February 23, 2005


Retirement plan sees million-dollar babies: A former Treasury secretary says the federal government should start an investment account for all babies -- and it will grow to a million dollars by the time they turn 65. (KEVIN G. HALL, 2/23/05, Miami Herald)

One new proposal emerging from the national debate on how to overhaul Social Security could make every American a millionaire at age 65.

Paul O'Neill, President Bush's first treasury secretary and a former chief executive officer of aluminum giant Alcoa, proposes having the government stake every American baby at birth to an investment savings account. By the time the child retires, the account would contain $1 million or more. The idea is drawing attention from an unusual coalition of lawmakers from both parties, liberals as well as conservatives.

To move away from Social Security's chronic funding problems, O'Neill suggests that the government put $2,000 in a special investment account for every newborn American. The government would invest $2,000 more each year until the child reaches 18.

The money would be invested in a conservative index of stocks and bonds and couldn't be touched until retirement. The investment would grow at a compounded rate, meaning that as the value of assets in the account grows, profit would be reinvested so the account would grow even more. Without adding a single cent beyond compounding after the child turns 18, he or she would retire at age 65 with $1,013,326 in the account, O'Neill said.

''If you do the arithmetic, the $1 million would provide an annuity of $82,000 a year for 20 years,'' O'Neill said in an interview.

O'Neill assumes a 6 percent annual return on investment. He calls that figure conservative since it represents the worst performance to date of any 25-year cycle on Wall Street.

This is where the death of the Democratic Party matters. It's the kind of idea they'd get behind if they were still functional and could easily win as part of broad SS reform.

Posted by Orrin Judd at February 23, 2005 9:17 AM

Funny. Everybody loves the long-term rewards that markets can produce on even relatively small contributions like $2,000 a year -- when the contribution comes from an additional, Federal giveaway. Why are they, then, skeptical about putting money that is already in the government's hands (in fact, even much more) to work in precisely the same investments?

Posted by: Moe from NC at February 23, 2005 9:39 AM


The point though is that by paying bupkus up front and then means-testing SS we can end the program.

Posted by: oj at February 23, 2005 9:55 AM

Every American baby should not participate.

Why should I hand over 2Gs to the rich????

Posted by: Sandy P at February 23, 2005 10:41 AM

Why a Republican Rep. or Senator does not take this idea and embelish it with, say, allowing a pre-tax individual match, is most curious. Our Rep. majoritarians are poised to become curators of a leftist legacy out of fear, lack of imagination, or venality. Do they think they are in power because we like the smell of their breath?

Posted by: Luciferous at February 23, 2005 10:44 AM

Schmuck that O'Neill has been, at least he's been smart enough to read BrosJudd. You've been blogging this idea for several years.
Personal horn blowing in the order of linking to all your posts promulgating this concept would certainly have been in order.
You're becoming the fortune teller/soothsayer for the 21st Century.

Posted by: Mike Daley at February 24, 2005 12:15 AM