Cory Morgan: Implementing a Guaranteed Basic Income Would Be a Fiscal Disaster for Canada

A man relaxes in a hammock as a cyclist rides past, in Kitsilano Beach Park in Vancouver, in a file photo. The Canadian Press/Darryl Dyck

Commentary

Governments around the world reacted to the COVID-19 pandemic the same way. They restricted the movement and ability of citizens to work while opening the floodgates of spending and borrowing to make up for lost productivity. The result has been predictable as inflation sets in and economic pressures hit everybody while the cost of living rises.

Inflation is inevitable when a government overspends and floods the economy with currency through borrowing. Central banks then respond by raising key interest rates to try to cool the economy and temper inflation. Raising interest rates is an effective method of curbing inflation, but it also crushes new capital investment projects and sends housing costs into the stratosphere as mortgage rates become untenable.

The cycle is as predictable as the seasons, yet governments can’t seem to resist the temptation to try and spend nations out of poverty. Canada’s government is currently examining the possibility of what would become the granddaddy of all social programs through a guaranteed basic income scheme. If they go ahead with it, the economic repercussions will be massive.

Bill S-233 has been quietly creeping its way through the Senate since fall 2021, and has reached the committee stage. It will make its way to Parliament soon. The bill calls for creating the framework for what it calls a “guaranteed, basic livable income” (GBI). This differs from universal basic income schemes as it is supposed to only apply to lower-income people rather than everybody. All the same, the costs for such a program would be astronomical.

Early cost estimates for implementing this GBI plan sit near $90 billion per year. For comparison, the Canada Emergency Response Benefit (CERB) pandemic support program came in at under $30 billion per year.

The CERB program gave us all a taste of what a GBI program would look like and how effective it would be.

To begin with, the price tag for CERB rose dramatically from early estimates as the program unfolded. This is typical of any government program and we can expect a GBI program to blow by its already eye-popping $90 billion price tag quickly.

Such a program is sure to be rife with abuse as unprincipled people find ways to collect benefits they aren’t entitled to. With CERB, it’s estimated that $4.6 billion was paid out to people who weren’t eligible to collect, and $27.4 billion of the COVID benefit payouts were questionable and needed more scrutiny. Even high-paid employees of the Canadian Revenue Agency got into the CERB fraud game, and 120 of them were fired for improperly collecting the benefit. Those are just the ones who got caught.

I wish we could pretend that Canadians at large were so honourable that fraud in a GBI program wouldn’t quickly become endemic but CERB proved otherwise. A significant number of ineligible people would collect GBI and the administrative costs of attempting to weed them out would be high.

Many nations have flirted with UBI and GBI models but none have widely embraced such programs after running trials with them. The most recent was Finland, which ran a program under the assumption that offering a UBI payment to people would somehow encourage people to enter the workforce. If paying somebody to do nothing to encourage them to go to work sounds counterintuitive, that’s because it is. The experiment failed to do anything aside from prove how economically naive UBI proponents are as recipients were no more likely to seek employment after taking benefits.

While sitting around and willingly living off the work of others when we could find work elsewhere sounds inconceivable to most of us, many people are perfectly happy to do so. One gentleman proudly proclaimed to The Globe and Mail that he wanted to give up on his Ph.D. and live on UBI so he could write poetry. Can we believe he would eventually tire of it and seek a job?

The GBI program going through the Senate proposes a benefit of $17,000 per year for recipients. The wording of the plan calls for a “liveable” income. Advocates would surely be lobbying for increases in the program the moment it was implemented, as they make the case that $17,000 per year isn’t a liveable subsidy in their minds. The spending spiral would continue upwards.

If a GBI were implemented, taxes would rise as would inflation, while the government deficits grow. Productive Canadians would be economically pinched further while the segment of non-productive citizens grows. In other words, it would be a fiscal disaster.

Prime Minister Justin Trudeau wants a legacy as his term in office approaches its end. Canadians need to speak up now and ensure the legacy isn’t a GBI scheme. We just can’t afford it.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.