Basic income would be the biggest reordering of public finance in a generation

OPINION: The federal Liberals are reportedly ready to support a basic income. If they’re serious about it, that would mean the biggest change in public spending since the 1990s
By John Michael McGrath - Published on Sep 15, 2020
A permanent basic income could cost into the hundreds of billions of dollars. (iStock/ vitapix)

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The Liberal government in Ottawa is in the market for big new ideas as part of a major pandemic recovery package, and we’ll learn at least part of what that it includes when MPs return to the currently prorogued Parliament on September 23. The Canadian Press reported over the weekend that one idea the Liberal caucus is largely supportive of is a universal basic income: the policy will be debated and voted on at the party’s next convention, in November.

The experience of the pandemic — and, more precisely, the Canada Emergency Response Benefit, which kept people home without starving for much of the year — has made the idea of a basic income seem slightly less fantastical. Sometimes, in politics, that’s all it takes to get the ball rolling. The idea of an easily accessed universal payment that could keep people out of at least the worst forms of poverty went from being totally unthinkable to the actual policy of the government of Canada in a matter of weeks.

Of course, CERB is not a long-term program, nor is it intended to be. Turning Canada’s recent experience into a real, durable social program is a tall order, and it may yet all come to naught. A permanent basic income could cost into the hundreds of billions of dollars — the advocates at UBI Works estimate $200 billion — and, even in this era of “billions fatigue,” that’s big bucks.

And, even if the Liberals could work up the political courage necessary, there are serious concerns about the design and implementation of a UBI that ought to give even ardent progressives pause. Economist Mike Moffatt has written extensively about his reservations; most recently, he looked at the weaknesses of Ontario’s basic-income pilot. In short, it’s possible to design a program that is substantially more generous than contemporary welfare programs but would nevertheless leave many of the most marginalized people worse off than before.

But let’s hand-wave away, for now, the details of implementation— and hand-wave away, for now, the question of how it would be paid for (the UBI Works page on suggested tax increases to fund a UBI is eye-opening, in multiple senses of the phrase). One point that is worth dwelling on early in the discussion is what a UBI would mean for a pretty fundamental element of Canadian politics: the balance between federal and provincial spending.

Canada is an outlier among Organisation for Economic Co-operation and Development nations in that a far, far larger percentage of public spending happens at the provincial or municipal level relative to other developed countries. (Only Denmark comes close.) When it comes to the actual mechanics of government — spending public money — Canada largely leaves the most expensive jobs (education and health care) for the provinces. And Canadian voters haven’t minded for more than a generation that the federal government has been leaving its most expensive obligation (national defence) on the backburner.

A basic income, especially one that weighs in at more than $100 billion, would not only be a massive social program in its own right — it would put the centre of the country’s fiscal gravity firmly in Ottawa in a way that arguably hasn’t been true since the provinces adopted income and sales taxes and started massively expanding education spending in the postwar period.

This is neither good nor bad, in and of itself. There’s certainly an argument to be made that Canada’s public finances are currently out of balance: even before COVID-19, the expensive obligations were all at the provincial or municipal level, and the federal government had much more fiscal room to play with. At some point in the future, just to avoid chaos in the country’s public finances, one of two things was always going to have to happen: more spending at the federal level (in the form of provincial transfers) or some mix of new revenue and slower spending growth at the provincial level.

But a UBI is an answer to that problem only if provinces do the very thing that many UBI advocates absolutely do not want: respond to a massive new federal social guarantee with deep cuts to existing provincial social programs.

The politics of rolling out a massive new expansion of the social safety net would be daunting enough if the Liberals had a majority and a clutch of progressive premiers in the provinces. Instead, they’ve got a minority and conservative governments in a majority of provinces. If they want to make a big push for a basic income, we may as well sit back and wish them luck — they’ll need it.

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