Q: In a recent column, you offered some suggestions for fixing Social Security to keep the system solvent in years to come when all the baby boomers retire. But I noticed you didn't mention any options for an ownership society. I think taxpayers should be free to choose how they want to invest their Social Security money. Aren't you showing your liberal bias by ignoring this important method to save Social Security?

A: I want you and all my readers to come away from this column with a basic understanding of two terms: "carve out" and "add on." I'll explain that apparent nonsequitur in a minute. But first, I need to lay some groundwork.

I really try to stay politically neutral when I write this column. But let's be honest: the term "ownership society," at least with reference to Social Security, is just political spin for privatizing the system. And given the recent collapse of the U.S. and world financial markets, you won't find too many politicians talking about turning over the management of Social Security to Wall Street. At least not in the rest of this election year.

But here's something that might surprise you. This alleged liberally biased columnist actually thinks that partial privatization of Social Security would be a good idea. I need to explain what I'm talking about, but first, you need to understand this important point: Any plan to privatize Social Security does ABSOLUTELY NOTHING to improve Social Security's long-range financial picture.

To prepare the system for the onslaught of all the baby boomer retirees, you either have to pump more money into Social Security's intake pipe (raise taxes), or cut back on all the money that will be gushing from the outflow pipe (lower benefits). Privatizing the system does neither. In fact, if anything, it makes the picture even bleaker because most privatization plans siphon money out of those intake pipes and puts it in the hands of Wall Street brokers.

Now, back to what I think might be a good way to reform Social Security. In addition to implementing one or more of the proposals to raise Social Security taxes and/or trim benefits as I explained in a column several weeks ago, I think Social Security taxpayers should be given the option of investing some extra money into one of several investment options managed by the federal government. This would be run in a manner similar to the way the very successful Thrift Savings Plan works for federal government employees and retirees.

To understand the difference between this kind of plan, and the privatization plans generally touted by most conservative politicians, you need to focus on the two simple terms I used at the beginning of this column: "carve out" and "add on."

"Carve out" privatization plans do just what their name implies: They carve money out of the current Social Security system and put it in the hands of taxpayers to invest as they choose in the private markets.

The current Social Security tax rate is 6.2 percent. (Taxpayers also fork over another 1.45 percent of their payroll into Medicare. But we're limiting our discussion to Social Security taxes.) A typical "carve out" privatization plan might give 2 percentage points of that payroll tax back to taxpayers and let them invest that money on their own. That leaves only 4.2 percent going into the Social Security trust funds. That's why I said that privatization plans (at least the "carve out" plans) actually worsen Social Security's long-range financial picture. When pressed, most "carve out" privatization proponents will admit that future Social Security benefits would have to be dramatically reduced. But their theory is that the shortfall would be more than made up for with the private market investments.

On the other hand, "add on" privatization plans continue to pump the full 6.2 percent payroll deduction into Social Security trust funds. But these plans give the taxpayer the option of putting additional money into one of several government-sponsored investments — that would run the gamut from riskier stock market accounts to much safer U.S. treasury-backed securities.

That "add on" approach is exactly the way the "Thrift Savings Plan" works. And I think if you talk to federal government employees or retirees, they'll tell you they love the TSP. And I think a Social Security/TSP system would be a great idea for all Americans.

To find out more about Tom Margenau and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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