Michael Kinsley is correct to be skeptical that privatization will generate a bonus large enough to eliminate the gap between the promises made to future recipients and the likely revenue to pay for those promises. In that sense, privatization will not "work." Neither will the status quo.
To a first approximation, Social Security's imbalance is not made better or worse by privatization. Instead, economic analysis suggests that the effects of Social Security privatization will be subtle and small relative to the challenges that lie ahead. A much more powerful tool for addressing the problem would be to increase the age of dependency, also known as the Social Security retirement age.
The way I feel about privatization is that it is a necessary but not a sufficient condition for straightening out the system. What would be sufficient would be a scaling back of benefits and a corresponding increase in personal saving. But I do not think we can get from here to there without first setting up private accounts.
While personal accounts can be an important element of a new, sustainable Social Security system, fixing Social Security will also require hard choices to ensure that promises do not exceed resources. But this should not deter us. Avoiding reform is not an option, and delay would leave us with fewer and less-attractive choices.
In the upcoming debate over alternative proposals, everyone should be careful to avoid the sophistry of those opposed to reform. In particular, we should be wary of comparisons between a new, reformed Social Security system and current law. The benefits now scheduled for future generations under current law are not sustainable given the projected path of payroll-tax revenue. They are empty promises. Unless a listener is discerning, empty promises will always have a superficial appeal.
Mankiw is arguing against those who say, "Leave Social Security alone. It's not broken yet." The fact that anyone would make such an argument is a sign of desperation, in my opinion. I cannot believe that someone would seriously suggest that we should wait until there is a huge shortfall in Social Security funds before we do anything about it. It seems to me that if you are going to reduce people's retirement benefits, you ought to give them fair warning while they are young, rather than wait until the last minute.