Recently I wrote about some conservatives who think Republicans should talk less about entitlement reform. Too gloomy. Too much “root canal” politics. But at least when it comes to Social Security reform, there is a path other than cut, cut, cut. It would make the program fiscally sustainable, create a reliable anti-poverty safety net in retirement, and encourage more Americans to save for retirement. AEI’s Andrew Biggs in National Review:

Beginning immediately, Social Security would pay every long-term U.S. resident a minimum benefit pegged at the poverty threshold of $950 a month, regardless of the retiree’s work history or earnings. This minimum benefit would take the place of both the redistributive aspects of Social Security and the Supplemental Security Income program, but do so with greater protections against poverty and no prohibition on work and saving. In fact, the Social Security payroll tax would be eliminated at age 62 to encourage longer work lives. But over several decades, the maximum Social Security benefit would be scaled down so that eventually every retiree will receive the same flat dollar benefit from the government.

For the bottom third of retirees, benefits would increase, but for middle and upper income Americans, benefits would decline relative to currently promised levels. This makes sense. At any given time, higher-income Americans are less dependent upon government than lower-income households. As incomes rise over time, Americans should gradually become less dependent on the government for income in retirement and more able to build their own savings.

To ensure an adequate retirement income, middle- and upper-income Americans would need to save more on top of Social Security. Federal policies should work to help them do so. Currently, around half of employers automatically enroll their employees in 401(k) plans, a policy that dramatically expands participation. Auto-enrollment should be made universal, as a simple best practice for pension administration.

To expand pension coverage by small employers, which often find 401(k)s costly to establish, Congress should allow for less-expensive “Starter 401(k)s” and multiple employer-defined contribution plans, as proposed by Utah senator Orrin Hatch. Finally, 401(k) plans should adopt auto-escalation, which gradually increases contributions over time. Again, employees can withdraw, but most don’t even notice the increased contributions, and the vast majority choose not to reduce them.

This plan would not cheat Americans out of Social Security benefits they had already earned. But it would change the terms on which Americans earn future benefits, to a paradigm in which government provides a real safety net against poverty — the ultimate “retirement crisis” — but treats middle- and upper-income households as adults who can and should generate most of their retirement income through their own saving. Unlike the actuarial minutiae of conventional Social Security–reform plans, this new approach would give a presidential candidate a compelling agenda to talk about in plain English that ordinary Americans can understand

And for those who desire international confirmation, Biggs points out that “New Zealand, the United Kingdom, and Australia have all evolved in the same direction.”

Now the basics of Biggs’s plan are already out there, and I can’t understand why all the GOP 2016ers haven’t flocked to it. This is a very different vision than what many Democrats are proposing, which is “an expanded Social Security program supplemented by government-run savings accounts, a model in which most Americans could eventually receive the vast majority of their retirement income from government programs.”  Some on the right are still clinging to privatization/personalization where money would be diverted from the current system.

But here are two explanation from Biggs on why they should give up the dream. First, in a podcast with me:

When the personal accounts were proposed in the mid-1990s through to when President Bush pushed them around 2005, Social Security was running surpluses equal to around 2% of payroll, collecting a 12% tax, but the cost to the system was only 10% of your wages, leaving extra money. The government takes that money, spends it, and credits it to the Social Security Trust Fund. There’s no saving going on.

People proposed personal accounts funded at around 2% of the payroll. You could take that money, put it into the account, and save it to pay benefits in the future. The surpluses that funded the accounts have mostly turned into deficits partly due to an aging population, but partly due to the weakness of the economy, fewer people are working and paying taxes. Letting people take some money out for a personal account, at least in the short-term, makes that deficit worse. Transition costs come about where you have to come up with the extra money to fund these accounts.

And Biggs in National Review:

One problem for the Bush administration’s reform drive in 2005 was that many congressional Republicans had bought into the idea that accounts reduce or eliminate the need for tax increases or benefit cuts. Finding out they don’t may have taken some wind out of their sails. … President Bush’s 2001 Commission to Strengthen Social Security (on which I was a staffer) wrote that once the program began to run payroll-tax deficits — something that happened this year — policymakers would face difficult choices to raise taxes, cut benefits, reduce other programs, or increase the budget deficit. … With personal accounts, we face the same choices, only sooner.

If workers invest part of their Social Security taxes in personal accounts, they could indeed earn higher returns and generate higher benefits without taking more risk. But diverting taxes to accounts leaves the program short of what is needed to pay benefits to today’s retirees. To cover these “transition costs,” we would need to generate new revenues for the program, either by raising taxes, cutting other programs, or borrowing.