First, borrowing money to pay these costs would be ill advised. I have never suggested such a thing.
Secondly, if the social security tax were abolished, then there is no reason why this cost could (or should not) not be funded from general revenues. The shortfall you are describing occurs over decades and would not be as burdensome as you imagine, especially since after an initial painful period, the costs would gradually decline as the number of SS recipients gradually declined. Some increase in general revenues would certainly be needed for quite a few years to replace the loss of the SS tax, so a tax increase might be needed, but this shouldn't require a larger total tax bill than before. What is needed is a growing economy, and a less "progressive" and simpler tax structure can help create that.
Thrid, this transition has already been successfully accomplished in several countries, most notably Chile, which moved rapidly from a SS like system to a 100% vested and individually controlled system very quickly, and found the process both politically and fiscally realistic.
Fourth, the entire process of streamlining, simplifying, and updating our tax and savings systems might best be done simultaneously. Doing sso would allow a rationalization of the entire structure, and might ease some of your fears.
On the other hand, such changes might just play into them.
The White House IS suggesting it. That's part of my objection.
View this here:
http://www.whitehouse.gov/news/releases/2005/01/20050114-7.html
Specifically, he states:
"Second, we must not increase payroll taxes, because taxes are already high enough on America's workers, and higher taxes would slow job growth, and our entire economy. And third, we should give younger workers the option to save some of their payroll taxes in a personal account, a nest egg they own and control and can pass on to their children, which the government cannot take away. Let me emphasize here, this would be an option, it would be voluntary. Workers who prefer to continue with the current system should and will be allowed to do so.
Setting up personal accounts as part of a reform package is needed to modernize the system. Workers should have the option of investing more of their own retirement money and earning a reasonable rate of return, rather than the less than 2 percent real return they can expect with the current system.
And so what would it take to introduce personal accounts? Setting up these accounts is likely to require transition financing. I said "transition financing", and not "transition costs", because we are financing the transition to a stronger pension system. We are not creating new costs. By allowing people to keep some of their payroll taxes in personal accounts, we would be pre-funding benefits that would otherwise have to be paid in the future - from the payroll taxes of workers not yet born.
Some opponents of fixing the system have suggested that transition financing would hurt our economy. They're wrong. It is true that the Treasury would have to borrow funds to pay for current retirees as young worker payroll taxes stay in their own accounts. But because of the new saving that would occur in these new accounts, the economy would see no net loss in saving."
We're being sold a bill of goods with this proposal and it could cost us our shirts.
Yes, if the proposal were - let's raise taxes to fix this problem, and create private accounts so you have control over your own money - that might be a good plan and a good fix. That's not being suggested. Only the private accounts with no new taxes. If your suggestion were on the table, I might support it, depending on how the taxes were raised and whether or not the pol crooks were padding the bill with pork.
I forget which Senator suggested to tax certain import goods - if this were done wisely, it might prevent the EU from going to the WTO to say we're protectionist in subsidizing American business - steel, for example (it's not the best example, tho it does have political mileage, but it will do to illustrate what might be done) - especially since they themselves are doing it. Since we don't do that here, THEIR products are 'subsidized' by us not taxing them! That's pretty anti-competitive for American companies. The plan could potentially be used to improve competitivity for US companies, since the US market is largest in the world by far and improving competitiveness here would be most helpful. This would have to be carefully done so as not to negatively impact the economy. I'm not sure I trust Congress to do it ... :p
It's something I would be willing to look at, depending on the particulars.