Presidential candidates usually steer clear of Social Security during campaigns, figuring it’s an issue too hot to handle. But this year, Social Security’s future is shaping up as a key campaign issue—as well it should.

Along with health care, potential changes to Social Security top the list of threats to Americans’ long-term retirement security.

The debate centers on two possible paths for Social Security, which faces a fiscal solvency problem somewhere around the middle of this century if no changes are made to the current system.

Democrats favor a combination of tax hikes and benefit adjustments that would keep the current program solvent; Republicans continue to push privatization ideas that would allow at least younger workers to invest Social Security dollars in private investment accounts. As first proposed by the Bush Administration in 2005, some recipients also would see reductions in benefits to address the solvency problem.

Sen. Joe Biden went out of his way to attack Sen. John McCain for supporting privatization when he was introduced as Barack Obama’s running mate:

You can’t change America and make things better for our senior citizens when you signed on to Bush’s scheme of privatizing social security. [Video of Biden’s remarks is here].

That was just the latest sign that Democrats intend to focus on Social Security this fall. Sen. Obama has spoken frequently on the campaign trail about the need to fix Social Security, not privatize it. And a coalition of Democratic groups called the Alliance for Retired Americans has been hammering McCain on the issue in an advertising campaign.

McCain supports privatization at least as a supplement to traditional Social Security, and his position is similar to that of the Bush Administration, which launched a second-term privatization initiative that failed to win congressional approval.

McCain has shown a surprising lack of understanding of how Social Security works. He created a firestorm earlier this summer when he said at a town hall meeting that “Americans have got to understand that we are paying present-day retirees with the taxes paid by young workers in America today. And that’s a disgrace. It’s an absolute disgrace, and it’s got to be fixed. “

Of course, this is exactly how Social Security was intended to work when the program was signed into law 73 years ago by Franklin D. Roosevelt. The program is funded through the Federal Insurance Contributions Act tax (FICA) on the payrolls of working people—young workers included.

Roosevelt saw Social Security as a way to lift older Americans out of poverty. At the time, about half of all seniors lived in poverty. Currently, Social Security benefits keep an estimated 40 percent of Americans out of poverty. The program continues to be an incredibly important component of retirement security, accounting for up to 80 percent of retirement income for people in low economic brackets, and about 50 percent even for wealthier Americans, according to AARP data.

Those numbers are important when you consider the other threats to retirement security we’re facing right now: vanishing pensions, eroding retirement portfolios and real estate values—and soaring health expenses. Against that backdrop, privatization is a bad idea because it essentially transforms Social Security from a defined benefit to a defined contribution similar to an IRA, with account holders exposed to the risk of market declines as well as gains.

So, let’s cut through the hype on the Social Security crisis. The looming problem is financing the program as the huge baby boomer generation retires and starts receiving benefits. Most forecasts say Social Security’s expenses will surpass incoming revenue starting in 2017, which would force the system to start relying on its trust fund—revenue that would last until 2041.

But any number of options could keep the program on a solid long-term footing. In fact, most federal budget experts view Social Security as a manageable problem with plenty of possible solutions. These include raising the minimum age for receiving benefits; encouraging people to work longer; raising the maximum wages on which Social Security taxes are collected; indexing benefits for longevity; and diversifying the investments of the Social Security Trust Fund.

Any of these fixes are easy when weighed against Social Security’s value. “Everyone thinks of Social Security as a program under fiscal strain,” says John Rother, AARP’s policy director. But if you look at the role it plays in the lives of people, it’s a different picture. Social Security is by far the dominant part of financial security for most people in retirement.”

Privatizing Social Security is a losing issue for Republicans—and not just because the country is aging. In fact, Social Security really is not a wedge issue between younger and older voters. Polling by AARP—which played a key role in defeating the Bush privatization initiative—shows remarkably broad support across age groups for fixing the current system.

The poll surveyed Americans over the age of 18—not just those near or in retirement—about possible ways to keep Social Security solvent. Seventy one percent supported raising the wage cap on Social Security taxes, and 59 percent supported an increase in FICA taxes. Remarkably, there were relatively small differences among Republicans and Democrats on support for solutions like this—the probable reason President Bush couldn’t win on privatization in 2005.

“What’s interesting is that not too many people told us that they would oppose changes,” says Rother. “The goal of keeping Social Security is widely shared, and people are willing to do what it takes. I think the public is ahead of political leadership when it comes to Social Security.”

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