$1000 Solution for the Left?

Yesterday while listening to CBC's the Point they were discussing the fortunes of 'the Left' in Canada. Commentator Michael Hlinka suggested that the problem the left is having is that traditionally Canadians like things that apply to everyone - Universal programs that are for everyone (such as health care). He pointed out that recently leftish parties have been promoting targeted programs rather than universal ones. He has a point, programs suggested by the Liberals and NDP are primarily targeted such as programs designed to help manufacturing, or working moms, or university students. The Conservatives, meanwhile, are heavily pushing universal programs - GST cuts, gas tax cuts, etc., - they may be small and they may benefit the rich more than the poor but they can sell them as universal.

As an example of a universal program that he found interesting Hinka mentioned a $1000/month each payment from the government. I agree, it sounds absurd. But if you consider Hlinka's background, it makes you wonder (at least it made me wonder):

"Born in Toronto , Michael Hlinka received his MBA from the University of Toronto in 1986. After developing property for several years, Michael entered the world of financial services and spent nearly a decade with companies like Standard Life, TD Waterhouse, RBC Dominion Securities and HSBC Securities.
He has been twice awarded the student-nominated, prestigious Golden Apple Award for his teaching excellence. In 2003, he received his CFA Charter and for several years worked with Canadian Academics as a CFA instructor, specializing in Quantitative Methods, Derivatives, Bonds and Portfolio Management. In addition, Michael is a regular commentator with CBC Radio."

So, the guy knows alot about numbers. Unfortunately they didn't talk about it long enough for him to get into numbers so I went and did some of my own research.

There are approximately 33 million Canadians. If we simply handed over a thousand a month to each of them it would cost a shocking 396 Billion - which is 150 billion more than the federal budget. So as a straight up plan it won't work. If however we say a thousand a month to people 18 and over that reduces it by almost 100 billion. We do not, after all, want to get in the business of paying people to have children - under this plan if it applied to everyone regardless of age a couple that had 8 children would receive 120,000/year even if they didn't work - and I don't think most Canadians would support that for very long. If however we keep the so called 'baby bonus' and only provide the money per adult then it would at least enable a very poor family to get by.

Still, we are talking about a program that costs about 300 billion so we have to tweak some more. First of all, Hlinka did mention that the money would be taxable - that means that if you are very poor you keep nearly all of it and if you are very rich you end up giving all of it back. As a general estimate based on average taxation we can guess that at least 25% of the money will come back through income taxes. So that takes the cost of the program down to about 220 billion.

If we return the GST to 7%, Cancel Harper's planned corporate tax cut, and get out of Afghanistan in 2011 that frees up another 61 billion. If we cut targeted programs such as the $100/month day care bonus, and the $500 annual tax credit for athletic programs because everyone is getting $1000/month now to use for whatever they need that helps too. Without examining all of them we can probably find another 2 billion from programs like these. If we say that, if you are receiving unemployment insurance payments that this counts as part of your payment that frees up 17.8 billion (the goal here, after all, is to insure that everyone has a steady flow of income, not to make unemployment more profitable). If we say to people in prison that the money, rather than going to you, is going to pay for part of your incarceration that frees up another half billion. If we institute the Liberal carbon tax, which the environment desperately needs, but use the funds for this program instead of income tax cuts that's another 15.5 billion. Remember that everyone is getting 1,000/month so it should help offset the costs of the Carbon tax.
All put together that's another 96 billion dollars.

So, we still have a little over 120 billion to come up with. But let's set that aside for a minute and see what this program would actually accomplish. For the working poor this would be a lifeline. If you have an entry level, full time, service sector McJob that pays 10 dollars/hour (and I know that alot of them don't pay that much.) you make approximately 375 dollars a week. The thousand dollar a month plan would break down to about $230/week taking these people up to $600/wk which you can actually live on, not well, but you can afford the basics. For the truly destitute, the homeless, this would provide a steady income. If you were homeless and could find a roommate the combined 24k/year would enable you to get a modest apartment and put food on the table in most places in Canada. Obviously this would also help university students (allowing them to borrow less), working parents (allowing them to pay for day care and school expenses), it would help the elderly and others afford prescription drugs. It would help native Canadians, new Canadians and would ultimately considerably reduce the poverty rate.

So, back to that 120 billion we still need: We don't know, but can assume, that there would be considerable savings on welfare and other programs to help the very poor as fewer people needed the help. There is even growing evidence that if people have more money that we will save on health care. We can also assume that because the very poor would actually spend most of the money that some of the money would be recovered through GST, Carbon Taxes, and other taxation. Is this enough? Does it come to 120 billion? I don't know, but we're at least getting into an area where this plan might be possible. The amount of good it would do is undeniable and it might be worthwhile to go through the Federal budget more carefully to find other funds that could be made available.

The Conservative reaction to this would be predictable - they will say 'tax and spend' they will say 'just let people keep their money in the first place'. But Conservative theories on economics don't work and everyone knows it. What Ronald Reagan called 'trickle down' economics doesn't trickle down - it makes the rich richer and the poor poorer. Letting people keep their money only works if the people we are talking about have money to keep. Taxes are not robbery, taxes are how we build society and work together for common goals. We all pay into health care, we all get health care - obviously the sick get more out of it than the healthy but we accept that as the system working the way it's supposed to. We all pay in to maintaining highways, the post office, emergency services and obviously some people get more good out of these than others. Everyone pays the fire department and we all hope that we don't need it. This program would be much the same but applied to income. If you ended up giving all the money back you should be glad that you are in an income bracket where you don't need it. On the other hand you will know that no matter how bad things get for you, for friends, for co-workers that there will have enough money to live on, not well or comfortably but enough to survive.

I have often said that I don't believe in putting ceilings on how successful people can become, but I do believe as a civilized country that we should put a floor on how far we let people fall. This program would provide a floor. I'm not 100% sold on this, there is more math that would need to be done. But the fact that it might be possible, and that it would obviously have a major impact on our society, helping most those who need the most help means it should be out there for people to consider.

If anyone out there knows Michael Hlinka I would be fascinated to know if he's done the math on this idea.