When previous administrations needed to reform Social Security, they took predictable steps: They increased the amount collected to anticipate baby boomer retirements, raised the age at which beneficiaries would receive the full payment, adjusted the rate of payment increase to more closely match inflation. These steps were significant and sometimes controversial, but there wasn’t much question of what the goal was or how the change would affect the long-term health of Social Security.

Privatizing a part of the system, as the Bush administration is considering, however, raises those questions. The current administration doesn’t have a specific plan yet but President Bush has made it clear that he intends to use partial privatization to address a coming shortfall in Social Security payments. The president may be able to make the case that this is a good idea, but he hasn’t made it yet and rather than create a sense of crisis to force privatization through Congress, he would do better to proceed slowly and spend a lot of time explaining the details of his proposal.

The severity of the shortfall is debatable; Social Security’s board of trustees projects the program’s trust funds will be depleted by 2042, reducing the amount to be paid out to only what was being paid in, about 73 percent of what is needed. Unlike reforms carried out in 1977 and 1983, there is more time to act now, which suggests that more modest changes could make payments sustainable for decades more. Privatizing part of the system could take many forms – from letting workers invest a significant portion of the money on their own to having the government direct a small percentage of the total

to a few index funds.

If the purpose of this is to stabilize the long-term outlook for Social Security, the added interest from stocks would be offset by lower payments from Washington, which itself would be raising more money from private markets to make up for the loss in the payroll tax. Add to this the potential problem of a lot of people with limited experience trying to make their retirement money beat the Treasury-plus-broker-fee rates and it is difficult to see how the nation grows its way out of its Social Security problem.

Difficult, though not impossible, which is where the Bush administration could begin its explaining. For instance, financial experts say privatization would be a bonanza for financial-services companies. Stock market investments are more profitable than bond market investments because of exchange fees and broker commissions. Small, “odd lot” stock market transactions are the most profitable of all. Would those be prohibited?

Speaking of Congress, Sens. Olympia Snowe and Susan Collins remain circumspect about privatizing. Like almost everyone else, they want more information about a specific plan before deciding. Sen. Collins suggests it could be a mistake to try to complete a reform this winter – she points to the Medicare drug benefit as an example of hurrying a faulty reform into place – and suggests Congress look at a broad range of reforms. Without endorsing the idea, she sensibly says Congress should analyze Sen. Lindsey Graham’s idea of raising the top taxable income from about $88,000 to $200,000, without touching the tax rate.

She also says the overhaul would be a good time to revisit the government pension offset, which unfairly denies benefits to teachers in Maine and other states, and look at whether the remaining 14 states that have not switched to Social Security for state and local workers should be required to do so. All of it should be on the table as Congress uses this year and possibly next to sort out competing ideas.

But first the president needs to offer a specific plan, then he has the tough job of trying to sell it.