealing, and then controlling the victims' behavior by giving them a small portion of their stolen earnings back if they behave the way the government wants.

[NutCrackerBoy]

I need Bush to give me control over my savings and my own home?

Ideologically, you are right. There is no amount of sugar which will make these proposals palatable to a principled small-government believer. The compromise is, without creating an utter welfare state, it feeds the insatiable appetite moderns have for government intrusion.

Look at it this way. Taxes take a huge bite. You will sacrifice much to shelter some of your money. What the government gets in return for sheltering your money from its confiscatory taxes is to limit your choice of what you can do with it, to a few things that the "collective" approves, like medical insurance, retirement income, retraining costs.