A bold theme is circulating among America's chattering class -- the ownership society. The idea is to increase the number of citizens who own financial assets such as stocks, bonds and property in order to spread the benefits of wealth accumulation. Even President George W. Bush has started using the phrase and spoke in his State of the Union address this week about broadening ownership. It is a pity the administration's current proposals do no justice to what may be the most promising social policy breakthrough of the early 21st century.

As productivity gains outstrip wage growth, enlarging the gulf between the haves and the have nots, it makes sense to increase the number of Americans who have a direct ownership stake in the most productive sectors of society. Gradually, this would enable more citizens to derive their incomes not just from wages, but also from returns on their own financial assets, thereby deepening America's middle class. Personal saving rates would also increase, smoothing the way for the retirement of the baby boomers and decreasing US dependence on foreign capital. And over the long term, there would be less need for a large welfare state.

Rather than embracing the broader promise of the ownership society, however, Republicans are merely using it as new packaging for their old agenda of tax cuts tilted towards the affluent. Indeed, the administration's policy priorities will further concentrate wealth and will not increase national savings.

The president's proposal to make permanent the temporary cuts in capital gains, dividend and inheritance taxes is a case in point. It may seem that this would help increase the number of asset-owners. But the real effect would be to shift more of the tax burden on to work and away from passive investment income. That would raise the barrier for members of the working class who hope to save enough of their wages to build a nest egg. It would also worsen the country's fiscal position.

The plan to establish tax-free retirement savings accounts is no better. The benefits would only accrue to those few Americans wealthy enough to put away more into tax-deferred savings accounts than the current limits -- and in that case they would probably be substituting one form of savings for another, with no net increase in overall savings. Worse, such a policy would permanently remove large sums of money from the long-term tax base, further weakening public finances. Interest rates would ultimately have to rise, making it harder for many working-class Americans to pay for what are now their primary assets: their houses.

Privatising Social Security could lead to similar problems, but at least these could be overcome through intelligent policy adjustments. If the government simply allows workers to divert part of their Social Security payroll taxes into private accounts and pays for the cost of funding two separate retirement systems at once by borrowing, there would be no net increase in savings. This could be overcome by financing the transition to partial privatisation by means-testing Social Security benefits. Another problem with conventional privatisation plans is that they do not do enough to enable low-income Americans to build significant retirement savings accounts. An elegant remedy here would be for the government to top up these workers' retirement accounts on a sliding scale basis.

If Mr Bush really wants to build an ownership society, however, he will need a new policy agenda. He could draw inspiration from the UK, where Tony Blair's government plans to give every child a sum of money at birth. Imagine if every American child became a trust-funder, through a one-time government contribution into a personal account that would grow until they reached 18, at which point it could be put towards a college education or a first home, say. This could be paid for by closing corporate tax loopholes, new pollution taxes or by other means.

The goal of creating an ownership society taps into a deep-seated American tradition, one that inspired the Homestead Act in the 19th century, which broadened land ownership, and the mortgage interest deduction for home-buyers in the 20th century. Now it is time for policymakers to broaden the ownership of financial assets. Though Republicans have publicy championed the idea, their own agenda is at odds with its ultimate goals. Perhaps Democrats ought to give the theme a try.