There is no longer any serious question that Social Security is facing crisis. Even a great many Democrats in Washington who once made “there is no crisis” their singular talking point on the issue now concede America’s invaluable retirement program is in need of repair.

The problems facing Social Security are severe. According to Federal Reserve Chairman Alan Greenspan, the system will begin to run cash flow deficits in just three years – the Social Security tax revenue surplus will peak and then begin to decline. In a little more than a decade, Social Security will begin to pay out more than it takes in. Those deficits will accumulate until the year 2041, when the system will no longer be able to meet its promise to America’s retirees. A cherished component of the American way of life will have simply ceased to be.

All told, the system faces an $11.1 trillion unfunded liability. Sen. Joe Lieberman (D-CT) estimates that each year Congress puts off fixing the problem will cost beneficiaries and taxpayers $600 billion.

President Bush has proposed two courses of action, which, working in conjunction, will avert disaster. The first is to change the formula by which benefits are calculated by instituting progressive indexing. Progressive indexing would reduce the rate of growth in benefits for future retirees who today earn higher wages.

Low-wage workers would not be subject to any change in their benefit structure.

President Bush’s second proposal would make future retirees less reliant on taxpayer-funded benefits by permitting them to invest a portion of their income into personal retirement accounts; safe stock and bond funds similar to those enjoyed by millions of federal employees.

It’s important to note that none of Maine’s 263,000 Social Security recipients would be affected by these reforms. If you were born before Jan. 1, 1950, your Social Security will not change one iota.

This is a significant feature of the plan, because Maine’s senators, Olympia Snowe and Susan Collins, have expressed concern about the personal accounts, claiming the transition costs of such a reform could accumulate as much as $2 trillion in debt.

The so-called “costs” of reform are already part of the current system and will continue to grow unless proposed reforms take them fully into account. The full, official measure of the government’s commitment to pay future retirement benefits in excess of future payroll taxes, as stated above, amounts to $11.1 trillion (in present value terms) under the current system. And, just like debt, this cost grows with interest as time passes. Those who say Social Security doesn’t need reform need to specify where that $11.1 trillion is going to come from.

Under the current system of budget accounting, all of this cost remains hidden. Indeed, because the Social Security trust fund currently holds government IOUs, many believe that Social Security is well funded and not in trouble; and this partly explains the eye-popping reaction when someone suggests that the “transition cost” of a reform plan is $2 trillion.

For perspective purposes, the amount of those IOUs is insufficient to alone pay more than three years’ benefits to current retirees. The surpluses will serve to subsidize the remaining years’ benefits that will continue to come out of current payroll taxes paid by a worker – which implies those funds won’t be invested for their own future retirements. Future generations will not have the advantage of a system that accumulates a surplus so there is a need to create a system that can subsidize future payments.

Hence, transforming the system by introducing personal accounts won’t create “new” costs. It will only make existing costs visible. But again, the president’s proposal also reduces the system’s overall costs by slowing future benefit growth.

Complicated? Yes. But here’s the bottom line: the so-called “transition costs” associated with establishing personal accounts are debts we will have to pay regardless of whether we maintain the status quo or convert to a pre-funded, investment-based system. It’s merely a question of where we want that money to go.

Bill Becker is the executive director of the Maine Heritage Policy Center.