U.S. Department of the Treasury

(Archived Content)

It's a pleasure to be here with you tonight. It's always a treat to come to New York, where everyone thinks Paul O'Neill is a hero. Although since he's announced his retirement, I guess I only have a few more months to enjoy that confusion.

Tomorrow is the 6 ^th month mark of this Administration, and I'm really proud of what we've been able to do so far. We really challenged the conventional wisdom, and I think we're making a difference.

In January, we were told over and over again that Congress couldn't pass a tax cut before September. We said that's not good enough. In my testimony on the Hill I said when I ran a company and decided to give my employees a raise, it didn't even take 9 days, never mind 9 months. There was a consensus in Washington that we should have a tax cut and that we should stimulate the economy, so it was time to act.

We were able to overcome all the conventional wisdom and pass a tax cut in time to have fiscal policy hitting the economy when it is needed most. The President asked the Congress to speed up passage and make the tax cut retroactive to this year, in order to have a real fiscal stimulus. The Congress obliged, and tomorrow we begin sending out 92 million rebate checks to every American who paid income taxes last year. We're injecting $40 billion into the economy right when we need it the most.

The rebates will have an added stimulus effect because they are connected to long-term tax rate reductions. The rate reductions began on July 1, and 35 million taxpayers will see a little more in their very next paycheck. The long-term relief changes people's expectations of their available resources, so they don't just spend the check they get in the mail next month, they permanently change their spending behavior. Private forecasters have estimated that the tax cut will boost growth somewhere in the range of 0.5 to 1.5 percentage points going forward. This is a rare Washington success story, where process and politics couldn't stop a good idea.

The next challenge is Social Security. You all know the numbers, so I won't bore you with 75-year actuarial balances. It's a simple fact that if we do nothing the Trust Fund won't have enough to pay even today's level of benefits. So, we've got a problem that we need to fix. But I don't view this challenge as just a matter of solving an actuarial problem. I view it as an enormous opportunity to spread financial independence to millions of Americans, especially to groups who've struggled to reach that independence so far.

What we have to do is highlight these opportunities for financial security and also force Washington to acknowledge that there's a major cost to continuing with the current system unchanged.

We can't fix the problem until Americans understand what Social Security holds for them today. I've seen quotes stating that the Trust Fund is good for another 80 to 100 years. That's either willful misinformation or determined ignorance. And it's not fair to the American people. Millions who are trying to plan for their retirement have a right to know that the system is unsustainable in its current form.

Yet when I said there are no real economic assets in the Trust Fund you'd have thought I said the sky is red. I got angry letters from people who should be joining with me in recognizing this truth and doing something about it. Even when I pointed out that the Clinton Administration acknowledged in its 2000 budget that the Trust Fund held no real economic assets, that didn't end the tirade. I'm not telling you anything you don't already know, but somehow people in Washington think if I tell you this, you'll panic. You know better, and so do I. That's why I'm not going to stop telling the truth.

Social Security took millions of people out of poverty. It was - and is -- a brilliant idea. Now it's time for the next step. It's time to make Social Security a program that enables every American to create wealth for their retirement security.

If we want people to live out their retirements with the dignity they deserve, then we have an obligation to make every American a wealth accumulator. It's just wrong to mislead people with promises of trust the government, you'll be fine. People can do better if they own their own retirement nest egg. That's true for people of every economic and social background. Personal ownership allows them to accumulate funds and multiply them by the power of compound interest.

You all know that women tend to outlive men. So women need a larger retirement nest egg to ensure that they are comfortable in their senior years. They should be able to put the magic of compound interest to work for them, generating greater financial security and peace of mind.

You've all heard the statistics that minority men on average don't live as long as the rest of the population. Instead of forfeiting all the payroll taxes they've paid in to the system, shouldn't they be able to pass that nest egg on to their children, to improve their families' living standards?

Real ownership would make financial security possible: the ability to create a nest egg that is always there, no matter what political decisions are made in Washington. Millions of Americans who today live from paycheck to paycheck can become wealth accumulators, and improve living standards for generations to come. After all, the American Dream is for every generation to reach a higher living standard than the generation that went before. We all want our children and grandchildren to enjoy opportunities we didn't have. Giving more working Americans the opportunity to own their own nest egg will create a domino effect in families, as wealth is passed from generation to generation.

I think this is another instance where process and politics won't be able to stop a good idea. Once people understand how much better their retirements can be, they will demand personal accounts and Washington will oblige.

Let me finish by turning to the economy for a moment.

You might remember the rough treatment I got back in April when I said that the economies of the world are interconnected. I was reflecting on my understanding of how our global economy works, how the linkages between investment and spending patterns in the major economies were likely to play through. To me it was simply a statement of fact - and the reaction seemed to be a statement from those who didn't want to accept those facts. In recent weeks, we've seen just how interconnected the economies of the world are. We've seen increasing reports of how the slow down in the US is affecting other economies, from Singapore to Germany-making the fiscal and monetary policy steps taken this year to boost the US economy even more important.

I believe the US economy has the flexibility to adjust and recover very quickly. Certainly pro-growth policies around the world are crucial, both for the world living standard and for the US specifically. A strong world economy requires growth from the three largest economies in the world - the United States, Europe and Japan. I remain optimistic that we are going to see higher growth next year, and that, as we did in 1998, the US economy we will lead the world back to the path of prosperity.