The right economic agenda

T he presidential campaign has come down to two rival ideological visions for the United States. John Kerry wishes to create a middle-class entitlement society, where the government offers free health care, child care and college tuition to tens of millions of working-class Americans. He offers America, in a sense, the mythical and alluring free lunch.

How will Republicans combat this demagogic, socialistic vision of government as the central force in our lives?

The answer is to offer a countervision with bedrock American principles of freedom, opportunity, and prosperity as a higher and nobler goal. America is not Europe — nor should it be.

President Bush lately has spoken eloquently of his desire to create what he calls “an ownership society.” He wants to pursue policies that expand home ownership, stock ownership, and new business creation. In a sense, Mr. Bush wants to create in America a nation of capitalists.

It is hoped that as Americans become shareholders and owners of wealth, they will become less dependent on government. That is precisely why the left is agitated and desperate to win.

The White House has unveiled this attractive, pro-growth vision of 21st century America, but has refused so far to describe in all but broad-brush strokes the actual policies that would advance the ownership society.

Mr. Bush needs to do so for two reasons:

(1) Laying out a conservative economic agenda is the best way for the president to solidify and energize his conservative base of voters. Karl Rove has spoken many times of the fact some 4 million to 6 million conservatives did not vote in 2000, which caused a perilously close election. Conservatives might wonder if a Bush victory is a conservative victory at all if there is no mandate for an economic agenda that promotes freedom and prosperity and smaller government. Mr. Bush is seeking an electoral mandate to do … what exactly? Presidents’ second terms are normally far less successful than their first, and the Reagan and Clinton presidencies are stark recent examples.

(2) Mr. Bush needs a mandate to succeed legislatively in a second term. Without an agenda, there is no mandate.

So here are five ideas for the Bush campaign that would excite conservatives and advance the an ownership society:

Bury the Internal Revenue Code and advance a flat-rate consumption tax. There is no more self-defeating obstacle to prosperity than our antiquated and unnerving tax code. All around the globe, from Russia to Estonia to Hong Kong, flat taxes are taking hold. Mr. Bush is taking baby steps toward getting us to a flat tax — by cutting dividend and capital gains taxes, lowering income tax rates, and phasing out the death tax. But why not end our tax system’s tyranny in one fell swoop? A Steve Forbes postcard style flat tax would be rocket fuel for our economy. Why not end the failed income-tax experiment entirely and have a national consumption tax, paid half by businesses and half by consumers? The consumption tax would do away with tax forms, would benefit our manufacturers and domestic producers, would maintain worker financial privacy, would make April 15 just another day of the year and would end the modern day Spanish Inquisition in America: the Internal Revenue Service.

Offer young workers private investment accounts for Social Security. Every worker in America should be permitted to put aside as much as half of his payroll tax payments into an individual retirement account (IRA) privately owned by the worker himself. These private accounts, according to economist Peter Ferrara of the Institute for Policy Innovation, would earn workers about 2 to 3 times higher returns on their money than what Social Security promises — and Uncle Sam almost certainly won’t even be able to keep those promises.

Voluntary private accounts for Social Security would leave tens of millions of young workers with a golden entry ticket into the ownership society. Perhaps 80 percent to 90 percent of Americans would instantly enter the shareholder society. This plan would essentially privatize the largest federal program.

• Muzzle the trial lawyers. Baseless lawsuits are to America’s economy what termites are to wooden homes. They deter economic growth, slow innovation and raise prices of almost every product we buy from health care to jungle gyms. The Manhattan Institute in its brilliant report “Trial Lawyers Inc.” estimates the net annual cost to Americans of frivolous lawsuits now approaches $500 billion. Americans now pay the equivalent of a 5 percent trial lawyer tax on every good and service they purchase today. Health care costs are inflated by about twice that amount thanks to medical malpractice suits that benefit a few patients who win the lottery and the trial bar that earns hundreds of millions of dollars on other people’s misfortunes and then funnel a share in the form of campaign contributions to left leaning Democratic candidates.

Tort reform would put caps on judgments, the end of joint and several liability where a firm that is only 5 percent responsible for an injury must pay as much 100 percent of the damages, reasonable caps on legal fees in cases where the government is the plaintiff, and “lawyer free” products where consumers can buy products at cut rate prices, by waiving the right to sue.

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