The current debate among conservatives on Social Security reform is a perfect reprise of a debate that occurred in the late 1970s over tax and budget policy. Back then, the conservative Republican orthodoxy became known as the “pain caucus”; budget deficits and unfunded liabilities were of greater concern to these politicians than the total level of taxes and spending. Indeed, it was this concern that led orthodox conservatives to oppose the Kennedy tax cuts of the early 1960s, a politically unpopular position. As tax collectors for the welfare state, the old Republican guard bore the political negative of trying to pay for Democrat promises, while the Democrats kept riding to victory on the political positives of such promises.

But the young GOP turks at the time, led by Jack Kemp, turned the tables on the Democrats. They focused instead on tax cuts and their political positives for taxpayers and economic growth. And while the pain caucus was appalled by the projected revenue loss from the tax cuts, as well as the refusal of the young turks to address “paying for” the tax cuts through cuts in government spending, the tax cutters won the debate.

In the 1980s, conservatives made low taxes the central economic platform of the Republican party, a move that helped lift the GOP to a majority status it had not enjoyed since the 1920s. Under the leadership of House Speaker Newt Gingrich in the 1990s, the GOP proved that tax cuts bring about economic expansion, which in turn produces surging tax revenues, and that in partnership with modest spending restraint, those revenues can lead not only to balanced budgets, but to record surpluses.

This is the lesson the pain caucus still fails to grasp.

Today, in the Social Security debate, the pain caucus emphasizes the unfunded liabilities of Social Security. It is even willing to offer Democrats a tax increase for some concession on the benefit side. For this group, Social Security reform is mainly about balancing the Social Security budget.

Meanwhile, today’s turks want to focus on the political and economic positives of personal accounts. Large personal accounts, such as those proposed under the current Ryan-Sununu legislation, would allow workers to invest their Social Security tax money in their directly owned personal accounts, amounting in essence to the largest tax cut in world history.

The pain caucus is appalled that there are no benefit cuts to balance out this personal-account proposal. “Big personal accounts,” goes the argument, “do nothing to address Social Security’s liabilities.” But pain-caucus members fail to understand that personal accounts shift Social Security benefits out of the public sector and into the private sector. Big personal accounts, like those proposed in Ryan-Sununu, would shift 100 percent of Social Security retirement benefits to the personal accounts over time. As a consequence, all of Social Security’s liabilities for such retirement benefits would be eliminated, resulting in the largest reduction in government spending ever. By comparison, the politically suicidal benefit cuts advanced by the pain caucus would be piddling and ideologically inadequate.

Think of this: A couple takes an early morning flight from New York to Los Angeles. About halfway through the flight, while over Kansas, they parachute out of the plane. On the way down, they begin a discussion about where they will have lunch in L.A. after the plane lands.

That’s how today’s pain caucus thinks. If the plan is to shift Social Security benefits to the private sector, why would you still be talking about cutting those benefits?

Writing on NRO, Carrie Lukas addressed my personal-account proposal, which developed into the Ryan-Sununu bill. In doing so she fell into the pain-caucus trap: “Peter Ferrara’s proposal explicitly depends on an additional $7.9 trillion in corporate income taxes over the next 75 years. Taxpayers should be as concerned about that tax increase as they are about any other.” But that $7.9 trillion is the revenue feedback from the higher economic growth resulting from the personal accounts over 75 years.

Higher revenues from higher economic growth do not represent a tax increase. Rather, this is another example of the Laffer curve at work. After capital-gains tax rates were slashed by 25 percent in 2003, we experienced over the next three years an increase in capital-gains revenues of $133 billion above pre-cut projections. Must we now refer to that 2003 rate cut as President Bush’s tax increase? Should we “be as concerned about that tax increase as … about any other”?

Such higher tax revenues do not represent “real costs for taxpayers.” Instead, they will represent another huge benefit of big personal accounts. And if we were to finance the remainder of the transition to personal accounts by reducing the growth of other government spending, that also would be a benefit — not a cost. This is the right goal for conservatives: big personal accounts on the Ryan-Sununu scale; big, big benefits for working people; financing by way of restraint in other government spending and economic growth. It’s a grand slam.

And if shifting to personal accounts in one big step is too daunting, the transition can be broken down into smaller steps. We can start with whatever size accounts seem feasible, and expand them over time. Republicans can then continue to offer the full Ryan-Sununu accounts, and their enormous benefits, as the ultimate goal, contrasting them all the while with the hugely unpopular alternatives of tax increases and benefit cuts.

Real-world politicians have won election after election on the personal-account model of today’s young turks. But no one has ever won anything campaigning on the pain-caucus model. Indeed, it was the latter model that brought down the president’s whole Social Security reform effort.

The lead White House staffer for Social Security policy, Chuck Blahous, has even bragged that it was he who moved the president to put the benefit-cut/tax-increase idea “on the table” alongside personal accounts. In the process, the focus of the Social Security debate changed from the enormous positives of personal accounts to the enormous negatives of benefit cuts and tax increases. Indeed, Democrats now have made it clear that they will never consider real personal accounts, even in return for a tax increase. And some libertarians who had wanted to reform Social Security completely with personal accounts have been so turned around they are now insisting on tax increases.

The only way to bring back personal accounts is through the positive, populist model of the young turks in Washington. Meanwhile, conservatives would be silly to ask Republicans to support the suicidal pain-caucus recipe of benefit cuts and tax increases, especially when personal accounts are the superior plan both economically and politically.