O'Neill spoke to a group of financial executives in a small wood-paneled room at the top of the World Trade Center in New York City on Monday, laying out the themes of the Bush administration's push to overhaul the program.
He said that allowing workers to divert some of their payroll contributions to stock and bond investments in an individual account would give then "real money in a real account" that could be passed on to their heirs, according to the Washington Post.
O'Neill said that if he and his managers in his old job as a corporate executive had run their pension funds the way the government ran Social Security, "we'd all be in jail" because "we would not be permitted to have pension-fund obligations without assets behind them."
The choice, O'Neill asserted, was between "an account with money in it or an account without any money in it."
The group before which O'Neill spoke, the Coalition for American Financial Security, favors partial privatization of Social Security and plans to launch educational efforts to complement the work of a commission appointed by Bush to make recommendations on a privatization plan.
The group was founded by Frank Russell Co., a Tacoma, Wash., subsidiary of Northwestern Mutual Life Insurance Co., which helps corporations allocate pension money among fund managers.
Many of the few dozen executives at the lunch were Frank Russell clients or other fund managers, with only a smattering of representatives from big Wall Street firms that might profit from privatization.
An adviser to some big firms said they were wary of being too closely associated with the push for Social Security privatization, and so were unlikely to join the effort.
The Post said O'Neill's blunt description of Social Security, while widely shared among Republicans, is noteworthy because as managing trustee of Social Security, he signs the trustees' reports stating that the trust fund contains real assets.
Social Security benefits now are paid with payroll taxes collected from current workers. Since more payroll taxes are being collected than necessary to pay benefits, the surplus funds are being used to pay down the publicly held debt while also being credited to the trust fund.
The government has made a political commitment to honor the bonds held in the trust fund, which pay market rates of interest. Failure to make good on that promise, the Post noted, might be regarded by financial markets as a default by the U.S. government.
But O'Neill and other critics of the current system argue that the trust funds are merely an accounting fiction that disguises the fact that in 15 years, payroll-tax collections will no longer cover promised benefits.
Some analysts disagreed with O'Neill's description of the trust-fund assets as essentially meaningless, especially when compared with stock investments. "A stock is a risky investment, while a government bond is as safe as Fort Knox," said Henry Aaron of the Brookings Institution. "It depends on who makes the promise."
To view the Washington Post article, click here.
asury Secretary Paul H. O'Neill has launched an attack on the current Social Security system, contending it has "no assets" and leaves Americans vulnerable to the whim of "someone else's promise."