So the established belief around Washington is that you can't do anything about the deficit unless you cut social insurance and, of course, that means sending Social Security off to Iowa Beef Packing for some serious weight reduction surgery. Paul Ryan has a plan:

The Roadmap specifies reductions in traditional retirement benefits through progressive price indexing for many workers who are age 55 or younger in 2011. Under current law, the benefit formula has three replacement factors: 90 percent, 32 percent, and 15 percent. The replacement factors are lower for higher levels of earnings. The two dollar levels at which the rates change are called bend points. Under the Roadmap, an additional bend point would be introduced to the benefit formula. It would be set initially at the 30th percentile of earners, or 25 percent of the way between the original first and second bend points. The replacement factor above that new bend point initially would be 32 percent.

Beginning in 2018, new Social Security recipients with average monthly lifetime earnings above the new bend point would face benefit reductions. Benefits for “maximum earners” (people with high earnings over their lifetime who have made maximum contributions to Social Security) would be determined by price increases since 2010 rather than by earnings increases (which are projected to be higher) during that period. Benefits for other new beneficiaries with lifetime earnings above the new bend point would grow with a mix of price and wage increases. Because the change would not take effect until 2018, it would not affect people who are age 55 or older in 2010. The change would be applied to the two replacement factors for higher earnings, causing them to gradually decline after 2018. Those factors would fall to zero in 2064, when benefits for a worker with earnings at the second bend point (which would have grown at the rate of earnings) would reach the benefits of the maximum earners (which would have grown at the rate of prices). Thereafter, scheduled benefits for all newly retired beneficiaries would grow with earnings, but no one would receive higher benefits than the worker with earnings at the second bend point.

Now if you can understand this you probably read Finnegan's Wake for pleasure. Nevertheless the reality seems fairly simple. Social Security currently replaces about 32% of income for most people and 90% of income for very low earners. Ryan's proposal sets a new upper limit on Social Security income. Take the top earnings of the most highly paid member of the bottom 30% of the population. Ultimately Security will be capped at 32% of that value.

In 2007 the 30th percentile for income was somewhere between $15,000 and $25,000 per year - let's call it $20,000 - which leaves Social Security benefits capped for all time at about $6,400 per year. People on the verge of retirement will be urged to invest in a large mini van and explore our national parks where they will be able to shoot possums with their handguns and make a fine living.

Clearly this will reduce the deficit and, if we are to believe the graphs, eventually bring the Social Security fund into a state of permanent surplus. it will once more be the cash cow that God and Alan Greenspan intended it to be.

Now the fact that any earnings above $25,000 per year would serve only to increase a citizens tax payments without bringing any further benefits is sure to cause some discontent. But there is a solution to this. High earners will be able to take one to three percent of their earnings away from Social Security and place them in individual retirement accounts which will be used to purchase annuities upon retirement.

If this sounds a lot like the plan proposed by President Bush in 2004 and rejected then, well it is.

But cheer up. There is an innovation here. Individual retirement accounts will be guaranteed by the Federal Government and will never earn less than the rate of inflation. The CBO seems to be at a loss to estimate the impact of this guarantee. Again we note that the director of the CBO, Elmendorff, is not our friend.

Wonks Anonymous has a suggestion for the CBO on this issue: Run a scenario where 40% of the people who qualified for Social Security this year - the top 40% of earners - had deposited about 3% of their earnings in an assortment of mutual funds, like the ones now available to Federal employees. How much would it cost to make these folks whole in our current depressed asset markets?

Social Insurance is a clunky durable way to assure minimal retirement income for everyone. It works like an old Volkswagen. not fast or flashy but reliable. These reforms are a like a Jetta. You can't rely on them to get you there and they will spend a lot of time in the shop.