NCPA - National Center for Policy Analysis

A Private Pension Fund Trustee Would Go To Jail For This

June 19, 2001

Treasury Secretary Paul H. O'Neill, a former business executive, says that if he and his managers 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 current Social Security system, O'Neill told a group of financial executives in New York City, has "no assets" and leaves Americans vulnerable to the whim of "someone else's promise."
  • The choice, O'Neill asserted, was between "an account with money in it or an account without any money in it."
  • 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.

O'Neill spoke at an organizational lunch of the Coalition for American Financial Security, a group that favors partial privatization of Social Security. Many of the few dozen executives at the lunch were fund managers.

"I come to you as managing trustee of Social Security," O'Neill told them. "Today we have no assets in the trust fund. We have promises of the good faith and credit of the United States government that benefits will flow."

According to the most recent report signed by O'Neill, the Social Security trust fund has more than 50 special Treasury securities totaling nearly $900 billion.

O'Neill and other critics 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.

Source: Glenn Kessler, "O'Neill Seeks Social Security Changes," Washington Post, June 18, 2001.


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