Contrary to conventional wisdom, the debate over Social Security's future is not over. Indeed, it may take a new path that could fundamentally change our economic system.
 
Most Republicans and Democrats, ideologists of all persuasions as well, accept that Social Security as presently structured is not sustainable. Social Security's Board of Trustees has made this abundantly clear in its voluminous annual reports, warning us in excruciating detail of the mismatch between taxes and benefits and the sum of all projected shortfalls.
 
There are just three available options: increase taxes, cut benefits or increase the rate of return on taxes. President Bush has promoted the third option by allowing individuals to save and invest a small part of their payroll taxes in higher-earning capital markets through personal retirement accounts.
 
Others advocate the first option by increasing the wages subject to tax. Still others favor cutting benefits by linking them to longevity or some index that favors low-income workers at the expense of higher-paid workers. The president has endorsed this last idea, as well.
 
While the politics of these options are discussed, there are two apolitical axioms to consider. The first is that those who reach the working age of 20 will almost certainly live to age 62 and need retirement income. The second axiom is that saving and investing is the most efficient way of providing retirement income if reaching age 62 is "almost certain."
 
Social Security's defenders, even though they acknowledge the merits of saving for retirement, remind us the system was never meant to be an investment program but rather, to paraphrase President Franklin Roosevelt, social insurance protection against disturbing factors in life related to old age.
 
Social insurance made some sense when the program started because achieving old age was uncertain and the value of insurance is predicated on uncertainty. The government could tax many workers a small amount to finance retirement for the few who made it to their mid-60s.
 
However, outcomes which are almost certain, such as now reaching old age and needing retirement income, face a different financial challenge. Because there is little uncertainty to share and be financed by the larger group, each member must save and invest for his own retirement. There is no more cost-effective way.
 
Mr. Bush's advocacy of personal accounts is consistent with these two axioms. But his opponents argue personal accounts, not the saving and investing, take taxes from a system that needs more revenue not less. They declare you can't fix a resource-starved system by taking resources away. Gridlock.
 
Personal accounts have a lot to do with who owns the assets, but in a limited sense little to do, per se, with saving and investing. This is the nuance that the administration's critics will likely mine.
 
The logic of their argument is that if individuals pay fewer taxes and divert them to personal accounts, then the government has fewer resources to pay promised benefits. But if the new saving and investing remained with the government, it would not lose resources. In fact, it would gain them by the amount that the return on private capital is greater than that on the government bonds in the so-called trust fund.
 
Social Security could be saved without unduly increasing taxes or decreasing benefits -- both politically difficult -- by doing what President Bush has always wanted to do but with a subtle twist. This is the slippery slope to socialism.
 
Milton Friedman warned of this in a 1999 Wall Street Journal op-ed: "I have often speculated that an ingenious way for a socialist to achieve his objective ... would be to persuade Congress ... to fully fund obligations under Social Security and invest the accumulating reserves in the private capital market by purchasing equity interests in domestic corporations."
 
It's not far-fetched. Over the last decade, there has been a subtle shift on the part of Social Security's defenders. In the early years, they were against any investing. Then they began to change their position but with the caveat that only the government own the assets because, in part, of the resource issue mentioned above.
 
What they miss, or choose to ignore, is that the accumulating assets, if held by individuals, are equal to those if held by the government; resources are not lost. Rather, they are reallocated and the government's benefit obligations fall as individuals' assets rise.
 
But this aside, they are now in a better position then ever of achieving their goal of government investing. Emboldened, even. After George Bush boldly took the offensive to reform Social Security in his 2005 State of the Union address, the message was badly botched thereafter. Political capital that was meant to be invested was instead squandered. The oxygen so necessary for this political success has gone elsewhere.
 
Fundamental Social Security reform is now rarely mentioned; it is more remote than it was at the beginning of 2005.
 
Milton Friedman's speculation is not. If the socialist is able to achieve his objective in such an ingenious way, our economic system will fundamentally change. Political capital is a funny thing; once squandered it is more difficult to acquire than it was before it existed in the first place.
    
William G. Shipman is chairman of CarriageOaks Partners LLC and co-chairman of the Cato Institute Project on Social Security Choice.
 
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