I would recomend reading the CBO 2001 piece labled Social Security, A primer.  You can find a link to it here http://www.cbo.gov/ftpdoc.cfm?index=3213&type=0&sequence=5 

Privatizing Social Security would be a huge boon to the American Economy.
The way the system works now is that all legal working Americans pay a payroll tax 6.75% of their income, and if they are self-employed 13.5% of their income up to around 90,000 dollars.  It is essentially a pay as you go tax - meaning as of now we have a social security surplus: we pay more in Social Security Tax than is needed by the collectors of Social Security.  Why is this bad?  First of all that extra money floating around doesn't help investors and the surplus will not last forever.  Second of all Americans have an abysmally low savings rate which is going to get even lower as we have even less money to invest.  Why does that matter?
So who cares if we have a low savings rate?  Savings rate translates into domestic investment in our economy via stock (for our economics majors this isn't quite right but bear with me here can't get too overcomplicated).  In a competitive marketplace investment is needed for research and development, advertising, training, hiring the best people, getting new equipment, buying more land, securing capital, investing or creating new technology, etc.  All of these attributes eventually lead to higher wages, and lower prices - why?  They lead to products and services that are better, easier to create/produce which means we can make more of them for the same cost, more comprehensive and less costly.  Why should Americans care about domestic investment?  Because other countries like Japan have forced savings - which are invested into their domestic economy.  In order to be competitive we need to invest in ours (foreign investment, Sovereign Wealth Funds invested in our economy are another topic).  Also think about it this way: you invest in your economy - your income will rise because of increased efficiency and profits, your quality of life goes up, you get more money and you in turn invest more into your economy, this is a positive feedback loop.  That sounds great - so what is the problem?
Now here is the problem: not everyone's stock's and investments turn out.  According to the SS primer the annual average real rate of return on large company stocks is 7.7%, 9.0% for small company stocks, 2.5% for long term t-bonds (20 years maturation), 2.2% for medium term t-bonds (5 year maturation) and .7 % three month t-bills.  However look at the upper and lower bounds: for large company stocks lower bound -11.4% to upper bound 31.0%.  For small company stocks lower bound -19.3% to upper bound 47.4%.  Just look at that volatility!  Versus the t-bonds long-intermediate-three month: lower -7.6% to upper 13%, lower -4.5% to upper 9.3%, and lower -3.0% to upper 5.4%.  Not so much volatility here.  I left out corporate bonds but feel free to look up those figures too.  You could also mix a portfolio too, with t-bonds and stocks for more stable results, but again, higher avg than the return rate of t-bonds.  So what is the best way to solve this?  First of all keep in mind that the growth rate is 5-7% higher per year with stocks than t-bonds.  That type of growth over a long period of time is substantial.  Using compound interest you can see the difference between investing 10,000 dollars a year with 8% interest versus 2.5% interest.
Next entry we will look and see the totals.