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The Next Pro-Life Fight

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Missile Opportunity

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Elián and the Embargo

6/19/00 7:10 p.m.
Stock Options
Gore competes with Bush for the investor class.

By NR's Ramesh Ponnuru & John J. Miller

onservatives are lining up to take shots at Vice President Al Gore's latest retirement-security plan. It's yet another flip-flop, say spokesmen for George W. Bush. Gore's plan wouldn't fix Social Security, say a legion of think-tank critics. It's another entitlement; it's a big-spending program. . . . We're probably going to be hearing a lot along these lines from friends of ours. But this reaction misses the political significance of the Gore proposal — to the detriment both of the Bush campaign and of conservatism generally.

What Gore is offering is a revamped version of the "USA accounts" Bill Clinton proposed in 1999. These accounts would be like 401(k)s, but matched by the federal government in the form of tax credits rather than by employers. Money could be withdrawn from them to pay for college, catastrophic medical bills, a first home, or retirement.

Conservatives can carp all they want, but this is a tax cut. Indeed, it is in one respect more of a tax cut than Bush's Social Security plan, since Gore's accounts could be used for purposes other than retirement. Gore's proposal and Bush's would offer roughly the same dollar benefit to many households, though Gore phases his plan in very slowly to disguise just how big it would be. (When fully implemented, the Gore accounts would cost the federal government about $35 billion a year.) Workers will certainly perceive the Gore plan as a tax cut, no matter how often conservatives say that it's an "entitlement" — which isn't a dirty word to the public anyway.

By bringing more workers into the new investor class, Gore's plan would advance the cause of an eventual free-market reform of Social Security. But even as a proposal, it completes the reversal in the politics of Social Security we've watched unfold over the last two months. Now it's the Democratic candidate who's trying to co-opt the Republican's popular position on the program. Instead of continuing his head-in-the-sand approach to private capital markets, Gore will from now on be able to acknowledge the superior return they offer but also promise more security than Bush (since he's leaving Social Security funds alone). It's a smart pitch to millions of small investors.

Bush can't afford to cede these voters to Gore, and conservatives can't let Democrats use a pro-investor agenda to split economic conservatives from social conservatives. A knee-jerk attack on the Gore accounts, then, would be a strategic mistake.

The alternative is to promote enthusiastically the trend Gore is acknowledging grudgingly. Bush should see Gore and raise him. The first step is to congratulate Gore for coming around to the view that reducing taxes on saving and investment can serve important public purposes. Then he should come out with his own, bigger and better plan to use tax credits to seed private savings accounts for workers. (He need not worry about charges of following Gore's lead, since he has already proposed a tiny version of such a program as part of his "new prosperity initiative.")

He should go beyond Gore in two ways. First, he should let these accounts pay for an even wider range of expenses. Costs related to elementary and high-school education would be an excellent start. Second, he should invite state governments to participate in the program. Adding state tax credits to the federal government's reduces the cost to the latter and helps conservatives trying to reduce the size of state governments.

But cost concerns shouldn't get in the way of a bold agenda. No doubt some Bush advisers will prefer to use additional surplus funds to pay down the debt instead. Debt paydowns poll well. But pro-investor policies offer concrete benefits to specific voters, and do so in a way that expands the constituency for conservatism. "The end game is to create more investors, and to link their interests as owners of capital with the Republican party," says Richard Nadler, head of the Republican Ideas Political Committee and the sharpest theorist of the politics of the new investor class.

Nadler has argued for several years that tax policies designed to aid small investors were bound to grow larger thanks to the normal processes of politics. A tight presidential race, he now notes, "has condensed that process from a decade to a day." The presidential candidates are now engaged in a bidding war for the allegiance of the small investor. And there is no reason Republicans should lose this bidding war.

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