O'Neill Confident on Tax Cuts, Social Security Reform
WASHINGTON – President Bush will get tax relief enacted into law "faster than anyone would have thought possible" this year and then turn his attention to Social Security reform, Treasury Secretary Paul O'Neill said Friday.
O'Neill said the president sees long-term reform of Social Security as a vital to providing financial security for the country.
Bush told a joint session of Congress in February that he would appoint a commission to study ways to put the government's biggest benefit program on a sounder footing to handle the retirement of the baby boomers.
The members of that commission have yet to be named, but the administration has said it expects them to report their findings by this fall.
O'Neill, in a speech to a U.S. savings bonds luncheon in New York, said Washington policy-makers have too long delayed making the necessary changes to ensure the solvency of Social Security, which is projected to run out of cash in 2038 if no changes are made in benefits paid to retirees or in payroll taxes collected to pay for the program.
"We're not going to wait until we are on the brink of disaster to solve this problem," O'Neill said. "The president will keep us focused on this issue and we will produce a good result for the American people, quicker and better than the naysayers expect."
Bush has said he will push for creation of voluntary personal accounts within Social Security as a way to bolster the finances of the system.
This was an approach he promoted during the presidential campaign last year. However, an Associated Press poll last month showed that support for the idea of investing a portion of Social Security contributions in the stock market has waned following the big declines this year on Wall Street. Just about half those surveyed said they supported the idea. Last year, supporters outnumbered opponents by two-to-one margins.
O'Neill, in his speech, said the administration has already proved the critics wrong with the speed in which Congress is enacting the president's tax program.
"In January, the conventional wisdom in Washington held that the Congress couldn't pass a tax cut before September. The president wouldn't accept that timetable ... and Congress has responded," said O'Neill, who predicted on Thursday that a tax relief proposal very close to Bush's package would be approved by June 1.
The House has approved several major portions of Bush's tax package as well as the overall figure of $1.6 trillion over 10 years, but the Senate has yet to take up specific tax bills and in its budget resolution set aside only $1.2 trillion for tax relief.
In an earlier interview, O'Neill said that he believed it would take a few more months before the effects of the Federal Reserve's interest rate cuts have an impact on the economy. The Fed on Wednesday cut rates for a fourth time in an effort to ward off a recession. The rate cuts began on Jan. 3.
"In the next few months, we will see the first effects of the rate cuts made a couple of months ago," O'Neill said in a CNBC interview. "Rate cuts take a while to work their way through the economy and I frankly don't think we've seen a major reaction of the economy."