Forced Busing, the Deficit Commission, and Social Security
Forced school busing is often held up as one of the most misguided policy measures ever put into practice. Forced bussing came about as part of the process of desegregating schools. In some areas, desegregation simply meant ending laws requiring segregation or redrawing school district lines so that they no longer put African Americans and whites in separate schools.
However in many metropolitan areas, housing patterns, themselves partially the result of discrimination, made it difficult to have integrated neighborhood schools. African Americans and whites lived in different areas. If schools were to be integrated it meant bringing African American children into schools in overwhelming white neighborhoods and vice versa. Since many parents would not voluntarily send their children across town to integrate a school, we got forced bussing.
This policy set off a firestorm of anger, especially among working class whites. These parents were infuriated at seeing their kids bussed into inferior schools in African American neighborhoods to meet goals for integration set by a relatively affluent group of professionals who largely lived in suburbs or sent their kids to private schools. The political backlash put a quick end to forced bussing in the early 70s. Ever since, forced bussing has been held by as model of bad policy and horrible politics.
It seems that President Obama’s deficit commission is apparently now attempting to put up a challenge to forced bussing on the all-time boneheaded policy list. According to stories based on leaks from the commission, it is considering a plan to raise Social Security benefits for the lowest income beneficiaries. This is a great idea, since many of the elderly live at, or only slightly above, the poverty line. A modest increase in benefits would make a big difference in their standard of living.
However, the geniuses on the commission want to pay for this benefit increase by cutting the benefits of the “affluent” elderly. The problem with this plan is that there are very few genuinely affluent elderly and their benefits are not much higher than the benefits of normal people. . . .
While we can raise lots of money by taxing the richest 1 percent of the population, since they earn such a disproportionate share of the country’s income, we cannot save much money by cutting their benefits. When billionaire investment banker Peter Peterson tells audiences that he doesn’t need his Social Security benefit, he is only putting $40,000 a year at stake. We can zero out the benefit for Peterson and his wealthy friends and not have to change a single number in the Social Security publications since the difference would be within rounding error.
In order to get any substantial sum of money to increase benefits for low-income elderly and to eliminate the long-term projected shortfall, it will be necessary to cut benefits for people who earned $35,000 -$40,000 a year during their working lifetime. This means cutting benefits for people who worked as schoolteachers, construction workers, factory workers and other very middle class or working class jobs.
We know that most of the people for the commission wants to cut benefits were already looking at a difficult retirement. Few had managed to accumulate substantial savings and much of what they did accumulate was destroyed by the crash of the housing bubble and the stock market plunge that followed. The middle quintile of workers near retirement has on average $170,000 in assets, including the equity in their home. This is roughly enough to buy the median house, which means that if they took all their wealth they could pay off their mortgage and have nothing other than Social Security to support them in retirement.
Near retirement workers in the fourth quintile, most of whom would likely be nailed by the commission’s cuts, have accumulated an average of $340,000 in assets. This means that they could pay off the mortgage on their home and have an annuity income of roughly $10,000 a year in addition to their Social Security.
In addition to actually needing the money, these workers can also point out that they did pay for their benefits. The real return on the Social Security taxes paid by most of these workers is already less than 2.0 percent. For many it would be less than 1.0 percent. The commission wants to make a low return even lower.
Just as was the case with forced bussing, the leading proponents of these cuts are unlikely to have to deal with the consequences. One of the co-chairmen of the commission, former Senator Simpson, can rely on his Senator’s pension, in addition to the money he can garner as a result of his political connections. Erskine Bowles, the other co-chairman, pockets $335,000 a year from his “work” as a director of Morgan Stanley, one of the banks that would be out of business today had it not been rescued by the taxpayers back in 2008.
So we have another great scheme ostensibly designed to help the poor. This time it is by taking away retirement benefits that working class and middle class people have already paid for. And, the designers are all comfortable in their own retirement pensions so that they need not worry about this scheme’s impact. Of course there is one important difference: forced bussing was well intentioned.