For decades, money collected through Social Security payroll taxes has gone via “securities” into the Treasury’s general fund. From there, the money was spent on all sorts of things including payouts to current retirees. Fortunately, Social Security has always brought in more money than it has paid out.

At least that was the case until this week when it was announced that starting this year (and for perpetuity) Social Security will pay out much more than it takes in. The net cost this year alone is going to be $45 billion, and over the next decade the figure will mount to well over half a trillion dollars.

Looking at the financial state of the union–$14 Trillion in debt, high unemployment, low growth, states facing bankruptcy–you might think Democrats would be getting ready to sit down with Republicans and figure out how to avoid piling on more debt. You would be wrong. Instead, they’ve got their new messaging team figuring out how to turn the issue into a political goldmine:

Senate Democrats led by Sen. Chuck Schumer (D-N.Y.) and Sen. Bernie Sanders (I-Vt.) are gearing up for a battle with House Republicans over Medicare and Social Security benefits.

Schumer and other Democratic strategists see Medicare and Social Security as winning political issues that can help them regain the momentum they lost over the last two years…

“They want to privatize Social Security,” Schumer said of Republicans. “Privatize equals end, no more.”

You have to admire the brazenness of that line, i.e. privatization equals nothingness. I suspect Hugo Chavez could waft that one into his nose and pronounce the odor it gives off heavenly, but then he is a socialist not a US Senator. In any case, that is apparently the message they’ve settled on because Harry Reid echoed the same line yesterday:

“Simply said, it’s off the table,” Reid said at a press conference with Social Security recipients Thursday. “As long as I am majority leader, I will do everything within my legislative powers to prevent privatizing or eliminating Social Security.”

The prospect of another half trillion in debt doesn’t even make these guys flinch.

The President, for his part, has already made clear through his total bypass of the topic on Tuesday that he’ll do nothing to aid any Republican who steps into the Democrats line of fire. Simply put, it’s going to be two more years before we, maybe, get a chance to have an adult conversation about entitlement reform.

Update: This story encapsulates the risk inherent in waiting for two more years on serious reform:

Moody’s has warned that it may have to apply a negative outlook to America’s top-notch AAA credit rating because of the US government’s failure to tackle its growing budget deficit.

The report from the ratings agency, which came hours after a downgrade of Japan by Standard & Poor’s and an IMF warning on growing budget deficits in both countries, reiterated previous comments made in December.

Moody’s said then that the extension of Bush-era tax cuts would increase the likelihood of a negative outlook on the US to credit rating in the next two years. A negative outlook makes a rating downgrade more likely in the next 12 to 18 months, which would push up the country’s borrowing costs.

That’s just what we don’t need as we try to climb out of the debt quicksand we’ve fallen into as a nation. While it would certainly be ironic if the President’s dithering on reform now led to a downgrade just as he resumes office in 2012, this is one area where I’d much rather see him succeed. For everyone’s sake, let’s hope he has a bit more foresight than his party’s top Senators.