Senate hearings on Social Security reform began today. The distortions and exaggerations by both sides will no doubt pile up faster than anyone can correct them. But let’s at least pick off a couple. Reuters reports:

Sen. Max Baucus of Montana, the top Democrat on the committee, said that while lawmakers should deal with Social Security's finances sooner rather than later, private accounts were not the answer. "We do not need to privatize Social Security to save it," he said. "The president's plan would dig Social Security into a deeper hole."

Private accounts are the answer if you are asking the right question, namely, “How can we give young workers better retirement saving returns without burdening other taxpayers?” They’re not the answer if you’re only asking, “How can we preserve Social Security in its present form?” Baucus is right that we don’t need to privatize Social Security to save it. We only need to privatize to improve it.

The president’s plan for personal accounts would not, in fact, “dig Social Security into a deeper hole.” Personal accounts are fiscally neutral with the right “clawback” rate, namely with future benefits reduced, per dollar redirected into a PRA, by that dollar plus compound interest at the Treasury’s borrowing rate. Bush’s proposal actually sets the rate higher than necessary for fiscal neutrality (the Treasury pays less to borrow than the 3% real rate he proposes).