In his State of the Union address last January, President Bill Clinton opened a national discussion about how to "Save Social Security." Clinton proposed that any federal budget surplus (now estimated at $75 billion or more) be dedicated to shoring up the anticipated shortfall in Social Security revenues in the coming century. At present, Social Security runs a $100 billion annual surplus, money the federal government does not actually hold in trust but uses to balance its own annual budget. It is the Social Security taxes (FICA) of current workers that pay for the benefits of retirees.

And therein lies the problem. By 2013, as the baby-boomer generation begins to retire in large numbers, the system will start to pay out more than it takes in annually. By 2029 the Social Security surpluses now being generated and credited to the system by the government will no longer exist. Although most Americans think of Social Security as a kind of individual retirement plan administered by the federal government—politically, that was how FDR sold the program—it is better described as a social convenant between generations. That’s why numbers count. In 1960 the payroll taxes of five workers paid for every Social Security beneficiary. Currently three workers support each retiree, and by 2029 there will be only two workers paying into the system for each beneficiary. It is because of such demographics that payroll taxes have risen from 2 percent in the 1930s to the current 12.4 percent (split between employees and employers). By 2029 (assuming no other fix is found) payroll taxes will have to be raised, or benefits cut significantly, or the system will go bankrupt.

Clinton’s budget-surplus proposal was shrewd as well as responsible politics. Congressional Republicans are torn over the federal budget surplus. Fiscal hawks want to continue to shrink government and cut taxes. Republican moderates are leery of further cuts in taxes or government programs, especially popular middle-class entitlements such as Social Security and Medicare.

Still smarting from the political debacle surrounding his health-care initiative, Clinton has been careful not to put forward a specific Social Security proposal of his own. Many Republicans, in a move designed to appeal to anti-Washington sentiment as well as to the investment community, have championed the "privatization" of all or part of the Social Security system. If Social Security is just a retirement plan, why use government as the middle man? Why not let taxpayers open individual investment accounts with the wages that now go into payroll taxes? Investing payroll taxes in the stock market would stimulate the economy and, so the theory goes, pay higher yields for workers to retire on.

Initially resistant to such ideas, some Democrats, most notably Senator Daniel Patrick Moynihan (NY), have put forward partial privatization plans as well. Moynihan’s own plan calls for a 2 percent cut in payroll taxes that workers are advised but not required to put into tax-free individual investment accounts. Moynihan would also cut the rate of cost-of-living adjustments and raise the retirement age of beneficiaries. (The private bipartisan National Commission on Retirement Policy has put forward a similar plan.) This partial privatization scheme, Moynihan candidly admits, is intended to forestall the Republicans’ more radical privatization proposals. Moynihan says he now regrets that principled opposition to compromise on welfare reform only resulted in the abolition of the welfare entitlement altogether.

Moynihan’s worries cannot be lightly dismissed and his proposal deserves serious consideration. Although Social Security is still enormously popular with voters, support is waning—especially among younger workers, most of whom will pay more in payroll taxes than they will receive in benefits. Even more worrisome, the regressive nature of the tax—90 percent of the work force pays more in payroll taxes than in income tax—has perversely fed the broader anti-tax and anti-government mood of the last two decades. Indeed, in lowering income tax rates and increasing the payroll tax, the Reagan "revolution" managed both to redistribute wealth upward and increase the average citizen’s resentment toward government. Now some Republicans hope to use the "no new taxes" mantra to dismantle a program that is a paradigm of how government can provide for the common good.

Turning from government to the stock market to guarantee a basic economic provision for the elderly is wrong for two reasons. First, the stock market can fail (yes, even this market) in a way government cannot. Second, the social and moral return from our shared commitment to Social Security far outweighs any failure to maximize return on retirement funds. In these flush times it must not be forgotten that Social Security has been this nation’s single most successful antipoverty program. Thanks to Social Security, dire poverty among the elderly, once epidemic, has virtually been eliminated. This has been accomplished not because of a high rate of return on investment, but because the system is mandatory and has a redistributive mechanism. Poorer retirees get back a higher percentage of their contributions than do more affluent retirees. Despite popular misconceptions, Social Security is not primarily an investment program but a social insurance system designed to guarantee a minimum standard of decency for all. Indeed, one-third of Social Security outlays go to widows, widowers, the disabled, and children who have lost a parent. Just as important, Social Security still provides the bulk of retirement income for two-thirds of Americans.

Yes, keeping the system solvent will demand some restructuring. But reform should be guided by a conception of Social Security that places mutual obligation and common provision, not self-interest or private prerogative, first. In that spirit, the cap on wages subject to the payroll tax, currently at the ludicrously low figure of $68,400, should be lifted. This alone will go a long way toward balancing the books. In a similar spirit of progressive taxation, some measure of means-testing for beneficiaries is also appropriate, as is raising the retirement age. Shoring up Social Security by increasing the FICA tax is problematic, especially because this tax falls disproportionately on those less able to pay. If needed, the Social Security system should also have access to money from general tax revenues, which are raised by the much more progressive income tax. Moreover, money earned from investments, now entirely exempt from FICA withholdings, should be taxed to help pay for Social Security. A tax on stock transactions specifically dedicated to Social Security is one idea. Such a levy might also help dampen the market’s current speculative fervor.

Social Security has worked wonders, and people know it. Talk of privatization is premature if not financially imprudent, and vastly underestimates the popularity of the program and the willingness of Americans to tend to the common good as well as take care of the truly needy. In seeking a solution to Social Security’s economic problems, defenders of the program should speak the language of economic fairness and common purpose, a language Social Security has given concrete expression to for more than sixty years. An ethic of communal obligation, not mere individual benefit, should play a greater role in shaping this nation’s future.