An editorial in the Los Angeles Times claims "privatizing social security" is a bad idea because:

1) Most social security taxes are immediately paid out to beneficiaries.
2) Changes in projection assumptions would dramatically change the moment in time when the system becomes insolvent. It is possible that social security won't go broke for a long time.
3) Privatization will not make the system solvent - "transition" costs will pay off the current and future IOUs.
4) Privatization will not change the financial instruments within our economy - it's a zero-sum game.
5) Privatization would do nothing to change the savings rate within the economy - again it's a zero-sum game.
6) There is no theory which explains how it is that retirees would be able to extract more money from the economy via private accounts unless they take money from someplace else - it's a zero-sum game.

What the author of this piece is forgetting is that economics is not a zero-sum game. Simple addition and subtraction does not begin to explain things. Liberals tend to think of the economy as the huge bundle of resources, products, services and cash. The bundle is a fixed size and weight. That is an overly simplistic view of one of the most complex elements of human activity. That's not how it works.

Economists have spent huge amounts of time examining how dollars spent in different ways by different kinds of people cause different results. For example, that piece of GDP which is businesses spending to buy or build long-term assets does not cause the same result that piece of GDP which is consumers spending dollars to go out to dinner. The business spending reverberates throughout the economy creating jobs and trickling out here and there. The restaurant dollar does not get spent nearly as many times hence. Likewise government dollars do not reverberate the way business long-term spending does. Think of it this way, if we gave all our money to the government and the government was in charge of spreading it around the economy, the results would look something like the old Soviet Union, China before capitalism, or even Cuba. The overall economy would be a smaller, lighter bundle of stuff. Not only that but it would be shrinking rather than growing. The lessons the Pilgrims learned, the lessons of the failure of Communism, are that private property does matter and it is most certainly not a zero-sum game.

Social Security is a tax. Money flows from you to the government which decides when and where it will spend it. Currently, government takes from you gradually over your whole productive life and gives back to you gradually over your remaining natural life. If you die early, you get less than you put in. If you die later than the average, you may very well get more than you put in, although not much more. That is a fool's bet we usually only engage in when we buy private life insurance. But at least the decision to buy life insurance is a choice. You have no choice with respect to social security taxes. They are a certainty.

What Bush is trying to accomplish via the "privatization" is a sort of weaning the government off of its addiction to your money. You see, social security taxes aren't all spent for retiree benefits. Much of it is used by the government to fill current spending holes. The whole mess is essentially bundled together into a single budget. You don't know that because of the obfuscation we have endured for years. But the government considers all money collected to be fungible. There is no lockbox!

So maybe you buy into this zero-sum game thing anyways. Maybe you are too confused to think the thing through. OK. Think of a real world example. Take a person making $1,000 each week which they promptly spend. Now make that person place $100 into a lockbox, earning no income. At the end of 30 years, you will give that person a piece of the $156,000 you have collected you locked away and they will be better for it since they weren't otherwise saving anything when you started. Now, instead of putting that money into a lockbox, put that money into any interest bearing financial instrument and you wil discover that there is more money to distribute when the person retires. Great, but how does that impact the whole economy. It doesn't unless you have 200 million of these people who are investing in companies so those companies can purchase long-term productive assets. Then you have done something good for not only the one person, but the productivity of the economy as a whole. We have shrunk governmental spending and increased private sector spending which is what Bush is after.

Economics is not a zero-sum game. "Privatizing" social security is a move away from Communism / Socialism and results in productivity growth for the United States.