Paul O’Neill, Former U.S. Treasury Secretary

This is a partial transcript from Your World with Neil Cavuto, April 30, 2003, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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NEIL CAVUTO, HOST: The president still wants his tax cut. But it’s not the size he wants. And apparently it’s not even what some Republicans want, most notably this next fellow, this very president’s former Treasury Secretary Paul O’Neill.

Secretary, good to have you.

PAUL O’NEILL, FMR. U.S. TREASURY SECRETARY: It’s great to be here, Neil.

CAVUTO: So much I want to talk to you about. First on the tax cut, Secretary. You went out on the record shortly after leaving office saying it was a mistake. Do you still feel that way?

O’NEILL: In fact, I didn’t say that, it was an interpretation that ended up in the newspaper from a question that was asked to me after I did a television interview.

CAVUTO: Yes, but the interpretation was fairly, I don’t flip over this.

O’NEILL: Well, I’ll tell you my view. Alan Greenspan said today something I think is very important, that people need to focus on, that is fundamentally the long-term growth prospects of our economy are still very solid. I believe this. I don’t care too much to get caught up in the day- to-day pushing and shoving over these issues, but when I was in the government, and even now I believe this, that the federal government has a unique responsibility to define the terms and conditions under which our a economy works. And when I was there and even now as I look at what we should be doing, I continue to believe that we need to do fundamental tax reform.

CAVUTO: Is this fundamental?

O’NEILL: What I have said, for me, fundamental tax reform is really sweeping reform that simplifies the system that makes it fair. Right now, by the best calculations, $200 billion worth of revenue that is due in owing under the current law is not being collected; partly because the system is too complicated. There are 9500 pages in the.

CAVUTO: I know how complicated the whole system is. Here’s what I want to.

O’NEILL: And so I believe for fundamental tax reform, we need to basically redesign, we need a consumption based tax. We need to eliminate the fiction that corporations pay taxes. And.

CAVUTO: Well, the president agrees apparently on all those counts. But it is going to be done in stages. The first cut you championed and got through. Now this, are you just as confident about or no?

O’NEILL: I’ll tell you, I believe that you need to have a north star in what you are you trying to accomplish. And for me, the north star is fundamental tax reform. And I think you don’t get it done unless you lay it out for the people so that they know where are you going and they know how it is going to affect them. And I think only a president can put that premise down. I think it takes time to do it. I think in the case of fundamental tax reform, it takes a couple of years for a president to establish the predicate for why we should do it and how we should do it. And then I think there needs to be an election so that a president gets the mandate.

CAVUTO: But you think this Iraq war and the goodwill the president got after that helps him in his push? We had Treasury Secretary Snow here not long ago saying certainly this will make the president push harder.

O’NEILL: I don’t know. You know, not being an insider, I don’t know. But if I can finish my thought, I think the federal government has a responsibility for creating the context for our economy. And I think fundamental tax reform would be interpreted if enacted by the market as a very positive sign because we have got so much inefficiency in the system. It is costing us $200 billion to administer this morass. That would be a very substantial amount of money to reduce to make available to the economy for investment. Secondly, I think that the market would love a creation of a new retirement system that is better than Social Security, that creates more savings in the economy.

CAVUTO: Well, you are probably right on all those counts, but now you talk about what the market would like, were you worth bothered that many in the market were glad to see you go and they blamed you for a lot? Did that hurt?

O’NEILL: Well, I don’t know that your premise is right. I’ll tell you, as I walk around the streets of New York, I’m amazed. As I was walking in here today, some fellow from J.P. Morgan introduced himself to me and said, you did a great job and I’m sorry you are gone. So I don’t know, maybe you know a lot of people who are glad to see me.

CAVUTO: So how did you feel about that? I mean, how did you feel about the way you had to leave and the circumstances?

O’NEILL: I’ll tell you what, I am having fun every day of my life now. I am working on things that I know a lot about and I think are fundamental. Health and medical care is a great problem in our country. I believe that I know how we can reduce the cost of health and medical care 50 percent and substantially improve outcomes at the same time.

CAVUTO: You are writing a book, right?

O’NEILL: Well, actually, what I am doing in this area is, five years ago, I helped to found a group of 42 hospitals, and all the medical societies, and the insurance companies, and the big and small employers in Pittsburgh, and we are beginning to demonstrate that it is possible to make big cost reductions by eliminating mistakes, by getting rid of what happens in most acute care facilities.

CAVUTO: So that is your focus now. There’s no bitterness looking back at the whole White House thing.

O’NEILL: I’m working on.

CAVUTO: Have you talked to the president since?

O’NEILL: I have not.

CAVUTO: Have you talked to Treasury Secretary Snow since?

O’NEILL: I talked to him when he was coming in. Let me finish what I was saying. I am working on health and medical care.

CAVUTO: Seriously, why don’t you like to mention all of this political stuff, you just don’t want to be bothered with it?

O’NEILL: It is not relevant to me anymore.

CAVUTO: You were the treasury secretary of the United States. You left like a thief in the night.

O’NEILL: It does not mean that I am not continuing to be interested in these things, but I am finding new ways to get ideas in front of the population, to help perhaps shape the conversation going forward in things I know about.

CAVUTO: But if you were ever asked to government service again, what would you say?

O’NEILL: That’s really hard. I must tell you, I think you know this, when I was asked to be secretary of the Treasury, I made a three-page list of reasons why that wasn’t a good idea and shared them with the vice president and the president. And they waived them aside. I think maybe my instinct was right.

CAVUTO: All right. Paul O’Neill, always a pleasure, thank you very much.

O’NEILL: Nice to see you.

CAVUTO: The former treasury secretary of the United States, Paul O’Neill.

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