Does anyone else have an “Am I being given crazy pills” moment when somebody trumpets some version of a universal basic income nowadays? On Tuesday the Parliamentary Budget Office published a response to a request by Independent Group Sen. Yuen Pau Woo; Sen. Woo had asked the PBO to estimate the costs of a federal guaranteed basic income for all Canadians between the ages of 18 and 64.
The senator proposed that the income amount ought to be in line with Ontario’s aborted 2017 pilot project on basic income: $16,989 for individuals, $24,027 for couples. He wanted to know the cost of the program given three possible levels of clawback on earned income, although not every basic-income advocate favours this.
The gross bill for the whole country comes to $46 billion with a 50 per cent clawback, $72 billion with 25 per cent, and $96 billion with a 15 per cent reduction rate. The punchline is that these are amounts for just six months, because Senator Woo was thinking in terms of another pilot, tailored to the miserable long tail of the pandemic. The PBO found that Woo’s basic income plan would allow the provinces and Ottawa to shut off other welfare programs and tax credits, saving $15 billion for the six-month period.
But there is an important caveat: the PBO’s cost estimates do not in any way account for behavioural responses to the free money. “Some studies show,” the PBO’s report tersely observes, “that a guaranteed minimum income could have a negative impact on labour force participation and hours worked.” Some basic-income advocates try to fudge this point, yet their advocacy inevitably rhapsodizes about the “freedom” from low-wage readily available work that a basic income (beyond the ones we have for children and the disabled) would provide to dream-chasers and unknown geniuses in the “gig economy.”
Anyway, the PBO figures running from somewhere between $100 billion and $200 billion a year, minus any welfare cuts implemented simultaneously, are obviously only part of the picture. It’s just the total amount of the cheques that would need to be sent out. The PBO didn’t estimate the effect of behavioural response on federal revenues (or provincial ones) because there is no half-decent basis for estimating them.
No state has tried a basic income within a liberal-democratic setting for any length of time, unless you count the emergency supplements being flung around now because of the pandemic. These efforts will generate a great deal of data, none of which can possibly tell us much about the long-term effects of a basic income over a period when people aren’t afraid to go outside or be breathed on.
That’s the strange part of all this. Sen. Woo thinks the pandemic, essentially a slow-motion natural disaster, is an absolutely excellent time to test the basic income idea. Advocates of basic income do span the political spectrum, but if I were one of them I would be sort of annoyed with this. Woo greeted the PBO’s figures, the ones that tell half the story or less, with total aplomb. And, after all, the cost of the Canada Emergency Response Benefit to individuals is going to be of the same order of magnitude: federal Finance Minister Bill Morneau said Wednesday that $53 billion has been shipped out already.
Maybe we can raise taxes enough to make this kind of transfer tenable perpetually. Maybe we can live with the damage to competitiveness that those tax rates, in themselves, would cause. But the pandemic has already driven labour force participation to unfamiliar, terrifying historic lows. No doubt you’ve noticed that raising participation rates is routinely cited as a desirable, appropriate goal for other social programs like child benefits and subsidized daycare space. Labour force participation, as a parameter, is very visible in the tense, emotional discussions now happening over re-opening schools in the fall. Is going out to work a good thing or not?
‘Let’s get the eff back to work and rebuild’
The truth is that nudging people back into the workforce is going to be an enormous public-policy priority when the COVID era is over, whether any politician admits it explicitly or not. If ideas like basic income have really earned a proper trial, and I do not take Sen. Woo’s talk of “a leap of faith” as being especially encouraging, then surely it ought to be a fair trial, held under otherwise normal conditions.
Maybe we really are undergoing a revolution in popular attitudes to work; maybe the pandemic will have the pro-socialist effects sometimes attributed to the total wars of the 20th century, and particularly the one that came with its own pandemic tacked onto the end. I am not so sure, although I know SARS-CoV-2 has a habit of confirming everyone in their own political predispositions. (Maybe it’s that famous spike glycoprotein that does it.) You can’t deny that the end of the First World War brought with it a passion for normality, or, in the immortal coinage of Warren Harding, “ normalcy. ” “Normalcy” was bad English, and tremendously good politics — good enough for Harding to win 60 per cent of the American popular presidential vote in 1920.
The end of the Second war in the democracies led to a triumph of liberal technocracy and a prioritization of economic growth that we are arguably still living with. Culturally conservative politicians, admittedly ones prepared to superintend a consolidation of the welfare state, had the whip hand for decades. Even Britain went back to voting Tory after the Attlee government created socialist institutions for the Tories to manage.
We are all already desperate, more desperate with each passing week, to have things back the way they were. This means, or could mean, that the prevailing attitude will be “Let’s get the eff back to work and rebuild.” The retailers and service businesses now going bankrupt or just disappearing every day will create huge sucking voids of labour demand. We might decide that we have more important things to do than take leaps of faith. Or, at any rate, to be the first to take one.
But, then, Mr. Morneau also mentioned something on Wednesday about a one-year deficit running to one-third of a trillion dollars. So Sen. Woo’s publicity campaign may have already succumbed to terrible timing. And maybe I have to apologize for engaging with a pre-refuted idea.
National Post
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