Tim Penny's Social Security Solutions Will Expand It and the Federal Budget

There will be no Social Security benefit cuts in 2032. For former congressman and longtime budget scold Tim Penny to say otherwise is not only unoriginal, but also dishonest. And that’s not a defense of Social Security.

Social Security has always been an unnecessary retirement plan wrapped into a tax increase. The tax increase worked brilliantly for Congress when workers paying the higher tax well outnumbered retirees, but now they don’t. Lost on Penny is that Social Security’s impending “insolvency” explains precisely why Congress should do nothing about it. But we’re getting ahead of ourselves.

Social Security was long manna from heaven for a Congress unsatisfied with its takings from regular income. Workers were paying into it on the supposition that they owned their Social Security accounts, only for Congress to turn around and spend every dollar paid in and that wasn’t spoken for by the meager retirement payouts doled out to recipients who were happily (for Congress at least) dying too soon to really cost the faux “trust fund” much at all. Which is the point, though one Penny ignores.

Exactly because there’s never been a Social Security “trust fund,” “lockbox,” or any other storage for the tax increases masked as Social Security, there’s no threat to benefits from the faux retirement program. That’s because the same Congress that spent all the excess tax collections in years past will simply dip into general revenues or borrow so that the “Third Rail” isn’t touched.

Penny will say the national debt makes more borrowing a non-starter, that it’s the “single most critical threat to the nation's economic and national security,” but what he crucially ignores here is that his crowd has long been the unwitting source of all the borrowing. Yes, you read that right. The budget and deficit scold in Penny was and is the problem. It’s made evident by the Social Security solutions he offers:

“Extending the payroll tax to higher income levels, linking the retirement age to longevity, capping cost-of-living-adjustments for wealthier retirees or offering a flat rate adjustment.” Penny is either talking about more federal revenues, or ways to reduce the cost of Social Security. Watch the federal budget and national debt explode if he gets his way. Penny would know why if he had more private sector experience.

If so, he would know that the borrowing capacity for individuals and businesses grows the more that they’re taking in, and better yet, the more they’re expected to take in. Governments are no different, which is why the national debt has exploded since 1980. Naturally it did. As taxable wealth in the U.S. soared, so increased the willingness of lenders to lend to a country backed by the richest individuals on earth.

Consider this alongside Penny’s lament that the “Republicans have largely refused to consider revenue” to improve Social Security’s outlook. Penny yet again gets it backwards. Social Security is enormous and costly precisely due to too much tax revenue, and the debt required to grow it will only increase the more that Congress arrogates to itself even more taxable access to the wealth of the rich. That’s Penny’s solution, and it will fail. Once again, see the budget and debt trajectory since 1980.

Which is why Congress should do nothing to fix what is a problem of too much federal revenue. If so, as in if nothing is done, watch as Social Security, Medicare, and interest payments on the federal debt swallow more and more of the federal budget. Yes, past mistakes limiting the introduction of new programs. That's truly manna from heaven care of do-nothing politicians.

Originally published on Real Clear Markets.