Our current system is old and broken.(Be not afraid: Social Security reform is no radical idea)

The idea of an Ownership is politically and economically revolutionary, because it's a way to create a nation of stakeholders. Every American could own a share of the larger American economy--and have a chance to share in its prosperity. That would particularly benefit low-income people--many of whom currently have no assets, nothing but their hourly wages. This would be their first opportunity to own something tangible and lasting.

Almost all Americans know that Social Security simply must be fixed. It is in dire financial straits, as the adjoining large chart indicates. If we wait much longer, we will wake up one day to massive annual shortfalls, and the realization that we have promised older Americans trillions of dollars of benefits for which we do not have the funds.

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Democrats say that if we will just raise the payroll tax enough we could solve the problem. Well, yes, we could eliminate the shortfall for Social Security--but we would have to raise the tax a whole heck of a lot to do that. John Goodman at the National Center for Policy Analysis indicates that the payroll tax would have to jump to somewhere around 25 to 30 percent of each worker's salary just to pay for currently promised Social Security and Medicare benefits.

And even that wouldn't solve the essence of our Social Security problem. Because Social Security is simply a lousy deal in terms of the rate of return it offers young workers. And if the system were made solvent in its current form through a combination of sharp tax increases and draconian benefit cuts, it would become an even worse deal for young Americans, who would have to pay more into the system and get less out of it.

There's no reason any young worker would want to enter such a system--and no reason he should have to. A system based on real savings and personal accounts can eliminate the annual deficits hanging over our future, while also offering much better returns, and thus a richer retirement to Americans. Why patch a badly leaking, barnacle-encrusted 70-year-old ship, when we could just as easily transform it into a sleek, modern craft?

The chart below compares the long-term rate of return on stocks and bonds to what Social Security promises to pay (this assumes the dubious proposition that benefits wouldn't be cut--and taxes wouldn't be raised). As you can see, Social Security gives miserable returns on the dollar. The bond market reliably does two or three times better, and the real rate of return on stocks over a ...