Plan was welfare on steroids — but it didn’t have to be
Ontario’s Premier Doug Ford and Social Services Minister Lisa MacLeod have faced a firestorm for cancelling the Wynne government’s Guaranteed Basic Income pilot project. The program’s architect, former Senator Hugh Segal, called the cancellation “horrific.”
What is truly horrific is the existing welfare state, which survives only by keeping people poor. It does this in two ways. First, it engenders a self-serving bureaucracy whose survival depends on a growing clientele of poor welfare recipients. To end poverty, this bureaucracy would have to put itself out of business, something it will never do. Second, there’s the welfare wall: When a welfare recipient gets a job, the system sharply withdraws benefits and imposes taxes. The result is that the harder he works, the poorer they become. He stuck behind the welfare wall.
Nobel-prize winning free enterprise economist, Milton Friedman, proposed to solve these two problems by replacing the entire welfare state with a simple basic income — a tiny survival stipend for all low-income people to be gently phased out as they earned money. But there was a catch: Governments would pay for Friedman’s basic income by eliminating all other programs, including housing, drug plans, child care and the bureaucrats who administer it all.
A few years back former premier Kathleen Wynne set up a pilot project of several thousand Ontarians to test out the idea. Well, half the idea — the part about free money.
Compared to the current system, single recipients without kids would get twice the money — $17,000 a year instead of the current $8,700.
Taxpayers would pay over triple the cost — a total of $28 billion (based on data from the Parliamentary Budget Officer) versus the $7.5 billion cost of current welfare and disability payments.
For all the talk about groundbreaking social policy, there was nothing new in this proposal other than giving more money to more people. Sure, welfare and disability income assistance would get a new name, the “Guaranteed Basic Income”, but the proposal would not replace a single program, bureaucrat, or strand of red tape. Far from replacing the welfare state, which was Friedman’s first goal, Ontario’s proposal fed the beast more money and people.
What about removing penalties for working? Ask University of British Columbia economist, Kevin Milligan, a former member of the federal Liberal Economic Advisory Council. “The Ontario plan stacks a 50 per cent phaseout rate on top of the existing 20 per cent income tax rate on low earners. If you add in CPP and EI payroll taxes and the phase out of income-tested child benefits, we could see Basic Income recipients retain only 10 cents on a dollar of earnings,” he wrote.
Not only would it punish work of recipients, Wynne’s plan would punish taxpayers funding it: “Ontario would need to add at least five points to its HST to raise that kind of revenue,” wrote Milligan.
Who would benefit? “An analysis of Statistics Canada income data tells me that if you implemented the proposed basic income scheme across Ontario, most of the money would likely go to young childless adults living with their parents,” Milligan said.
So university students — including those living with millionaire parents — would get the $17,000, on top of subsidized tuition, funded through higher sales taxes and marginal effective tax rates on the working poor. March on, social justice warriors!
The basic income pilot would not have replaced welfare, but would have replaced work. Maybe that was the intent. Just ask Ontario’s former Liberal social services Minister, John Milloy: “As well as ensuring that it is properly implemented and evaluated, needs to help Ontarians understand that the starting point of our fight against poverty can’t be about a job at any cost. It has to be about human dignity.”
He writes this as though work and dignity are at cross-purposes. To the contrary, Martin Luther King spoke of the “dignity of labour” because the two go together. The taxes and other work penalties in the Ontario proposal would have robbed people of that dignity. That is the fraudulent fairy tale of the welfare state: It promises pay without work, but delivers work without pay.
While the Ontario Liberal scheme was a disaster, and Minister MacLeod was wise to cancel it, many basic income supporters have the right goal: replacing bureaucracy, lowering welfare costs for taxpayers and freeing people to earn independence and reclaim control over their own lives. With a bad idea behind us, let’s work to find a good one.