IT IS CALLED the "third rail" of US politics: lay even a finger on Social Security and you will suffer the political equivalent of instant electrocution. Tonight, however, in his State of the Union address, President George Bush will not merely touch that third rail, but positively embrace it. He is expected to propose the greatest changes to America's hugely popular retirement safety net in the 70 years of its existence.
Social Security has come a long way since President Franklin Roosevelt signed the system into law in August 1935, to provide "some measure of protection to the average citizen" in the depths of the Great Depression.
Despite world war, the baby boom, the inflationary 1970s oil shock and much else beside, the system has survived, essentially unchanged. Today 47 million Americans, one in six of the population, receive a monthly cheque from Social Security. For the retiree of 65, the average payment is $1,184, but for the poorest 7 million of them, Social Security is all there is.
Now Mr Bush wants to change it. The system, he claims, is on an unstoppable trajectory towards bankruptcy, as a result of the ageing of the population being experienced by the US, along with the rest of the industrial world.
Once, a dozen active workers supported each retiree. Come 2040, there will be only two, the President argues; when those entering the workforce today retire in 35 or 40 years' time, the money will have run out. To avoid such a catastrophe, the President is calling for Social Security to be part-privatised. New workers will be allowed to invest part (according to reports, up to one-third) of their contributions in private savings accounts.
On the campaign trail last year, Mr Bush constantly extolled the virtues of these new accounts, as "something the government can't take away ... accounts you can pass on from one generation to the next". The idea sounded especially beguiling when he pointed out that long-term returns on stock market investments invariably outperform those dreary old Treasury bonds in which Social Security currently invests its surplus income.
But if America's ascendent economic conservatives have their way, this would be the first tremor in a political earthquake - not a tinkering with the status quo, but a step towards a total overhaul of retirement security that would replace a state safety net with private resources. Small wonder Social Security reform is a central facet of the "ownership society" that Mr Bush has made the domestic goal of his second term.
But is the remedy really that simple - and above all is there really a crisis at all? Social Security is financed by a payroll tax (currently 12.4 per cent) jointly paid by companies and their employees. Barring a few years in the late 1970s and early 1980s when inflation ran riot, the system has operated at a surplus. The difference between what it receives in contributions and pays out in benefits goes into a trust fund standing today at $1.5 trillion. By the best actuarial estimates, the surplus will continue until 2018. At that point the system will pay out more than it takes in. By 2040, if current contributions and benefits remain the same, the trust fund will have been exhausted, and the system will no longer be able to meet its obligations. In Bush-parlance, it will be "bankrupt".
But will it? Even after 2040, if nothing is done in the meantime, Social Security income will cover 80 per cent of scheduled payments. The very date too is hardly set in stone. Such calculations are no more than best guesses, at the mercy of unknowable variables, including life expectancy, childbirth rates and immigration patterns. …