FROM THE OFFICE OF PUBLIC AFFAIRS

Good afternoon. It is great to be here. Since I became Treasury Secretary I've found it is so easy to get a reservation at the great restaurants in New York. I just call the maitre d' and say this is Paul O'Neill and I would like to have a table for four at eight o'clock. The maitre d' says "that will be fine Mr. O'Neill. Is there any chance Derek Jeter or Roger Clemens will be joining you?"

Okay, so that's the other Paul O'Neill. He's got a great life. He has a 3 for 4 day and the press accounts are wonderful. Lucky for him he doesn't have a point of view about whether there is economic stimulus in the President's tax reform or on global climate change or foreign exchange rates or workplace safety. The other Paul is very expressive. When he has a particularly bad at bat he shares his feelings with the water cooler in the dugout. I've been thinking about getting a water cooler for my office.

Thank you for inviting me to give you some inside perspective on President Bush and his economic agenda. I'm always glad to be invited back to New York - I worked here for ten years, and there is always a sense of coming home.

I've been in Washington now for three months and I've especially enjoyed getting to know George W. Bush. He is a serious man who believes deeply in the goodness of America and what we can achieve. That was clear to me from the day I first met with him to discuss joining his Cabinet. We talked about principles and policies and means, beginning with education. The principle is "no child left behind." I have worked on this subject as a policy analyst in the Federal Government, as Chairman of George H. W. Bush's Education Policy Advisory Committee, as Chairman of the Pennsylvania State Standards Commission, and at the local level as Chairman of an Education Policy Group. I have come to the same conclusion as President Bush. The first priority for our society should be "no child left behind".

I believe it is our obligation to achieve this result, and I am convinced we will achieve it when citizens at the local level commit themselves to the idea that when children get to be ten years old they will have the foundation skills they need to be life long learners.

To deliver this result we need early diagnosis of learning development and individually tailored interventions for those who are lagging behind. Yes, it takes money, and the President has proposed that, but we need standards and measurement too, always focused on the success of individual children, not on statistical aggregations about groups of children or entire schools. And we need to check progress every three months and change our interventions if we are not making progress.

As we discussed the full spectrum of public policy issues on that December day, I found myself in agreement with all of the important elements of President Bush's vision and that's why I abandoned my own plans and signed on for this job.

I'm proud to be part of his team, working to foster prosperity in every corner of this nation, and to play a part in fostering what I believe can be a golden age of economic prosperity for the world.

I'm proud to join the team of a man who believes our society is only on the frontier of its true potential. As Treasury Secretary my first priority now is to get the President's tax reform enacted.

Think back three months ago and you will remember the conventional wisdom was that if there was to be any tax reform this year it would not come before September or October and it certainly would not be more than half the size that President Bush was recommending. The President refused to accept that timetable. The result, the House has already passed several pieces of the President's tax relief plan. And in a vote on April 6th, 65 members of the Senate supported a ten-year tax cut of $1.27 trillion and $85 billion of immediate tax relief.

I believe next week we will see the House and Senate come together around a tax relief number that is very close to the President's request. That's leadership in action.

You've all seen projections that we are going to have a $5.6 trillion surplus in Washington over the next 10 years. Private forecasts are close to Washington forecasts on this subject. The President has put together a reasonable budget plan that pays down $2 trillion in publicly held debt, provides $1.6 trillion for tax reform, and funds all of our budget priorities. We've got some work to do convincing the Congress that a 4 percent increase in spending is plenty to cover our needs, but we'll get there.

The slowdown in the economy makes it all the more important that the Congress act on tax relief quickly. We can put money in people's pockets this year, with the knowledge that it is just the first installment of permanent tax relief, and we can reignite the spark of economic growth.

As soon as we have tax relief in place, we will turn our attention to Social Security. Standing alone against the pundits' advice that he should not say anything about Social Security in his campaign, he championed the cause of long needed reform.

I remember going before the Senate Appropriations Committee in 1973 with George Shultz who was then-Director of the Office of Management and Budget. He told the Committee that we needed to fix Social Security before it led to an intergenerational fight between the young and the old because the system could not be sustained as the age balance in our population shifted. That was twenty-eight years ago - and, the time to make necessary changes is running out.

President Bush is committed to fixing Social Security. He has already announced that he will create a commission to develop the framework we need in order to put specific legislative recommendations before the Congress. The President will keep us focused on this issue and, as in tax reform, we will produce a good result for the American people; quicker and better than the naysayers expect.

Further down the track, it is my hope that we can turn our attention to tax code simplification. The code today encompasses 9,500 pages of very small print. While every word in the code has some justification, in its entirety it is an abomination. It imposes $150 billion or more of annual cost on our society with no value creation. We are worthy of better.

I want to turn for a moment to the world outside the United States and say a few words about the international financial institutions.

I want to begin with a declaration. I believe the international financial institutions are a necessary and important part of our past, present and future. But I am concerned that their future will be constrained unless we can work together to reduce the amount of time and money they spend on fire fighting. Certainly, there will always be unexpected events that we and the institutions will have to deal with, but fire fighting should be the exceptional cases for these institutions, not the norm. In examining some fire fighting cases, it is clear to me that some professional economists and financial people knew beforehand that economic conditions were deteriorating. Dealing with such situations before they turn into a contagious disease seems to me to be the preferred policy. In a sense, doing so in advance requires taking more responsibility, because you have to stick your neck out and tell people what needs to be done before crisis forces your hand. But I don't know any other way to fulfill my fiduciary responsibility to the American people.

As we in the finance ministries of the world talk glibly about billions of dollars of support for policies gone wrong, we need to remember that the money we are entrusted with came from plumbers and carpenters who sent 25% of their $50,000 annual income to us for wise use.

Finally, I want to comment on the challenges that are internal to the Treasury Department and, more broadly, to the Federal Government.

I can tell from some of the editorial comments that I have seen that some people are mystified as to why I would bother myself with anything that didn't rise to the level of global finance and Presidential policy making. These commentators don't understand my notion of leadership. In a nutshell, that notion is this: Excellence is a habit.

If your organization is not striving to be the best in the world at everything you do, then you are unlikely to be truly excellent as an organization. Let me take this down from the lofty to the concrete. In the organization that I left in December, it took us 2-1/2 days to close our financial books at more than 300 locations in 36 countries. It takes the Federal Government five months to close our books; and then the auditors give us a qualified opinion. This is not the stuff of excellence.

Let me hasten to add, this is not the fault of the workforce. The Federal workforce can deliver what the leadership asks for. I have begun to ask for plenty from the Treasury Department workforce, beginning with workplace safety. Parenthetically, I find it odd to be criticized for caring about the health and safety of the 160,000 people who depend on me for leadership. I proved in my previous work life that it is possible to build an organization that is known for excellence; based on a foundation of dignity and respect for every individual.

I will continue to do the same in my new work as I strive to give meaning, in every way, to President Bush's vision.