Canada’s Parliamentary budget watchdog says it would cost $76 billion per year to fund a nationwide Guaranteed Basic Income (GBI) — which seems a wildly inflated price.
If it Costs $76 Billion, You’re Doing it All Wrong!
(a) For starters, even the Parliamentary Budget Officer (PBO) admits the federal government already spends $33 billion annually to support low-income Canadians — many of whom are senior citizens receiving the Old Age Supplement (OAS) — therefore, what the budget officer really means is the federal government would need an additional $44 billion to fund a universal GBI.
Suddenly, we’re talking $44 billion, not $76 billion
(b) Also, every province in Canada already has monthly social assistance payments to help those adults with no income, or whose Employment Insurance (EI) has run out and who can’t find work, or who live on a monthly disability benefit. There are other situations where people qualify for social assistance but those three groups represent the largest percentage of recipients.
From the federal perspective, a GBI is about the federal government ‘topping-up’ the monthly amount that provincial social assistance and OAS recipients already receive to a reasonable amount that a person could actually live on, sans luxuries.
See? It isn’t about paying the whole shot, it’s about replacing the many overlapping federal and provincial social assistance plans that are available to people trapped in the bottom economic quintile.
Now it’s $15 billion, not $44 billion
(c) Another reason the PBO numbers are so high is that he claims every adult on social assistance needs $17,000+ per year which is still well below the official ‘poverty line’ in most provinces. But it’s just too high. The PBO also says that couples who live together would receive $25,000 per year.
If a person lived in rural Canada he or she could get by on a lower amount than suggested by the PBO, but if they live in Toronto even his higher amounts won’t be enough.
So the question is:
- Do we want to pay people living on social assistance a large enough amount that allows them to live in Canada’s most expensive cities?
- Or do we want to pay people living on social assistance an amount that allows them to live in the other 99% of Canada’s landmass?
If we use the figure of $1088/month per individual (a number that is widely accepted by anti-poverty groups across North America) instead of the PBO’s inflated number, suddenly our 15 billion dollar problem turns into 2.2 billion dollar problem.
Now it’s $2.2 billion, not $15 billion
But it means that a person couldn’t afford to live in expensive cities like Toronto, Vancouver, or Ottawa as real estate prices there (and therefore, rent prices) are too high.
Q: Is it really that onerous to suggest to people on social assistance that they don’t live in Canada’s most expensive cities?
Q: From their point of view, isn’t it better for them to seek out lower-cost rents in Canada’s small towns and live there?
Q: Why would anyone want to spend almost all of their monthly social assistance payment to rent a room in a house in one of Canada’s largest cities when they could rent an apartment or even a small mobile home in small-town Canada?
As the Canadian government spends a lot of time and money to convince people to move to smaller centres (sometimes paying new Doctors and other professionals a higher rate to relocate to small towns so that residents there can receive medical care on a timely basis) wouldn’t GBI recipients moving to smaller towns and cities lessen the need to pay Doctors and other professionals more than the normal rate to practice in those regions?
Many Doctors would no longer need to be paid extra to base their practice in Canada’s small towns once large numbers of GBI recipients would move to small-town Canada. (Many of whom would be senior citizens who could finally afford to move, it must be said)
Let’s pretend that factor represents a future savings of 200 million/yr — which sounds like a lot but it isn’t — because in addition to the premium that Canada pays new Doctors to practice in marginal areas of the country, the federal government must also fund the monitoring and management of that system. It isn’t run by one person in a telephone booth earning minimum wage.
Also, many Doctors contest their small-town posting decision which must be adjudicated at significant cost to the government.
Now it’s $2 billion, not $2.2 billion
Streamlining the System
We know that duplication of services costs money.
That covers anything that is done twice (2x) but how much money is wasted when there is duplication across ten provinces? (That’s 10x by the way — which is called a ‘decuple’) Because that’s what is happening with social assistance across this country.
Each of the ten provinces of Canada has its own Income Assistance programme and the government of Canada has various Income Assistance programmes for each of the ten provinces and three territories to support those who can’t afford to live on their own.
Also, Canada ‘tops-up’ the monthly income of senior citizens across the country through the OAS to something approaching half of the official poverty line in some cases. (Let’s not forget it was seniors that built this great country, and they deserve better than that)
Centralization can save duplication of services 10x over
Imagine if all social assistance benefits were paid out from one centralized location (say, in Winnipeg) and most of those provincial Income Assistance offices could close down.
Each provincial ‘welfare office’ with 20 to 100 staff, must cost well over a million dollars (the cost of the real estate alone) and must cost over one million dollars per month to staff and maintain — perhaps more. (Some of these offices would remain open because they offer other provincial services besides managing social assistance recipients)
Not only would each province save multi-millions, so would the federal government!
Now we’re saving the provinces money!
And, the federal government could close many offices across the country on account of being centralized and a social assistance ‘supercentre’ could handle every social assistance need across the country — whether it’s topping-up a senior citizen’s monthly income to $1088/month, or ‘topping-up’ a part-time worker’s monthly income to $1088/month, or paying those on social assistance or disability $1088/month — and save money compared to the way it’s presently operated!
Now we’re saving each province multi-millions (the amount of savings depend on the total population of the province) and we’re saving the federal government about $2 billion compared to the way it’s run now.
Now we’re down to $0, not $2 billion
Hey, this is fun! Wanna save some more?
NOTE: The GBI itself is based on having no ‘means test’ so every Canadian adult resident who earns less than $1088/month would automatically be eligible to receive either the full amount (if they’re earning nothing at all) or a ‘top-up’ to $1088/month.
Vastly Lower Provincial Government Spending Will Allow 10 Instant Provincial Budget Surpluses
It also means that homeless people could afford to rent a home if they live in small-town Canada. (Read: No more homeless people in Canada)
It means that every person on social assistance can afford to eat properly if they live in one of Canada’s small towns. (Read: People who use part of their grocery money to pay the rent or keep the heat on during the winter… spend more time in the Hospital)
It means that poverty-stricken people won’t be tempted to commit crimes in order to pay their rent, eat, or to acquire steel-toed work boots for a temporary day labour position, or for bus fare to get to a job interview. (I’ve volunteered at a homeless shelter; I’ve seen it happen)
By simply paying a standardized monthly benefit to Canadian adults who earn less than $1088/month homelessness will cease to be an issue, property crime rates will plummet, hospital visits will decrease, provinces can free themselves of managing social assistance recipients, provincial office buildings can be sold, the federal government can streamline OAS and other federal anti-poverty programmes into one super-efficient monthly payment system — and the feds can cross-verify CRA tax returns with the GBI system to catch cheaters.
Let’s pretend that all of it together could save the federal government 10 billion dollars annually. (It would save more than that)
Now we’re SAVING the federal government 10 billion dollars per year!
On the provincial side, almost every government in Canada could stop running provincial deficits by getting out of the social assistance business, freeing themselves of overlapping social assistance programmes, selling off their Income Assistance office buildings, lower their healthcare spending, and lower their property crimes spending which requires a lot of police investigations, court time, and incarceration for offenders.
Why would every province suddenly show a budget surplus?
No more provincial deficits to worry about — because after offloading their social assistance programmes onto the federal government — Canada’s provinces would save significant sums of money.
Provincial social assistance programmes are paid for by provincial sales tax, provincial income tax, and federal transfer payments — and those tax rates are set by the provincial spending plan for the following twelve months. Therefore, once the federal government absorbs those provincial programmes, provincial taxation rates could remain the same (for a time) and every province would suddenly find themselves in a budget surplus.
After five years elapsed they would probably remove the portion of the provincial taxation that had funded their social assistance programmes, thereby saving provincial income tax payers money at tax time.
Of course, the people who work in Income Assistance offices might be wary of this change but they’re highly trained and valuable people that their respective provincial government could easily put to work on positive programmes like conservation, education, healthcare, etc. instead of having them spend their days trying to prop up financially marginal people 365 days per year.
I’d expect that each provincial government would treat their Income Assistance staff with the respect they deserve and guarantee them a minimum of five more years of employment to each and every Income Assistance employee that was no longer needed at their Income Assistance office due to their social assistance programmes being superceded by the federal GBI.
How to Pay for it Until the $10 Billion Annual Savings Kick-in
During the five year transition period, the federal government would be required to find a revenue stream for a GBI that rolls all provincial and all federal social assistance programmes into one programme that pays $1088 per month. (CPP and EI would remain completely unaffected, obviously)
As stated above, the federal government already pays 100% of the cost of existing federal level social assistance programmes across Canada, so to absorb the provincial systems and afford the slightly more expensive GBI, it would need to add an across-the-board .29% increase to the federal income tax rate and concomitantly lower transfer payments to the provinces.
Alternatively, the federal government could tax robots like it taxes people. (Yes! It’s a thing! Even Bill Gates wants to tax robots)
If each robot was taxed at 30% of the value of its annual output, it would pay for the difference between what the feds already pay for federal social assistance spending, and the cost of funding a universal GBI that would replace existing provincial social assistance programmes. (Read here about the U.S. presidential candidate for 2020 running on taxing robots)
EITHER WAY, the federal government would save a minimum of $10 billion per year, creating new revenue streams to afford the GBI until those savings kick-in is completely doable, and the feds would never need to run a budget deficit again. And many social problems (like homelessness) would disappear forever.
That’s what a Guaranteed Basic Income could do for Canada!