National newspapers last week ran front-page stories about the contents of a leaked memo from the White House detailing its strategy and challenges of reforming Social Security. But the memo was not merely a political document that may have been floated for public reaction. It was an acknowledgement that privately investing part of their Social Security payments through personal savings accounts is partly a distraction. The ideology of an “ownership society” may be sincerely behind the accounts reform, but the money is in another reform altogether.

The memo was written by Peter Wehner, President Bush’s director of strategic initiatives. In it he writes the following:

“If we borrow $1-2 trillion to cover transition costs for personal savings accounts and make no changes to wage indexing, we will have borrowed trillions and will still confront more than $10 trillion in unfunded liabilities. This could easily cause an economic chain-reaction: the markets go south, interest rates go up, and the economy stalls out. To ignore the structural fiscal issues – to wholly ignore the matter of the current system’s benefit formula – would be irresponsible.”

Running up $1 trillion to $2 trillion in debt without solving the problem would indeed be irresponsible. But what portion of the problem do personal savings accounts solve if the system would still have trillions of dollars in unfunded liabilities with them in place?

Mr. Wehner uses $10 trillion as the amount to be bridged; Social Security trustees, who include members of the president’s Cabinet, put the number at $3.7 trillion for the next 75 years. But the important part of the memo emphasizes the essential inclusion of reforms to wage indexing, the process by which Social Security payments are established, to be adjusted each year through the Consumer Price Index.

“We simply cannot solve the Social Security problem with Personal Retirement Accounts alone,” writes Mr. Wehner. He suggests a close look at alternatives, the most talked about of which is price indexing as discussed by the Social Security Commission, which factors the CPI also into the rates that establish benefit levels.

The result would be payments worth considerably less than the amount paid out today and that would continue to drop over time. A study by the Congressional Budget Office last year said the payments from this option – the commission’s Plan 2 – would be lower starting for those born after 1970 than what would be received by doing nothing and letting the trust fund exhaust itself by mid-century.

It is unlikely that Congress would allow significant benefit cuts that would come with the Plan 2 reform, and there is little reason to advance personal savings accounts if they required the federal government to borrow $1 trillion to $2 trillion but still not fix the Social Security problem.

In his memo, Mr. Wehner described the challenge of Social Security reform as “not simply an economic challenge, but a moral goal and a moral good,” which is a fair way of looking at it. But the economic challenge remains, and the distraction of a debate over privatizing a portion of the accounts doesn’t make the numbers add up any more easily under the reform contemplated by Plan 2.