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Before we decide if privatization is the answer, we had better figure out as a nation which question it's answering.

Do we view privatizing as the only way to make Social Security financially solvent? Or do we increasingly believe people should take more responsibility for their retirement from the government? If it's the latter, are we willing to live with the periodic losses that inevitably will be accrued as a result of these new investing freedoms?

Financial solvency for Social Security appears the least compelling reason to privatize -- even if the Bush administration relies on it most. By repeating concerns about a looming financial crisis, the administration is hoping to galvanize support for privatization. The trouble is, privatization doesn't resolve the financial issue, certainly not by itself and definitely not for a long time.

Social Security taxes will generate enough revenue to pay promised benefits until 2018. If you include money the federal budget owes Social Security -- the so-called Social Security Trust Fund -- then there's enough money until 2042.
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[quoting CBO Director Douglas Holtz-Eakin] "Privatization is the second step in a two-step dance. The first step is an important step, that is, addressing the long-term gap between outlays … and revenues dedicated to Social Security. That gap has to be closed somehow. Privatization does not finance that gap.''

As the administration already has acknowledged, the gap can only be closed by cutting guaranteed benefits or raising taxes.

Treasury Secretary John Snow is openly talking with Wall Street about borrowing between $1 trillion and $2 trillion over 10 years to pay for privatization. Since ours is a pay-as-you-go system, the borrowed money will replace the payroll taxes that now go to pay the benefits of current retirees but will be diverted into private accounts.

The only savings we'll get out of this is if the government cuts the guaranteed benefits, offering workers the opportunity to make up the difference with greater returns through investments. While the costs are immediate, the payoff for the government isn't for many decades. If we're privatizing to save money, it seems at least reasonable to consider the long-term costs of other ideas. Some of those include a combination of higher taxes and reduced benefits implemented over a long period.

So there must be other reasons.

In fact, privatization is part of a greater change in the zeitgeist, in which we're increasingly less likely to look to the government to solve our problems.
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I add that support for privatization is even more striking given the recent collapse of the stock market bubble and the headline-grabbing problems of several pension programs. If the blow-up of employee pensions at Enron Corp. doesn't scare Americans from Social Security privatization, it's hard to imagine what will. More Americans than ever have first-hand experience with the inherent risk of equities, suggesting maybe we know what we're getting into.

And that's really the most important part of this debate. People are going to have to acknowledge the facts of privatization: It isn't about the financial insolvency of Social Security, at least not in the first instance.

Let's acknowledge that we are moving to a fundamentally different system, from one with guaranteed benefits to one with inherent risk where we are free to make investment decisions that could lead to greater gain or loss. The possibility of some losing money in the stock market could result in a standard of living for some retirees that we have found unacceptable in the past -- what led us to create Social Security in the first place.

And let's acknowledge the costs of that. Security isn't free, it has a price and we pay it through the relatively low returns of the existing program.

Instead of talking about how the process isn't risky, the president should stand up and say: "This is potentially risky. You could win or you could lose. But we're going to let you -- not the government -- make the choice, reap the rewards and book the losses.''

Privatization of Social Security is a solution to a problem. Let's just be really clear what problem it's solving.