During the Great Recession a decade ago, a meme went around echoing the words of renowned economist Milton Friedman. He said that when a crisis hits, the response depends on the ideas lying around.
Canada’s COVID-19 stimulus package is just that, an anything-goes grab bag of ideas that happened to be lying around. There’s a new Emergency Support Benefit for those who lose their jobs to the virus; an increase to the Canada Child Benefit; a wage subsidy for businesses impacted by the virus; expanded financial support for exporters; and on and on.
In all, it amounts to $27 billion in direct stimulus spending, plus $55 billion in tax deferrals meant to give households and businesses breathing room until the fall, for a total cost of $82 billion.
All of it is designed to keep incomes flowing to businesses and households at a time when large tracts of the economy have simply shut down. But there is an idea that has been lying around that could achieve the same thing, likely more effectively and certainly more simply: A universal basic income.
Watch: 5 financial relief measures for Canadians impacted by COVID-19
According to a 2018 Parliamentary Budget Office (PBO) report, a Canada-wide basic income of the type experimented with in Ontario a few years ago would have a net cost of $43 billion ― or just a little more than half the cost of the stimulus package announced Wednesday.
Under that plan, an individual would be guaranteed a minimum annual income of $16,989 and couples would be guaranteed a minimum $24,027 a year. Anyone earning below that would be topped up to those levels.
By the PBO’s estimate, Trudeau’s Liberals could have put in a basic income of that model, and still had $39 billion left over for direct aid to business.
To be sure, in an economic crisis like the present one, those costs would probably be higher, because more people would qualify for basic income payments than normal. But the PBO’s estimate shows the scale of the costs involved ― and given the size of the bailouts, it looks reasonable.
“The idea of an emergency “pandemic basic income” is gaining steam fast.”
In an emergency situation like this, the government could choose a very simple and direct way of ensuring the money is delivered ― simply send cheques to everyone for same amount, the basic income amount either for an individual or a couple.
This “universal demogrant” model of the basic income is the most expensive, in terms of the sheer amount of money the government has to push out the door.
But in a report this week, a group of academics at Saskatchewan’s Johnson Shoyama Graduate School of Public Policy proposed just that: A $1,000-a-month basic income for all Canadians that they estimate has a gross cost of $11.6 billion a month.
That doesn’t include savings from other government programs, like welfare and workplace disability, that could be dovetailed into the basic income payments.
A targeted basic income “is a feasible, efficient, and equitable option for addressing income precarity during the ongoing health pandemic,” they wrote.
“It would provide a direct economic stimulus by putting money into the hands of the people most likely to spend it, and more importantly, into the hands of those most likely to need it.”
Emergency ‘pandemic basic income’
The idea of an emergency “pandemic basic income” is gaining steam fast. A group of more than 500 academics from around the world published a letter this week “calling on our governments to enact emergency basic income to save lives.”
The advocacy group Basic Income Canada Network (BICN) noted that Canada’s stimulus package includes an increase to the GST rebate. A much larger increase could be one quick way of instituting a basic income, the group argued.
“It’s not means tested ― you get it whether you lost your job, or don’t have one or whatever ― they need an infusion fast,” Sheila Regehr, BICN’s president, told HuffPost Canada.
Regehr noted that the progressive income tax first came into being during the First World War, “when (Canadian) governments asked themselves, how are we going to pay for this?”
They ended up adopting the income tax, which the U.S. had used to pay for the American Civil War a half century earlier. First introduced in Britain in 1799, and popularized by Karl Marx in the 19th century, the progressive income tax has become a permanent fixture of modern economies, and has proven to be one of the most effective tools in the government toolbox for reducing economic inequality.
“But it took that crisis for something hugely important in society to happen,” Regehr noted. “This could be one of those moments.”
Regehr worries what could happen at the peak of the outbreak, when many people may find themselves desperate and lacking basic supplies.
For her, it’s a personal concern. She worries about an aging in-law in New York, where the pandemic is on a rapid upward swing this week.
“When other people start running out of money, and they see this old Black man walking with food (from the supermarket), he is going to be a target. This is what we will quickly get to if we don’t get people the resources they need,” she said.
“Canada may think it’s a kinder, gentler place, but there are lots of people on the edge in this country and things can turn fast.”
Regehr sees Canada as a good place to try out a basic income. “We’re fortunate that we have done a fair bit of work on this,” she said, noting she has been in touch with Members of Parliament and Senators who are engaging in the issue.
“This is a crisis,” she said. “This is a time when paradigm-shifting change has to happen.”
Given that, let’s hope this idea doesn’t have to lie around until the next crisis for us to give it a shot.
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