What? You want responsible accounting? You want to know how we recapture the couple trillion necessary to fund the transition to personal accounts? You want to know how we maintain government bond yields for payout to personal account holders while at the same time underwriting the personal accounts with diluted government bonds? What are you, some kind of liberal?
Since I was so successful at debunking the WaPo article, I'll take a stab at answering your question: WHAT shortfall in payroll taxes?
You see, it is all a semantics game. Most people are under the illusion that the "premiums" you and your employer pay into your "account" go into the Social Security Trust Fund or into AlGore's Lock Box. You think you have an "account" since you get an annual statement just like you get from your IRA or 401K - of course there are no earnings listed on it, only the amount paid in. In simple terms, private accounts lets you vest for 1/3 of your future balance (the 4% they are talking about) and will give you a few choices of where to invest that portion; very much like the IRAs and 401Ks of which so many Americans are now familiar.
OK, but where is the shortfall? Well the sorry truth is that there is no Trust Fund and there is no Lock Box, at least not in the standard meaning of those terms. Even though we are given the illusion that the payroll tax nee FICA tax is earmarked for SocSec, in fact it is treated as general revenue and from a budget standpoint, is fully spendable as if SocSec didn't exist.
Sure, if you wanted to color the payroll tax dollars red and trace them, you would see the current recipients paid in red dollars, but there would still be a pile of red bucks left over. This "excess" pays for roads, planes, and John Kerry's unearned salary, among other things; it is ALL spent as soon as it is received. The SHORTFALL is that private accounts exposes this little trick and suddenly the "red" money isn't available for KKK Byrd to spend on West Virginia projects bearing his name. Our Congresscritters are crying foul, saying "you blinded me with accounting!"
The real problem that this diversion of "excess" payroll tax dollars into the general fund for spending purposes is that in order to keep up the sham, there is some little bureau buried deep within some little agency that writes special IOU's on fancy paper. Those IOU's, treated as special gubermint bonds, bind future generations to raise non-payroll taxes to redeem them when all of the "red" dollars go to pay then current recipients and someone says, "whoops, not enough red dollars." You see, these IOUs are a generational transfer payment and represent the financial rape of our grandchildren.
GWB and the republicans mark the date that we first run out of red dollars and have to dip into these IOUs as the start of bankruptcy of the system; democRATs mark the date that we run out of IOUs as that start. Of course, long before we run out of IOUs, we'll run out of tax payers and our grandchildren will be forced to euthanize us or their children. Guess which chioce they'll make?
OK, to be fair to your question some of the "red" money will disappear from the current spending budget. As I explained above, this money wasn't Congress' to spend in the first place but they are spending it and we didn't stop them. The answer from the democRATs and from some RINOs like Olympia Snowe of Maine is "get the money from the people in the form of additional taxes." Now whether you call them payroll taxes, income taxes, or sales taxes ... they are taxes. The other side of that equation is to cut spending. Yes, there will be a budget hit, but the reality is that this hit should be on the current generations who are doing the spending and reaping the benefits. The Intergenerational Transfer Payments must stop.
The shortfall you ask about is a current budget shortfall, NOT a payroll tax shortfall. One way out is to make one of the funds available for private accounts a fund that invests in these special gubermint IOUs, but if there is a choice of more than one fund, that won't work! I guess what this long-winded response shows is that there is no easy answer and we will see taxes increase, likely by adjusting the cap on income subject to payroll taxes. In other words, tax the rich.