The main thing that the Democrats need to remember is that they're discussing ways to better pre-fund Social Security with people who like to tell us that the Trust Fund doesn't exist. There's little reason to agree to put more money into something which is, as we keep being told, just a myth. Doing something like increasing the income cap may be a good idea if we assume we're in a universe with responsible lawmakers. But, since we're not increasing the income cap just increases the amount of tax revenue being paid by not-very-upper-middle classish people and helps relieve pressure to roll back tax cuts on the very rich.
This is the drum that Comrade Max has been beating, and he's basically right. Right now the majority party doesn't believe the trust fund is real, so there's no actual way to pre-fund it, aside from perhaps putting the money under the mattress. As Max wrote:
Now along come the liberals, wanting to tidy up the Trust Fund's actuarial imbalance, albeit without the concession of private accounts. (The Diamond-Orszag plan is the flagship proposal of this type.) There is no reason to do this, except under extreme duress or to get something in return. But as Matt and others say, right now the Bushists are on the defensive. No peace offerings are required. This is not the time to take prisoners. Defend the Keep and show the orcs no mercy, because you will receive none.
There is something to be said for a social insurance program -- stipulated benefits financed by dedicated revenues -- that stands on its own bottom. It's a way of cementing political consensus around the way a program is set up. As explained above, a national government need not maintain a separate stock of assets financed by those revenues if it keeps proper account of what has been paid and received. Under a rational political culture, pre-funded accounts make sense.
But that isn't the world we live in. Instead we are set upon by fiscal saboteurs -- in firm control of the House of Representatives and the White House, with strong influence in the Senate. These are forces that have stated and demonstrated their determination to damage Federal finance to the point where programs they dislike can be cut down on spurious fiscal grounds, rather than on their own intrinsic merits. Indeed, one rationale for private accounts advanced by ostensibly sober analysts is that, in making so-called implicit debt under Social Security explicit (borrowing to finance the accounts), pressure will rise to reduce other Federal spending. Negotiation with wingnuts on social policy is folly. Social Security will be just fine in fifteen years, when perhaps President Jenna Bush will exhibit better sense.
In this light, possible future shortfalls in Social Security and Medicare are better left for future modifications, should any prove necessary. Better reform slogans: Now less than ever. If we do nothing now, things can only get better. It might be broke, but don't let idiots fix it. Stuff like that.
If sensible-sounding reform were passed this year, the same crowd will just come back next year and start telling us that the trust fund isn't real and that therefore it's their right to loot it.