The ownership of society

Ill fares the land, to hastening ills a prey,
Where wealth accumulates, and men decay.

— Oliver Goldsmith, "The Deserted Village"

In the current New Yorker John Cassidy examines what President Bush's "ownership society" will really mean: "Tax cuts were just the beginning: the President is signalling a far more radical agenda."

The end result of that "far more radical agenda" is an America in which wages, and only wages, will be taxed. People with lots of disposable income — the wealthy — will be able to shelter that income in tax-free investments, which in turn will create more tax-free investment income. They will purchase health care through their tax-sheltered HSAs and provide for their own retirements through tax-sheltered private accounts. And since Social Security and Medicare will be defunded in order to pay for these new shelters for the wealthy, they may be the only America's who can purchase health care or retire.

This isn't a minor change, it's a revolution — or a counter-revolution — against the 20th century and the idea of a middle class.

A return to the Victorian world of rentiers and laborers may seem like an outlandish scenario, but a generation ago it would have been difficult to imagine a White House, even a Republican one, phasing out the inheritance tax, which affects only a tiny minority of the richest families, and slashing the taxes on dividends and capital gains, which few middle-class families pay, either. The people who devised these policies simply do not accept the old rules.

Cassidy offers a patient, step-by-step look at the ownership society agenda and its implications. The Bush administration's attempt to drag America back to the Guilded Age is cloaked in guilded language. Cassidy substitutes plain language for the euphemisms.

You really ought to read the whole thing, but here are some highlights:

When the President pledges to create an "era of ownership," he is not talking merely about encouraging people to buy their own homes and start small businesses. … He is also talking about extending and expanding the tax cuts he introduced in his first term; he is talking about allowing wealthy Americans to shelter much of their income from the I.R.S.; about using the tax code to curtail the government's role in health care and retirement saving; and, ultimately, about … the abolition of the graduated income tax and its replacement with a levy that is simpler, flatter and more favorable to rich people. …

Since the personal income tax was introduced, in 1913, it has been based on two principles: the burden of taxation is distributed according to the ability to pay; and capital and labor carry their fair share. The Bush Administration appears set on undermining both of these principles. …

Lest you think Cassidy is being alarmist, or that my talk of euphemisms cloaking the real agenda sounds conspiratorial, consider what Stephen Moore of The Club for Growth has to say:

"Bush doesn't talk the language of the supply-siders," said Stephen Moore, the president of the Club for Growth, a Washington-based lobbying group that pushes for lower taxes. "He doesn't sound like Arthur Laffer. He doesn't talk about incentives. … But is Bush a supply-sider in terms of policy? No question about it."

"That's the hidden story of what is going on under Bush," Moore said. "People like me have been advocating a flat tax for a decade. I helped Dick Armey put together his flat-tax proposal. Nobody could get it done politically. What Bush has done, in a hidden way, is move us in baby steps toward the flat tax."

And here's Grover Norquist, the man who says he wants to drown the government in a bathtub, who despises the Preamble to the Constitution, and who compares the inheritance tax to the Holocaust:

"Do you think it was an accident that the first three tax cuts moved toward expensing business expenditures, toward universal IRAs, toward getting rid of the capital-gains tax, toward getting rid of the double taxation of dividend income, toward getting rid of the [inheritance] tax? No. It is consistent with a vision."

And what is that vision with which all the components of Bush's economic policy and ownership society are consistent?

… The Republicans' agenda … potentially involves a historic restructuring of the American system of government. Roughly two-thirds of taxable income is paid to workers in the form of wages and benefits. The other third goes to reward capital, or accumulated savings, in the form of corporate profits, dividends and interest payments. If Bush's economic agenda was fully enacted, the vast bulk of these payments wouldn't be taxed at all, and labor would end up shouldering practically the entire burden of financing the federal government.

In a new book, "Neoconomy: George Bush's Revolutionary Gamble with America's Future," Daniel Altman, a former economics reporter for the Times and The Economist, describes what such a system might look like. "The fortunate and growing minority who managed to receive all their income from stocks, bonds and other securities would pay nothing — not a dime — for America's cancer research, its international diplomacy, its military deterrent, the maintenance of the interstate highway system, the space program or almost anything else the federal government did. … Broadly speaking, that fortunate minority would be free-riders."

That is President Bush's goal and agenda for the next four years. Sound good to you?