Paul Krugman’s NYT Column “The Bully’s Pulpit” and a post by Josh Marshall at TPM both lambaste a recent memo [Word] put out by the National Republican Congressional Committee that urged reporters not to use the term “privatization” to refer to Social Security reform plans involving personal investment accounts.

Now, Krugman and Marshall are clearly right about one thing: “privatization” is most assuredly not, as the memo insinuated, some kind of slur cooked up by D activists. It was, as both observe, the term Rs used for their proposals until fairly recently. That doesn’t mean that, in the context of the current debate, it’s not nevertheless misleading.

Let’s look at a piece of the memo Marshall cites: “[Democrats] are employing the word â??privatizationâ?? for the specific purpose of eliciting negative reactions among seniors because it carries connotations of dismantling the publicly run Social Security system. â??Privatizationâ?? is a false and misleading word insofar as it is being used by Democrats to describe Republican positions on Social Security.” [Emphasis mine.] Now, the way Mashall and Krugman spin it, the problem is that corporate scandals have made people wary of the term “privatization,” and Rs are trying to engage in some sort of Orwellian doublespeak. But there is, I think, another explanation. People who supported personal accounts frequently described their plans as partial privatization, and sometimes the qualifier was dropped, because everyone understood what was meant. That’s in contrast to full privatization, which would mean scrapping the current pay-as-you-go system altogether, and having the full payroll tax go to private accounts. The problem arises when that “partial” is dropped, when reform proposals are just described as “privatization” plans. To a lot of people — and the Ds haven’t exactly discouraged this interpretation — that means full privatization, because in other contexts, that’s exactly what “privatization” is used to mean. When people talk about “privatizing the Post Office” for example, they mean selling the thing off — breaking it up or transferring it intact — to the private sector and letting private firms compete to provide ordinary mail delivery services just like UPS and GOD and FedEx do for high-speed package delivery. You wouldn’t ordinarily use that term to describe outsourcing, say, stamp printing or mail-sorting or PO boxes to some private contractor, even though, strictly speaking, that would be a kind of “partial privatization” of one element of the service package provided by the USPS.

In light of that common usage, I think it’s reasonable for Rs to say: “maybe our original choice of words was ill-advised; our plans aren’t for full privatization, and so to avoid confusion, it’s better to use a less ambiguous term like ‘personal accounts’ which doesn’t carry these conotations of eliminating traditional SS benefits altogether.” In light of the way Ds have exploited that ambiguity (something the NRCC memo emphasizes), and the fact that there’s nothing particularly biased about the phrase “personal accounts,” that seems like the description most conducive to impartial discussion. Neither Krugman nor Marshall note that the memo quotes several Ds who also acknowledge that “privatization” is, in the current context, a misleading characterization of the presidential commission’s reform proposals.

A last couple of things worth noting about Krugman’s column in particular. First, the fact that Cato’s project used the word “privatization” doesn’t mean a whole lot, because significant as their influence may have been, Cato’s scholars would probably go further than the commission’s proposals in their ideal world, and Krugman must know that. Second, if you’re going to take Cato’s papers as representative of the position, what’s with this charge of “2-1=4” math? According to Krugman, the reform plans Bush supported “always depended on the assertion that […] we can divert payroll taxes into high-yielding personal accounts, yet still use the same money to pay benefits to retirees.” Well, let’s see what Cato’s Andy Biggs, who served on the presidential commission that produced the relevant reform plans, says about their funding.

“[A]ll of the commissionâ??s proposals demand an up-front investment. Thatâ??s what pre-funding is: putting aside extra money now to save money later. [….] The common objection to the commissionâ??s plans is that they donâ??t say where theyâ??ll get the money to fund the transition. The quick answer to that is that reformers will get it from the same place reform opponents will get the money to keep the current system afloat, except theyâ??ll need a lot less of itâ??up to 68 percent less, to be precise.

“The more thoughtful answer is that tough decisions indeed need to be made, but if we make them now in the context of reforms using personal accounts theyâ??ll be a lot less tough and be accomplished a lot sooner than if we donâ??t. Yes, there will be a transition period of moving to personal accounts, but after that weâ??re off the hook.”

And here’s what Peter Ferarra says in a new paper:

“Modest restraints on general federal spending over the years would free substantial general revenues for the transition [emphasis mine]. A small part of the transition financing burden, especially in the earlier years, can be financed simply by issuing new general federal bonds. Those bonds can be paid off later from the net surpluses generated once the transition is completed. Workers who exercise the personal account option can also be required to make some continuing payroll tax contribution for the transition. All those sources of transition financing are discussed in more detail in A New Deal for Social Security.”

Now, that sure looks to me like an acknowledgement that we need to finance the transition to private accounts by pulling money from sources other than FICA taxes (at current rates). We could, for example, use some of that current surplus that’s being “invested” in Treasury bonds — which is to say, being spent now in exchange for an IOU that’s just a claim on future general tax revenues. It’s fair enough to ask where that money’s going to come from, but since the reformers have acknowledged the need for it, it’s also fair to acknowledge that you’re going to need even more money in the long run from somewhere under the status quo. Anyway, with the very people who produced the reform plans calling attention to the transition financing problem, I don’t know how Krugman can write with a straight face that the proposals “always depended on” denying it.