The concept of a basic income – combining several existing income and social supports into a single, income-tested but otherwise unconditional cash benefit – has been debated for more than 200 years. It has drawn support, and criticism, from across the political spectrum, attacked or praised as either utopian socialism or minimal-state libertarianism. But has the whole debate just been settled?
You’d think so, to judge from some of the responses to the recent report of the British Columbia Expert Panel on Basic Income. It’s not hard to see why. The report’s authors are all highly regarded economists. Its research is voluminous. And its conclusions are, seemingly, unequivocal. Should B.C. replace its current web of support programs with a basic income? “Our answer is no. … The needs of people in this society are too diverse to be effectively answered simply with a cheque from the government.”
Well, there you have it, a number of commentators seemed to suggest: We can put that one to bed at last. Basic income? Rejected, discredited even. The experts have spoken.
Er, have they? It’s true that the panel advises the province not to proceed with a basic income on its own. But most proposals for a basic income envisage it as something the federal and provincial governments would undertake together – understandably, since much of the current apparatus of income support, and of the tax system that underpins it, is federal.
Moreover, the report is broadly simpatico with much of the thinking behind the basic income. Its analysis of the current system – bafflingly complex, with 192 different programs delivered by 20 separate federal or provincial departments – and its effects on work incentives – when every dollar in earned income is clawed back from benefits, recipients are effectively prohibited from taking a job – is very much on the same page.
Indeed, many of the panel’s recommendations for reform of the system look a whole lot like a basic income, only broken into pieces: simplifying eligibility for and lowering the clawback rate on social assistance (known as temporary assistance in B.C.), combining several existing tax credits into a single, income-tested benefit, even a “targeted basic income” for the disabled.
Why, then, does it reject the idea more generally? Or rather, what exactly does it reject? The panel is rightly skeptical of many of the more sensational claims made by some basic income advocates: that it is needed because most work will soon be replaced by robots; that it would free workers to go back to school, or do more volunteering, or start their own businesses, and otherwise transform society.
Likewise, it has little time for the most grandiose model of a basic income, in which the government literally mails everyone a cheque for the same amount, with no clawback at all: the so-called “universal” basic income, or “demogrant.” Were such a benefit set at $20,000 per capita – more than twice current welfare rates – the panel calculates the cost to the treasury at $51-billion, or roughly as much as the entire current provincial budget.
But the case for basic income doesn’t depend on it curing the common cold: It just has to be better than what it replaces. Neither is a universal demogrant the only possible way to deliver it. Rather, the amount of the benefit can be increased or reduced in line with income, much in the style of refundable tax credits, or (more difficult, administratively) a negative income tax: below a certain threshold the government pays you; above it you pay the government.
So what, the panel replies. You can call it social assistance, or you can call it basic income, or you can call it negative income tax, but the arithmetic is the same. The higher the basic or maximum benefit – the amount paid to those with no income at all – the higher the clawback rate has to be, for any given cost to the treasury.
So: To make any meaningful reduction in the current, punitive clawback rate, basic income proponents would either have to reduce the current maximum benefit – already less than half the poverty rate – or greatly expand spending; if the latter, it would have to be paid for in higher income tax rates, with similar effects on work incentives, just for different people. Or else they’d have to leave the clawback rate where it is – in which case, what’s the point?
Put like that, the case against basic income sounds airtight. But notice the assumptions that underlie it: one, that spending on current programs could not be reduced to make room for it (surely, in all those 192 programs, 120 of them provincial, there must be some that could be eliminated or replaced); two, that revenues could not be generated in some other way, besides higher income tax rates – by broadening the tax base (that’s a federal matter), or by increasing provincial sales taxes (a touchy subject, given B.C.’s recent history), or by raising other taxes.
The panel may be right in its assessments of the political likelihood of any of these, as it may be right in its preference for certain outcomes, notably that governments should continue to deliver all existing services in kind, rather than converting them to their cash equivalent. But it can’t pretend these are just arithmetic. The arithmetic is hostage to the panel’s political assessments and value judgments – which, unlike arithmetic, are open to debate.
So the panel hasn’t really debunked the basic income, or even rejected it. It’s just said it doesn’t see it as being feasible for B.C., based on a particular set of assumptions. Even then, it’s not that unfeasible. For example, the report calculates that a $10,000 basic income, clawed back at 30 cents on the dollar, would slash the province’s poverty rate in half, at a cost of $4.5-billion. Even if you made no other changes to spending or taxes, you could fund that with another four points on the provincial sales tax.
What the report does suggest, however, is that a basic income won’t be achieved at one go, but rather in stages. That’s probably just as well. We already have a basic income for the elderly (Old Age Security plus the Guaranteed Income Supplement) and for children (the Canada Child Benefit). Filling in the gap – people of working age – will take time, and resources, and lots of trial and error. But if we ever do get there, the panel will have blazed much of the trail.
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Andrew Coyne