March 11, 2005


Transcript: Fmr. Treasury Sec'y Paul O'Neill (This is a partial transcript from "Your World with Neil Cavuto," March 9, 2005, that was edited for clarity)

CAVUTO: [L]et's first talk about your plan for Social Security. You think we're chasing the wrong ghost here. What do you mean?

O'NEILL: I do. I think there's an opportunity now to do something really important, and it's related to this question. What meaning should we, the American society, give to the notion of financial security for people over 65? I think that's the right question.

And my answer is, we ought to create a system so that when people get to be 65 years old, they have a substantial amount of money, and the numbers I put together would suggest $1 million.

And the way to do that is on the day that a child is born, we, the American people, put $2,000 into an account in their name. And every year for the next 18 years, we put in another $2,000, and with the six percent interest rate, when they get to be 18, that account would have $65,000. And if left to accumulate to retirement at 65, it would be worth over $1 million.

CAVUTO: And they can't touch that money?

O'NEILL: They can't touch that money.

CAVUTO: What happens to Social Security in the meantime?

O'NEILL: Well, I want to get to Social Security in a minute. First, I think we, as a society, should define our objective, and for me, the objective should be people have real financial security when they get to be 65, without regard to what they do in their life.

If they're born in America, there should be meaning when you get to be 65 of real financial security, which means enough money to pay for your health and medical care needs and your housing and your food and your transportation and everything else. And the only way to really do that is to save and save early...

CAVUTO: A lot of people haven't.

O'NEILL: Because babies don't have earning capacity, I would say that those of us who are already working ought to create real savings. Instead of the tax and spend system that we have now...

CAVUTO: And we rob that. We rob that piggy bank.

O'NEILL: There's nothing in the piggy bank, really. And so, this is a way to take care of both Social Security and Medicare (search), which is a much bigger problem.

CAVUTO: Right, for those babies eventually become retirees. But protecting, let's say, the 65 and under crowd right now that's very leery of what the president is proposing.

O'NEILL: OK. Well, see, what I would do is, first of all, I would establish where we're going. You know, you have to be a little long-headed to do this. You need to be thinking kind of in a Chinese mode about the future.

So, what are we going to see? What are we going to leave as an inheritance for our children and their children? So we get that established.

And then we have remaining the issue of how do we take care of the financial requirements? How do we meet our obligations under the current system?

CAVUTO: How do you do that?

O'NEILL: I think there are bunch of different things that you could do.

CAVUTO: Radical, raise the retirement age, yes or no?

O'NEILL: Yes, it's a little bit of tinkering.

CAVUTO: All right. A little tinker. Now what about fat cats like yourself? Get no Social Security? Means tested?

O'NEILL: Personally, I don't care about that, but I think a lot of people would care about that. Personally, it's a point of indifference to me.

CAVUTO: Raising the income threshold above $90,000.

O'NEILL: I think that's all right.

CAVUTO: That's OK. How about raising the FICA tax, period?

O'NEILL: Well, eventually, what I'd like to do in my system is get rid of the FICA tax. If you think about it right now, the 12.4 percent Social Security contribution is a tax on labor. You don't pay it on capital equipment; you pay it on labor.

So that if we could design a system so that we provided financial security to the retired population through the savings process, when that system kicked in, the 12.4 percent tax on labor could go away. And labor would be in a much better position than it is today, as a factor of production.

CAVUTO: But if we do nothing for Social Security, the administration has argued that it will eventually go broke.

O'NEILL: That's true. That's true. And it's going to happen faster than Medicare and if not...

CAVUTO: The Democrats say it's fine. The Democrats say it's fine.

O'NEILL: That's not true. It's simply not true.

CAVUTO: OK. So on this, you agree with the president?

O'NEILL: We need to fix these systems, but nobody has talked about what we need to do about health and medical care in this country. I have, but it's hard to get any air time for this subject.

CAVUTO: That's true. Are you bitter as a result of that, that it is tough for you to get the word out?

O'NEILL: No. You know, it's the way it is. It's a very interesting thing, you know? The president gets all the air time that he wants, whether he has anything to say or not. And it's awfully hard if you have ideas to get people to pay attention.

Mr. O'Neill has developed credibility with the Left and far Right by criticizing the President, why not use him now? Have Mr. Bush take him on the SS road show and get some congressional sponsors for a bill along these lines--though with some GOP-friendly tweaks.

Posted by Orrin Judd at March 11, 2005 10:38 AM

Interesting notion but a few points

Will $1MM be enough to retire on in the future?

Once fully implemented the govt will be tracking accounts for all Americans - approx 300MM accounts. The bureaucracy to track this many accounts and deaths, when to cut off funding, when to distribute funds, etc will be enormous.

Getting rid of FICA tax is right as is means testing (i.e. no SS for people getting 200K a year)

Finally, O'Neill could be effective especially since he agrees it is a problem that requires fixing. But I think his book has alienated the Bushes too much for them to take him on as an ally in this fight.

Posted by: AWW at March 11, 2005 11:00 AM

"Mr. O'Neill has developed credibility with the Left and far Right by criticizing the President"

Perhaps I'm just nit-picking, but O'Neill has no credibility with the left. He was merely a club to beat the President over the head with. Now that he has served his purposes, the left merely discards him and either ignores him or attacks him as need be.

Posted by: h-man at March 11, 2005 12:25 PM

If O'Neill focused more on this than global warming and nukes, he might have kept his job longer.

However - why should the American people have to fund accounts for "the riches'" kids?

Posted by: Sandy P at March 11, 2005 12:59 PM

I watched the interview and was extremely disappointed. It was touted as O'Neill's solution to the SS problems. Instead, it was a naive socialist proposal for a time 65+ years from now, with no suggestion of how to deal with the upcoming fiscal crunch. And who could honestly believe that O'Neill's accounts, being untouchable and under control of the government, would remain untouched by the politicians?

Posted by: jd watson at March 11, 2005 3:34 PM

-- Instead, it was a naive socialist proposal for a time 65+ years from now--

Or a naive socialist proposal from 1935 - 65+++ years from then.....

Posted by: Sandy P at March 11, 2005 5:39 PM
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