Universal basic income – too good to be true, or simply not enough?

Good news travels fast.

Last December, a story appeared in the mainstream international media, e.g., Britain’s Independent newspaper, that Finland was planning to bring in a guaranteed basic income for all her citizens:

“Finland’s government is drawing up plans to give every one of its citizens a basic income of 800 euros (£576) a month and scrap benefits altogether.

A poll commissioned by the agency planning the proposal, the Finnish Social Insurance Institute, showed 69% supported the basic income plan.

Prime Minister Juha Sipila was quote by QZ as backing the idea.

“For me, a basic income means simplifying the social security system,” he said.

The proposal would entitle each Finn to 800 euros tax free each month, which according to Bloomberg, would cost the government 52.2 billion euros a year.

The country’s government will make a final decision on the plan in November 2016.”

(“Finland plans to give every citizen 800 euros a month and scrap benefits”, by Will Grice, December 6, 2015, Independent)

In quoting its source, Bloomberg View columnist Leonid Bershidsky’s article a month earlier, the Independent skipped the fact that there would be a “pilot stage” first:

“… Full implementation would be preceded by a pilot stage, during which the basic income payout would be 550 euros and some benefits would remain.”

(“Finns May Get Paid for Being Finns”, by Leonid Bershidsky, November 3, 2015, Bloomberg View)

A few days later the news appeared among the World Economic Forum’s Global Agenda, referring to the pilot stage as a “hybrid programme”:

“… The Finnish proposal, slated to be finalized in 2016, will first be rolled out as a hybrid programme in 2017, offering 550 euros a month while maintaining some social services. …”

(“Finland’s basic income experiment – can it work?”, by Donald Armbrecht, December 10, 2015, Global Agenda, World Economic Forum)

But it was “too good to be true”.

On the same day of the World Economic Forum article, Britain’s The Guardian dampened the euphoria by reporting that what Finland was planning was only a policy experiment – on a small scale and with no commitment to what would come next:

“Finland is not planning to scrap its existing benefit system and give everyone an unconditional grant of €800 a month – contrary to what some recent headlines may have told you.

What it is planning promises to be an interesting policy experiment involving a sample of the population, which may or may not include some form of basic income paid to all participants: which in turn may not be unconditional, and may be worth a lot less than €800. Still the general excitement was testimony to widespread interest in the basic income idea.”

(“Even in Finland, universal basic income is too good to be true”, by Declan Gaffney, December 10, 2015, The Guardian)

It “may be worth a lot less than €800”, because that level of a guaranteed income for all would occupy the Finnish government’s entire current budget, as noted by Jim Edwards of Business Insider UK:

“In Finland, €800 a month will cost the government €52.2 billion a year. The government’s revenue for 2016 is €49.1 billion. In theory, the shortfall should not be a problem because not every Finn is an adult (only those of working age will receive it) and richer Finns’ payments will be taxed. In addition, the end of other social programmes should produce savings.”

(“Here’s how much we’d all get if the UK dumped its welfare state and introduced a universal basic income scheme instead”, by Jim Edwards, December 13, 2015, Business Insider UK)

So for what the Finnish government could afford, it might not be enough for a living income – unless, of course, the government finds additional revenue, e.g., by increasing taxes as suggested by U.S. basic income advocate Scott Santens, who had proposed a basic annual income at a similar level, $12,000 per adult and $4,000 per child:

“Basic income is entirely affordable given all the current and hugely wasteful means-tested programs full of unnecessary bureaucracy that can be consolidated into it. And the cost also depends greatly on the chosen plan. A plan of $12,000 per U.S. citizen over 18, and $4,000 per citizen under 18 amounts to a revenue need of $2.98 trillion, which after all the programs that can be eliminated are rolled into it, requires an additional need of $1.5 trillion or so. So where do we come up with an additional $1.5 trillion?

• A land value tax has been estimated to be a source of revenue of about $1.7 trillion.

• A flat tax of around 40% would be sufficient. Due to the way such a tax works in combination with UBI, this would effectively be a reduction in taxes for about 80% of the population.

• A 10% value added tax (VAT) has been estimated to be a source of revenue of about $750 billion. That could be increased to reach $1.5 trillion or added to other sources of additional revenue.

• These other sources of revenue could be a carbon tax ($440 billion), a financial transaction tax ($350 billion), or taxing capital gains like ordinary income and creating new upper tax brackets ($160 billion). Did you know that for fifty years – between 1932 and 1982 – the top income tax rate averaged 82%? Our current highest rate is 39%.

…”

(“Why Should We Support the Idea of Universal Basic Income?”, by Scott Santens, June 26, 2015, Huffington Politics)

Ambitious taxation plans, but I am puzzled by some of Scott Santens’s numbers: the current highest U.S. income tax rate of 39% is pretty much the proposed flat-tax rate of 40% already; if that highest tax rate is currently paid by Americans with the highest incomes, then little additional money would be squeezed from them through the flat tax; and now where would the money for “reduction in taxes for about 80% of the population” come from?

Oh well, big taxes tend to be less popular than their advocates claim. Santens obviously understood it, and went on to suggest other big revenues:

“…

• From 2008 to 2014, we created about $5 trillion out of thin air, and handed it to banks in hopes they would lend it to people. It was called quantitative easing. The result was rich people got even richer. Why not skip the banks, and just hand debt-free money directly and equally to all citizens? Potentially, a quarter of basic income could require no taxes at all.

• There is a place in the world that already pays a regular dividend to everyone living there, universally to child and adult, through a wealth fund it has created through royalty fees paid by companies for the rights to profit from its natural resources. This place is Alaska, and the “Alaska Model” could be applied anywhere as a means of granting a basic income as the social dividend from a sovereign wealth fund of resource-based revenue.

…”

(Scott Santens, June 26, 2015, Huffington Politics)

Yeah, everyone would be rich if money could be made out of thin air, or could flow nonstop from oil.

Like with the reported Finnish plan of €800/month per adult, Santens’s $2.98 trillion plan of $12,000 per adult and $4,000 per child would gobble up much of the government budget:

“The U.S. spent about $3.7 trillion in the fiscal year that just ended, about $12,000 for every American. …”

(“5 myths about the budget”, by Michael Grunwald, October 21, 2015, Politico)

The difference is that the 2015 U.S. government budget could also pay each child $12,000, not just $4,000.

It is hard to imagine the government spending the bulk of the budget on a universal basic income like that, rather than raising big taxes to pay for it.

In early 2014 when the Liberal Party of Canada adopted two resolutions advocating for a “Basic Annual Income”, Toronto Star columnist Carol Goar immediately reminded the public that this was an idea Liberal leader Justin Trudeau’s father, former Prime Minister Pierre Elliott Trudeau, had dodged decades earlier due to taxation concerns:

“The Liberal Party has handed Justin Trudeau a gift he dared not refuse, but will soon regret accepting.

One of the “priority resolutions” approved by delegates at their biennial convention in Montreal this past weekend calls for a Liberal government to “work with provinces and territories to design and implement a Basic Annual Income” for all Canadians.

The same gift was thrust into his father’s hands 42 years ago. Sen. David Croll, author of a groundbreaking parliamentary report, entreated Pierre Elliott Trudeau to introduce a Guaranteed Annual Income. “Let this be our priority project; a project that will stir the world’s imagination,” he urged Canada’s 15th prime minister. “We need search no further for a national purpose.”

Trudeau’s heart said yes. His head said no.

He chose reason over passion. “It’s a good theory,” he acknowledged. “But we cannot guarantee to bring everyone over the poverty line by giving them part of the taxpayers’ pocket.””

(“‘Basic annual income’ loaded with pitfalls: Goar”, by Carol Goar, February 25, 2014, Toronto Star)

But this time, Trudeau the son did not say “no” right away, perhaps because the party resolutions made no reference to taxes.

The first of the two February 2014 Canadian Liberal Party resolutions on Basic Annual Income, Policy Resolution 97, put forth by National Women’s Liberal Commission, stated:

“…

BE IT RESOLVED that the Liberal Party of Canada advocate for a federal pilot of a basic income supplement in at least one Canadian town or city, in cooperation with the appropriate provincial and municipal government(s).”

(“Policy Resolution 97: Basic Income Supplement: Testing a Dignified Approach to Income Security for Working-age Canadians”, National Women’s Liberal Commission, Liberal Party of Canada)

“A federal pilot” involving “at least one Canadian town or city” would be like a minimal version of the Finnish “policy experiment” to be decided in November 2016. On this scale, obviously no new tax is needed.

For such a small-scale policy experiment, Finland and Canada would not be alone. Twenty municipalities in the Netherlands, Utrecht among them, are working to put a basic income into experiment, though keeping a low profile about it:

“It’s an idea whose adherents over the centuries have ranged from socialists to libertarians to far-right mavericks. It was first proposed by Thomas Paine in his 1797 pamphlet, Agrarian Justice, as a system in which at the “age of majority” everyone would receive an equal capital grant, a “basic income” handed over by the state to each and all, no questions asked, to do with what they wanted.

… in Utrecht, one of the largest cities in the Netherlands, and 19 other Dutch municipalities, a tentative step towards realising the dream of many a marginal and disappointed political theorist is being made.

The politicians, well aware of a possible backlash, are rather shy of admitting it. “We had to delete mention of basic income from all the documents to get the policy signed off by the council,” confided Lisa Westerveld, a Green councillor for the city of Nijmegen, near the Dutch-German border.

“We don’t call it a basic income in Utrecht because people have an idea about it – that it is just free money and people will sit at home and watch TV,” said Heleen de Boer, a Green councillor in that city, which is half an hour south of Amsterdam.

Nevertheless, the municipalities are, in the words of de Boer, taking a “small step” towards a basic income for all by allowing small groups of benefit claimants to be paid £660 a month – and keep any earnings they make from work on top of that. Their monthly pay will not be means-tested. They will instead have the security of that cash every month, and the option to decide whether they want to add to that by finding work. The outcomes will be analysed by eminent economist Loek Groot, a professor at the University of Utrecht.

A start date for the scheme has yet to be settled – and only benefit claimants involved in the pilots will receive the cash – but there is no doubting the radical intent. The motivation behind the experiment in Utrecht, according to Nienke Horst, a senior policy adviser to the municipality’s Liberal Democrat leadership, is for claimants to avoid the “poverty trap” – the fact that if they earn, they will lose benefits, and potentially be worse off.”

(“Dutch city plans to pay citizens a ‘basic income’, and Greens say it could work in the UK”, by Daniel Boffey, December 26, 2015, The Guardian)

Elsewhere, a small-scale experiment was recently carried out in 2008-2009 in an African village in Namibia, with considerable success according to the German aid organizations that conducted it:

“It sounds like a communist utopia, but a basic income program pioneered by German aid workers has helped alleviate poverty in a Nambian village. Crime is down and children can finally attend school. Only the local white farmers are unhappy.

…

The African continent receives roughly €30 billion in annual development aid, through charitable organizations, humanitarian assistance projects or direct payments to governments. The money flows into thousands of aid projects, into things like well-digging and malaria prevention, but some of it also ends up in the private bank accounts of corrupt statesmen or is spent on wars, and often never reaches its intended recipients. Indeed, the results of half a century of aid to the developing world are devastating: Out of the 40 nations that the International Monetary Fund (IMF) categorizes as “heavily indebted poor countries,” 33 are in Africa.

It seems that the financial assistance coming from donor nations is barely keeping the continent alive, which leads to two possible conclusions: Either development aid is not a solution, or Africa is beyond help.

In the small Namibian village of Otjivero, a coalition of aid organizations is attempting to prove that both conclusions are wrong. They insist that Africa can be helped — provided it gets the right kind of help, which requires a new and different approach to aid.

The idea is simple: The payment of a basic monthly income, funded with tax revenues, of 100 Namibia dollars, or about €9 ($13), for each citizen. There are no conditions, and nothing is expected in return. The money comes from various organizations, including AIDS foundations, the Friedrich Ebert Foundation and Protestant churches in Germany’s Rhineland and Westphalia regions.”

(“A New Approach to Aid: How a Basic Income Program Saved a Namibian Village”, by Dialika Krahe, August 10, 2009, Spiegel Online International)

But the Namibia experiment’s scientific validity has been questioned by social policy expert Rigmar Osterkamp:

“In January 2008, an innovative civil society initiative was started in the Namibian village of Otjivero. It paid a basic income grant to all residents with financial backing from Germany. The aim was to demonstrate how poverty and high levels of inequality can be reduced. The project was not evaluated diligently, however, so it did not serve as a valid pilot scheme. Its impacts remain unclear, but are certainly unsustainable.

…”

(“Lessons from failure”, by Rigmar Osterkamp, May 3, 2013, D+C Development and Cooperation)

The affordability of a broader basic income at this level is certainly doubtful, considering that for Africa’s 1.1 billion people to receive an international aid of €108 each annually would require nearly €120 billion, several times the €30 billion Africa received as per the 2009 Spiegel report.

As for “a communist utopia” the Namibia project might sound like, the income without requirement of work would certainly be much ‘freer’ than the communist rule in which I grew up in China: there was no income without work, but the government aimed at full employment by assigning mandatory jobs to people of working age.

Also confusing is the notion of rations, related to a basic income experiment in India. Under the communist rule decades ago in Chinese cities the rations were quotas, within the limits of which residents could purchase living necessities such as food stuff; that is quite different from the present rations in Delhi, provided free of charge to the residents, as in the following story about basic income experiments in India:

“In 2011 two pilot schemes have started in India, one conducted by the Self-Employed Women’s Association (SEWA), a well-known trade union for women who earn a low income through their own labour or small businesses. The project was supported by UNICEF. In eight villages the pilot provided all adults for one year with an unconditional payment of 200 Rupees (about 3.75 US Dollars | 2.80 Euros) per month and each child under the age of 14 with 100 Rupees a month. These payments represented about 40% of the bare subsistence level.

The other pilot is supported by the Delhi Government. It gives households a choice between continuing to receive food rations in an existing scheme or taking a monthly cash transfer instead. Many have opted for the cash.”

(“GROWING SUPPORT FOR BI WORLWIDE”, December 2012, Global Basic Income Foundation)

In Canada in February 2014, the second Liberal Party resolution adopted on universal basic income, Policy Resolution 100 – a Priority Resolution mentioned in Carol Goar’s Toronto Star article – proposed by the party’s Prince Edward Island wing, demanded the design and implementation of a Basic Annual Income:

“…

BE IT RESOLVED that a Federal Liberal Government work with the provinces and territories to design and implement a Basic Annual Income in such a way that differences are taken into consideration under the existing Canada Social Transfer System.”

(“Policy Resolution 100: Priority Resolution: Creating a Basic Annual Income to be Designed and Implemented for a Fair Economy”, Liberal Party of Canada (Prince Edward Island), Liberal Party of Canada)

The existing “Canada Social Transfer System”, referred to in this policy resolution, is defined as follows:

“The Canada Social Transfer (CST) is the primary federal contribution in Canada to provincial and territorial social programs related to post-secondary education (PSE), social assistance and social services, and programs for children.”

(“The Canada Social Transfer: Past, Present and Future Considerations”, by James Gauthier, September 13, 2012, Library of Parliament Canada)

This Liberal Party Priority Resolution is thus about turning the “existing” federal government fund transfer to the provinces and territories for post-secondary education, social assistance, social services and children’s programs, together with funds the provinces and territories already have, into a system of Basic Annual Income – whatever the income amount comes to, presumably.

The basic income normally does not include allowance for higher education:

“… Bettering oneself beyond basic needs – attaining higher education and pursuing a rewarding, long-term career – are aims that a basic income was never intended to replace.”

(“How can we not afford a ‘basic annual income’?”, by Rob Rainer and Kelly Ernst, February 27, 2014, Toronto Star)

Since government funds for post-secondary education are unlikely to be diverted to the basic income, the parts of the Canada Social Transfer that may be utilized would be funds for social assistance, social services and children’s programs.

The latest signal from Canadian Prime Minister Justin Trudeau’s government indicates that funds for children’s benefits would likely be separate from any basic income, and more importantly, the basic income is currently not on the government agenda although future discussions would be welcome:

“Veteran economist Jean-Yves Duclos, who is Minister of Families, Children and Social Development, told The Globe and Mail the concept has merit as a policy to consider after the government implements more immediate reforms promised during the election campaign.

…

Interest in the idea of a guaranteed income is heating up since the Finnish government announced last year that it will research and test the concept.

That has led to growing calls to explore the idea here. Former senator Hugh Segal and Conference Board of Canada chief economist Glen Hodgson are among those recommending pilot projects.

…

A guaranteed income was not part of the federal Liberal platform, and Mr. Duclos said it is not currently on the government’s agenda given the focus on delivering campaign commitments. However, the minister is clearly interested in exploring the idea over the longer term.

One of Mr. Duclos’s most pressing files is folding several existing benefits for parents into a single monthly payment that is geared to income. That has a target implementation date of July. The minister noted that elements of that plan are in line with a guaranteed national income.

“Most importantly, I think it’s the principles behind the idea [of a guaranteed income] that matter. These principles are greater simplicity for the government, greater transparency on the part of families and greater equity for everyone,” he said. “In fact, it’s the same principles that are behind the implementation of our Canadian child benefit in the next budget, so it’s great that different versions of different systems can achieve the same objectives of greater simplicity, transparency and equity.”

…

Conservative MP and finance critic Lisa Raitt said she would like the House of Commons finance committee to study the idea. She also said she raised the issue with Finance Minister Bill Morneau recently during a private pre-budget meeting.

“He seemed favourable,” she said. “I have an open mind on it. I know that there’s been progress made on it around the world in terms of how people are viewing it. I don’t know if it will work in Canada but the work of the committee will help us figure out whether or not it is something that is good or not good.””

(“Minister eyes guaranteed minimum income to tackle poverty”. by Bill Curry, February 5, 2016, The Globe and Mail)

Apparently, a party policy priority resolution is not necessarily in the party’s election platform, not in this case.

As Jean-Yves Duclos, the Canadian Minister of Families, Children and Social Development, explained, the Liberal government’s new Canadian child benefit is a different version of a different system but follows the same principles that would be for a “guaranteed national income”: “greater simplicity for the government, greater transparency on the part of families and greater equity for everyone”.

Whatever the principles, if the money has been for social assistance and social services, i.e., social welfare only, how much of a “guaranteed national income”for everyone can it be turned into?

Quite a lot more money than what the relative small number of welfare recipients get, because a larger amount of money is spent on others. For example, the U.S. data is staggering, although it includes some assistance on education (Pell grants):

“New data compiled by the Republican side of the Senate Budget Committee shows that, last year, the United States spent over $60,000 to support welfare programs per each household that is in poverty. The calculations are based on data from the Census, the Office of Management and Budget, and the Congressional Research Services.

“According to the Census’s American Community Survey, the number of households with incomes below the poverty line in 2011 was 16,807,795,” the Senate Budget Committee notes. “If you divide total federal and state spending by the number of households with incomes below the poverty line, the average spending per household in poverty was $61,194 in 2011.”

This dollar figure is almost three times the amount the average household on poverty lives on per year. “If the spending on these programs were converted into cash, and distributed exclusively to the nation’s households below the poverty line, this cash amount would be over 2.5 times the federal poverty threshold for a family of four, which in 2011 was $22,350 …” the Republicans on the Senate Budget Committee note.

To be clear, not all households living below the poverty line receive $61,194 worth of assistance per year. After all, many above the poverty line also receive benefits from social welfare programs (e.g. pell grants).

…

As for the welfare programs, the Republicans on the Senate Budget Committee note:

A congressional report from CRS recently revealed that the United States now spends more on means-tested welfare than any other item in the federal budget—including Social Security, Medicare, or national defense. Including state contributions to the roughly 80 federal poverty programs, the total amount spent in 2011 was approximately $1 trillion. Federal spending alone on these programs was up 32 percent since 2008.

The U.S. Census Bureau estimated that almost 110 million Americans received some form of means-tested welfare in 2011. These figures exclude entitlements like Medicare and Social Security to which people contribute, and they refer exclusively to low-income direct and indirect financial support—such as food stamps, public housing, child care, energy assistance, direct cash aid, etc. For instance, 47 million Americans currently receive food stamps…”

(“Over $60,000 in Welfare Spent Per Household in Poverty”, by Daniel Halper, October 26, 2012, The Weekly Standard)

Still, $1 trillion is just over 1/3 of the $2.98 trillion needed, according to basic income advocate Scott Santens quoted earlier, for a U.S. national basic income of $12,000 per adult and $4,000 per child per year.

But it is a lot of money that presumably can be consolidated into one basic income program to achieve “greater simplicity, transparency and equity”, as phrased by Canada’s Jean-Yves Duclos.

The British data is similar:

“So how might this work out in the UK?

We decided to use numbers for the 2013-14 financial year because those are the most-complete numbers provided by the Office of National Statistics and the Office for Budget Responsibility:

• UK WELFARE BUDGET FOR 2013-14

• Total welfare spending: £251 billion
• Population: 64.5 million
• Of which, children: 15 million

If that budget was recast as a universal basic income, this is what you would get:

• UK BASIC INCOME BUDGET FOR 2013-14

• Basic income per head for all residents, annually: £3,891
• Basic income per head for all residents, monthly: £324
• Basic income per head for adults only, annually: £5,081
• Basic income per head for adults only, monthly: £423”

(Jim Edwards, December 13, 2015, Business Insider UK)

In 2013, £3,891 was over $5,800, and £5,081 was over $7,600.

(“Yearly Average Currency Exchange Rates: Translating foreign currency into U.S. dollars”, last updated January 15, 2016, U.S. Internal Revenue Service)

So the British government welfare spending is clearly more than 1/3 of what is needed for a basic income at the same level as the U.S. one advocated by Santens.

The idea that a universal basic income would provide better “equity”, or more equality for the poor, appeals to the political left, while the notion that it provides “simplicity” in government management appeals to the political right:

“… To those on the left, a UBI would create greater equality by ending poverty and providing a minimum living standard. It would also increase bargaining power for workers, who could demand better working conditions with a safety cushion. …

…

Meanwhile, a few conservatives have advocated a form of basic income for a different set of reasons. The right likes basic income because it would allow for the removal of many overlapping and piecemeal government programs, such as food stamps and unemployment insurance, as well as programs the government directly runs. …”

(“Thinking Utopian: How about a universal basic income?”, by Mike Konczal, May 11, 2013, Wonkblog, The Washington Post)

The history of attempts at introducing a universal basic income by politicians and intellectual advocates in the Western world has been quite long, in the U.S. dating back to at least the Richard Nixon era:

“… Milton Friedman, the libertarian Nobel laureate economist, proposed a version of this idea called a “negative income tax,” in which every household would be given a check for a set amount, such that some people actually had a negative tax burden. That got picked up by the Nixon administration, in particular then-aide and future U.S. Sen. Daniel Patrick Moynihan, and Congress almost passed a version of the proposal. George McGovern proposed a $1,000 tax credit for every man woman in child during his 1972 run against Nixon, which he called a “demogrant”. …

Despite the current unpopularity of the idea — commonly known as a “basic income” when it takes the form of an unconditional payment to all citizens — among policymakers, it has some adherents among intellectuals, including Charles Murray of AEI – of The Bell Curve and Coming Apart fame – and the political philosopher Philippe van Parijs.”

(“Obama doesn’t want to just write welfare recipients checks. But what if we did?”, by Dylan Matthews, August 8, 2012, Wonkblog, The Washington Post)

I note that the U.S. politicians’ approaches were more pragmatic than universal: they simply proposed tax credits which would be universal when not dependent on income level, and the amount may not be at all close to the basic living level.

One of the most recent such proposals was put forward by then U.S. Congressman Bob Filner:

“The most recent version of the idea introduced in Congress was California Rep. Bob Filner’s “A Tax Cut for the Rest of Us Act,” designed by basic income activists, which would have replaced the standard deduction of the income tax with a $2,000 credit per adult and $1,000 credit per child, both fully refundable. The bill, introduced in 2006, didn’t catch on, only gaining one other cosponsor, and is not large enough to eliminate poverty, but it did give tax analysts a chance to crunch the numbers on what a basic income would actually cost.

According to Citizens for Tax Justice, a left-leaning think tank and advocacy group, the Filner proposal came to … $186 billion annually, a figure made lower by the fact that the credit is optional, only applies to those who doesn’t itemize deductions and replaces rather than supplements the standard deduction. …”

(Dylan Matthews, August 8, 2012, The Washington Post)

I note that Bob Filner, the main subject of my February 9, 2015 blog post, was a high-profile and successful Democratic Congressman who went on to become Mayor of San Diego only to resign in disgrace due to a sexual-impropriety scandal, while losing in his efforts campaigning for a U.S.-Mexico bi-national Olympics for the year 2024.

(“Sexual complaints against a seasoned U.S. Democrat, and the end of a U.S.-Mexico bi-national Olympics dream”, February 9, 2015, Feng Gao’s Posts – Rites of Spring)

Filner’s tax credit plan was proposed in 2006. According to the estimation of the U.S. Bureau of Labor Statistics’ Consumer Price Index calculator, $1,000 U.S. in 1972, when then Democratic presidential candidate George McGovern proposed a universal tax credit, would equal $4,822.97 in 2006.

(“H.R. 5257 (109th): Tax Cut for the Rest of Us Act of 2006”, GOVTRACK; and,“CPI Inflation Calculator”, U.S. Bureau of Labor Statistics)

So Filner’s plan of $2,000 per adult and $1,000 per child would have given every American an amount just over 40% or just over 20%, respectively, of McGovern’s plan. Moreover, the tax credit would replace the standard deduction, and so the real gain would be even smaller.

Filner’s plan not only would have been very inadequate as a basic income, but paled in comparison to the proposals of others, including conservative scholar Charles Murray’s, according to Dylan Matthews in his Washington Post Wonkblog article:

“Basic income activists have pegged the amount for a full basic income at $10,000 per adult and $2,000 per child. Here’s how much proposals between Filner’s and that plan would cost, given the current size of the population:

…

Filner’s proposal, not including any offsets from repealing the standard deduction, would cost a little over $500 billion a year. A plan with $5,000 grants for adults, or about half the $10,000 annual poverty line for adults, costs about $1.25 trillion a year, and Murray’s proposal to give $10,000 annually for every adult over 21 comes to about $2.25 trillion.”

(Dylan Matthews, August 8, 2012, The Washington Post)

While the basic income amounts in the proposals analyzed in Matthews’s article are all less than basic income advocate Scott Santens’ vision of $12,000 per adult and $4,000 per child, Murray’s is close to it, and is noteworthy given his fame as a conservative scholar.

Charles Murray, as reviewed in my January 23, 2015 blog post, has been highly controversial for his view on racial difference in IQ intelligence:

“Murray was one of the authors of the infamous 1994 book, The Bell Curve, whose claims about the genetic roots of the black/white IQ gap set off the most famous public intellectual debate over race and IQ.”

(“A Harvard Ph.D. thesis on “Hispanic IQ”, bad publicity even for the conservative Heritage Foundation in Washington, D.C.”, January 23, 2015, Feng Gao’s Posts – Rites of Spring)

Murray’s proposal was cheered on by British writer Tim Worstall in a Forbes magazine article on December 6, 2015 – the same day of the Independent story quoted at the start of this blog post – who emphasized that it would cost only about as much as the current U.S. spending on welfare:

“There’s rather a lot of discussion around these days about the merits of a universal basic income. We have, for example, those who tell us that the robots are about to steal all our jobs and therefore we need to tax the capital owners in order to provide that basic income for all. Well, maybe, but it’s not going to work out that way. However, that universal basic income is still a startlingly good idea simply because it’s better than any of the various welfare systems we have at present. But do note: It works by being universal and basic.

…

Charles Murray (in his book In Our Hands) did the math for the US: $10,000 a year to each adult over 21. It works. We spend about the same amount we currently do on welfare providing it. Chris Dillow, the thinking man’s Marxist, has pointed to similar studies for the UK suggesting £130 a week works.

This is a basic income. It is not a living wage, it doesn’t even reach the full year full time minimum wage. But you can, just about, in all the countries mentioned and with the sums for those countries, just about get by.”

(“Finally, Someone Does Something Sensible: Finland To Bring In A Universal Basic Income”, by Tim Worstall, December 6, 2015, Forbes)

But wait. Dylan Matthews’s August 2012 Washington Post article, quoted earlier, had stated Murray’s proposal would cost $2.25 trillion/year, whereas Scott Santens’s estimation of $2.98 trillion annual costs for his proposal, cited earlier, stated an additional $1.5 trillion was needed on top of elimination of existent programs – closer to a U.S. Congressional report figure cited earlier in Daniel Halper’s The Weekly Standard article, that in 2011 the entire U.S. governmental spending on poverty programs was about $1 trillion.

So how then could Murray’s math be so much smarter, than even the U.S. Congress, that his proposal’s estimated spending of  $2.25 trillion was what the U.S. already spent on welfare, and thus would carry no additional tax burden?

Here is what Murray wrote in a 2008 article, referring to his 2006 book, In Our Hands:

“To frame the discussion, it is useful to think in terms of a specific proposal. The one I have proposed in a book entitled In Our Hands converts all transfer payments to a single cash payment for everyone aged twenty-one and older (Murray 2006). It would require an amendment to the American Constitution that I am not competent to frame in legal language, but its sense is easy to express: ‘Henceforth, federal, state, and local governments shall make no law nor establish any program that provides benefits to some citizens but not to others. All programs currently providing such benefits are to be terminated. The funds formerly allocated to them are to be used instead to provide every citizen with a cash grant beginning at age twenty-one and continuing until death. The annual value of the cash grant at the program’s outset is to be US$10,000.’

…

The GI [Guaranteed Income] eliminates programmes that are unambiguously transfers — Social Security, Medicare, Medicaid, welfare programmes, social service programmes, agricultural subsidies, and corporate welfare. It does not apply a strict libertarian definition of transfer, leaving activities such as state-funded education, and funding for transportation infrastructure and the Post Office in place. …

…

Once benefits replacement is used as the basis for financing a GI, the money problem becomes manageable. By about 2011, the GI will be cheaper than maintaining the system the United States has in place, and the cost savings will increase geometrically in the years to come.”

(“The Social Contract Revisited: Guaranteed Income as a Replacement for the Welfare State”, by Charles Murray, April 22, 2008, The Foundation for Law, Justice and Society)

Aha, although Murray’s definition of welfare does not include education, it includes “Social Security, Medicare, Medicaid”, in addition to the standard welfare and social services; it even includes agricultural subsidies. In this manner, Murray’s Guaranteed Income would actually save the U.S. government money.

No wonder this staunch conservative scholar is sure he can provide a $10,000 guaranteed income while balancing the government books: in giving every U.S. citizen that one check, he would take away all their current entitlements and benefits.

According to the Bureau of Labor Statistics CPI calculator, $10,000 in 2006 would equal $11,756.80 in 2015. So in terms of the size of the check, Murray’s proposal is as generous as basic income advocate Scott Santens’s $12,000. However, when a person gets sick and needs medical care, $12,000 can be very little!

Murray proposed a mandatory medical insurance requirement to accompany the guaranteed income:

“The GI requires that every recipient of the grant, beginning at age twenty-one, spends US$3000 of the US$10,000 grant on a health care insurance package that includes coverage for high-cost single events such as surgery and for catastrophic longterm illnesses or disability. The GI also requires that insurance companies treat the entire population as a single risk pool. Given that environment, health insurance companies can offer plans with excellent coverage for somewhere around US$3000. They can be so inexpensive for the same reason that life insurance companies can sell generous life insurance cheaply if people buy it when they are young.”

(Charles Murray, April 22, 2008, The Foundation for Law, Justice and Society)

With $3,000 going to health insurance, the actual amount for basic living would be no more than $7,000. By the estimation of the Bureau of Labor Statistics CPI calculator, that amount in 2006 would equal $8,229.76 in 2015.

Charles Murray’s proposed guaranteed income for basic living would only be $685.81/month in 2015.

Tell that to the retirees.

According to the U.S. Social Security Administration, the basic social security income for 2016 is $733/month for one person and $1,100/month for a couple, but in December 2015 the average income has reached $1,228.12/month per beneficiary and $1,341.77/month for a retired worker – nearly twice the size of Murray’s proposed Guaranteed Income – and the retirees enjoy Medicare, most of them at a small premium of $104.90/month in 2015 and 2016.

(“It’s Official: Medicare Part B Premiums Will Rise 16% In 2016 For Some Seniors”, by Ashlea Ebeling, November 16, 2015, Forbes; and, “Monthly Statistical Snapshot, December 2015”, December 2015, and, “You May Be Able To Get Supplemental Security Income (SSI)”, January 2016, U.S. Social Security Administration)

The key here is that the Social Security is a retirement savings mechanism financed through payroll taxes, and as a result many retirees receive substantially higher benefits than the basic amount. Likewise, Medicare is a health insurance program financed primarily through payroll taxes.

(“Social Security: Medicare”, October 2015, “How is Social Security Financed?”, and, “Social Security Benefit Amounts”, U.S. Social Security Administration)

So for many of the retirees, Charles Murray’s proposed Guaranteed Income to replace not only the standard welfare but the government-administered retirement savings and health insurance schemes, would mean a substantial loss of income.

I wonder when Tim Worstall of the Adam Smith Institute in London leaped into the frenzy starting the latest media blitz on universal basic income, did he ever see ‘the devil in the details’?

To be fair, the current Social Security benefit eligibility requirements  include “limited income”, and “limited resources”, i.e., limited personal assets, whereas Murray’s guaranteed income would be in addition to the personal income, and independent of the personal assets:

“With regard to the elderly living in retirement, the first and largest advantage of the GI over the current system is that it is truly universal (American Social Security is not), and even in the worst case provides US$10,000 a year for every elderly person in the country. But the GI does more than give everyone a guaranteed floor income. The GI makes it easy for low-income people to have a comfortable retirement. Summarizing the more detailed discussion in the book, consider someone who puts US$2000 a year in an index-based stock fund every year from age twenty-one until he retires at sixty-six. If one applies a worst-case scenario, assuming a lower compound average growth rate (4%) than has actually occurred in any forty-five-year period in the history of the American stock market, that person will have about US$253,000 at age sixty-six, with which they could purchase an annuity worth about US$20,500 a year, on top of the US$10,000 continuing grant. What about people who don’t save any money or invest it unwisely? Everyone, including the improvident and incompetent who have squandered everything, still have US$10,000 a year each, US$20,000 for a couple, no matter what. …”

(Charles Murray, April 22, 2008, The Foundation for Law, Justice and Society)

So the rich would be getting richer while retired workers with limited means would get poorer, under Murray’s proposal?

Well, not exactly. Murray’s is able to save the government welfare money also because the guaranteed income amount would be reduced through taxation if one’s earned income is higher, meaning that those who make high incomes might not actually get the guaranteed income:

“… Earned income has no effect on the grant until it reaches US$25,000. From US$25,000 to US$50,000, surtax is levied that reimburses the grant up to a maximum of US$5000. The surtax is 20 per cent of incremental earned income. The grant is administered for individuals without regard to earned income from other members of the household.”

(Charles Murray, April 22, 2008, The Foundation for Law, Justice and Society)

So when a person’s earned income reaches $50,000, 20% surtax would return $5,000 Guaranteed Income back to the government coffer.

Murray did not specify what to do with income higher than $50,000. But if the 20% surtax is applied to all earned incomes over $25,000, Murray’s Guaranteed Income would not be a basic income for all even though no one is barred from it, but a basic income for all those making less than $75,000.

The simplicity of the earned income surtax with which Murray would implement the guaranteed income is significant.

In this manner, I think, perhaps, without drastically increasing taxes as advocated by Scott Santens or eliminating “Social Security, Medicare, Medicaid” as suggested by Charles Murray, a sizable budget from the existing government welfare-type programs can be rolled into a single basic income for all those in need fully or partially, thus effectively eliminating poverty.

According to Daniel Halper of The Weekly Standard quoted earlier, in 2011 the amount spent by the 80 or so U.S. government poverty programs was around $1 trillion, and the number of households with incomes below the poverty line was 16,807,795.

According to the U.S. Census Bureau data, the number of households in the U.S. in 2010-2014 was 116,211,092, the average size of the households was 2.63 persons, and the total population per the April 1, 2010 census was 308,745,538.

(“QuickFacts United States”, U.S. Census Bureau)

The percentage of households in poverty in 2011 was thus just under 14.5%.

By household percentage, since $2.98 trillion is needed for Scott Santens’s basic income of $12,000 per adult and $4,000 per child, and 14.5% of $2.98 billion is $432.1 billion, that would be an average amount needed to provide a basic income to those living in poverty; the rest of the $1 trillion in the government poverty program spending would then go to ‘partial’ basic income for the households above the poverty line, e.g., receiving the basic income but with their higher earned income subject to a surtax as in Murray’s proposal.

Unfortunately, like with the retirees’ Medicare benefits that would be taken away in Murray’s plan, the $1 trillion government spending on poverty programs included a substantial portion spent on medical care for the poor, primarily Medicaid:

“Although the public is aware that Social Security and Medicare are large expensive programs, few are aware that for every $1.00 spent on these two program, government spends 76 cents on assistance to the poor or means-tested welfare.

In FY2011, federal spending on means-tested welfare came to $717 billion. State contributions into federal programs added another $201 billion, and independent state programs contributed around $9 billion. Total spending from all sources reached $927 billion.

About half of means-tested spending is for medical care. Roughly 40 percent goes to cash, food, and housing aid. The remaining 10 to 12 percent goes what might be called “enabling” programs, programs that are intended to help poor individuals become more self-sufficient. These programs include child development, job training, targeted federal education aid and a few other minor functions.

The total of $927 billion per year in means-tested aid is an enormous sum of money. One way to think about this figure is that $927 billion amounts to $19,082 for each American defined as “poor” by the Census. However, since some means-tested assistance goes to individuals who are low income but not poor, a more meaningful figure is that total means-tested aid equals $9,040 for each lower income American (i.e., persons in the lowest income third of the population).”

(“Examining the Means-tested Welfare State: 79 Programs and $927 Billion in Annual Spending. Testimony before Committee on the Budget United States House of Representatives”, Robert Rector, April 17, 2012, The Heritage Foundation)

As in the above quote from the testimony of the Heritage Foundation’s Robert Rector before the U.S. House Committee on the Budget, when those not in poverty but of low-income are included, the average amount per person from the $927 billion total is not high, not to mention that about half of it went to cover medical care in 2011.

The actual Fiscal Year 2011 Medicaid spending figures cited in the above report were: $274.964 billion in federal spending and $157.600 billion in state spending, for a total of $432.564 billion.

In any case, consider the rough figures from the above quote: about half of the $927 billion went to medical care, and 10-12% to child development, job training and education aid and other minor functions; assuming these funds would be kept intact, it would leave only the 40% for cash, food and housing aid to be rolled into a basic income for the poor and low-income.

A more careful scrutiny of the Heritage Foundation report shows the amount for cash, food and housing aid as only around 38.1% in 2011: $182.12988 billion in cash aid – including Earned Income Tax Credit, Refundable Child Credit, Make Work Pay Tax Credit, and small amounts for refugee assistance and assistance to Indians, etc. – $109.41473 billion in food aid, and $56.143 billion in housing aid, for a total of $347.68761 billion of federal and state spending on cash, food and housing aid.

The availability of some of this $347.7 billion warrants further consideration: public housing has long been a useful subsidy for the needy and may deserve preservation; now if the $56.143 billion spending on housing aid is kept intact, the 2011 cash and food aid total would be under $292 billion – $140 billion short of the average $432.1 billion calculated earlier just for the households in poverty, for Santens’s proposal of basic income.

The 2012 U.S. federal budget showed a significant improvement over 2011, to around $325 billion in federal spending for cash aid and food aid, according to a U.S. House Committee on the Budget report in March 2014:

““Our aim is not only to relieve the symptom of poverty, but to cure it and, above all, to prevent it. No single piece of legislation, however, is going to suffice.”
– President Lyndon Johnson, 1964 State of the Union Address

Fifty years ago, President Lyndon Johnson declared war on poverty. Since then, Washington has created dozens of programs and spent trillions of dollars. But few people have stopped to ask, “Are they working?”

In “The War on Poverty: 50 Years Later,” the House Budget Committee majority staff starts to answer that question.

There are at least 92 federal programs designed to help lower-income Americans. For instance, there are dozens of education and job-training programs, 17 different food-aid programs, and over 20 housing programs. The federal government spent $799 billion on these programs in fiscal year 2012.

Program Area	# Of Federal Programs	Cost In FY2012
Cash aid	5	$220 billion
Education and job training	28	$94.4 billion
Energy	2	$3.9 billion
Food aid	17	$105 billion
Health care	8	$291.3 billion
Housing	22	$49.6 billion
Social Services	8	$13 billion
Veterans	2	$21.8 billion
TOTALS	92	$799 billion

But rather than provide a roadmap out of poverty, Washington has created a complex web of programs that are often difficult to navigate. Some programs provide critical aid to families in need. Others discourage families from getting ahead. And for many of these programs, we just don’t know. There’s little evidence either way.”

(“The War on Poverty: 50 Years Later: A House Budget Committee Report”, Committee on the Budget, Chairman Tom Price, M.D., March 3, 2014, U.S. House of Representatives)

The federal budget on poverty programs was substantially increased from $717 billion in 2011 to $799 billion in 2012. As a result, federal cash aid and food aid figures alone, i..e, not counting funding from the states, add up to $325 billion – $328.9 billion if energy aid is also added – that could be converted to basic income, with the other program expenditures intact.

The U.S. Census Bureau has more detailed data on poverty that can help my analysis on how far $325 billion could go for basic income:

“The nation’s official poverty rate in 2011 was 15.0 percent, with 46.2 million people in poverty. …

…

Thresholds

• As defined by the Office of Management and Budget and updated for inflation using the Consumer Price Index, the weighted average poverty threshold for a family of four in 2011 was $23,021.

…

Age

• In 2011, 13.7 percent of people 18 to 64 (26.5 million) were in poverty compared with 8.7 percent of people 65 and older (3.6 million) and 21.9 percent of children under 18 (16.1 million).
• …”

(“Income, Poverty and Health Insurance Coverage in the United States: 2011”, September 12, 2012, U.S. Census Bureau)

A $10,000 – not $12,000 – basic annual income for each of the 30.1 million poor adults would come to $301 billion, and a $1,500 – not $4,000 – basic annual income for each of the 16.1 million children would come to another $24.15 billion, for a total of $324.25 billion, just under $325 billion – without cutting funding for medical care, housing, child development, job training and education.

I guess one can say that it is simply not enough, that while the adults may get by the children would have a hard time surviving.

A little more thought reveals that the adults could be squeezed further, because the current norm of both tax filing and social benefit allocation is not based on the number of individuals, but on the size of the household as a whole. For instance, the Social Security basic benefit for 2012, cited earlier, was $733/month for one person but $1,100 for a couple – the second adult in the household received only $367, i.e., half of the first adult’s amount.

Underlying such benefit rules is an official measure: the poverty guidelines.

Below are the 2011 poverty guidelines of the U.S. Department of Health and Human Services:

“The following guideline figures represent annual income.

The 2011 Poverty Guidelines for the 48 Contiguous States and the District of Columbia

PERSONS IN FAMILY	POVERTY GUIDELINE
1	$10,890
2	14,710
3	18,530
4	22,350
5	26,170
6	29,990
7	33,810
8	37,630

For families with more than 8 persons, add $3,820 for each additional person.”

(“FEDERAL REGISTER: JANUARY 20, 2011 (VOLUME 76, NUMBER 13)”, U.S. Department of Health and Human Services)

Note that in the earlier-quoted Census Bureau document published in September 2012, the “weighted average poverty threshold” for a 4-person household was $23,021, slightly higher than in the “poverty guideline” above.

As shown above, the poverty guideline for 1 person was just under $11,000, but for 2 persons was under $15,000; thus, if giving one person a basic annual income of $12,000 makes sense, giving a couple $16,000 instead of $24,000 would not be unreasonable.

Hence, I devise a different but reasonable notion of basic income:

• basic income is granted to each household rather than each individual;
• to eliminate poverty, the amount of the official poverty guideline+$1 is the granted basic income amount.

Now I ask the question, using the existing government budget figures reviewed earlier, i.e., 2011’s federal and state cash and food aid budget total of $292 billion, or 2012’s federal cash and food aid budget of $325 billion, will I be able to lift all people out of official poverty – without cutting funding to medical care, housing, child development, job training and education?

Simple estimations indicate that the answer is likely affirmative for the improved 2012 figure: the Census Bureau figure of poverty for 2011 was 46.2 million Americans, and the The Weekly Standard figure (reported from Census Bureau) of the 2011 number of households in poverty was 16,807,795, which come to an average of under 2.75 persons per household, consistent with Census Bureau’s 2.63 persons for all households; using the Department of Health and Human Resources’ 3-person household poverty guideline for 2011, $18,530+$1 for each of the 16,807,795 poverty households, would require a total of 311,465,249,145, i.e., under $312 billion – the 2011 federal and state cash and food aid budget total of $292 billion wasn’t enough, but the 2012 federal cash and food aid budget of $325 billion would be enough.

Another method of estimation yields a figure lower than $312 billion to lift all out of poverty. For this lower estimate, I first convert the 2011 poverty household number 16,807,795 to 16.808 million, and cite a more precise number of Americans in poverty in 2011: 46.247 million.

(“Income, Poverty, and Health Insurance Coverage in the United States: 2011”, by Carmen DeNavas-Walt, Bernadette D. Proctor and Jessica C. Smith, September 2012, U.S. Census Bureau)

Now in the 2011 poverty guidelines quoted above, I note that the guideline amount for a family or household of any size is 1x$10,890+(size-1)x$3,820, i.e., the first household member gets $10,890 and each of the rest gets $3,820.

(“2011 POVERTY GUIDELINE COMPUTATIONS”, December 31, 1969, U.S. Department of Health and Human Services)

Therefore, for 16.808 million poverty households of 46.247 million members, the total costs of poverty guideline+$1 per household would be: 16.808 million x ($10,890+$1) + (46.247 million – 16.808 million) x $3,820, which come to $295.512908 billion, under $296 billion – much lower than the estimate of $312 billion using average 3-person households, let alone the 2012 federal cash and food aid budget of $325 billion, though still exceeding the 2011 federal and state cash and food aid budget total of $292 billion.

Nonetheless, the higher $312 billion is a safer estimate than the lower $296 billion, because the poverty guidelines my estimations utilize are themselves a simplification of the much more detailed “poverty thresholds”.

(“U.S. FEDERAL POVERTY GUIDELINES USED TO DETERMINE FINANCIAL ELIGIBILITY FOR CERTAIN FEDERAL PROGRAMS”, January 25, 2016, U.S. Department of Health and Human Services)

Note that my poverty guideline-based basic income scheme so far has taken care of all those living under poverty, but has not done so with those living slightly above, who should be partially subsidized as well; the most obvious situation is to compare a 3-person household of an earned income of $18,530-$1, that would qualify for an additional basic income of $18,530+1 – for a total actual income of 2x$18,530 – to a household of an earned income of $18,530+$1, that would not qualify for any basic income.

A more generic reason that households above the poverty line should also benefit from some basic income is that the U.S. cash aid budget already included tax credits such as earned income tax credit, refundable child credit and making work pay tax credit – they can be claimed by households with modest income above the poverty line.

(“Taxation and the Family: What is the Earned Income Tax Credit?”, by Elaine Maag and Adam Carasso, updated February 12, 2014, Tax Policy Center; and, “Withholding of Income Taxes and the Making Work Pay Tax Credit”, by John J. Topoleski, January 30, 2013, and, “The Child Tax Credit: Current Law and Legislative History”, by Margot L. Crandall-Hollick, January 19, 2016, Congressional Research Service)

A reasonable modification to my revised basic income scheme is to adopt Charles Murray’s idea of a surtax on earned income (or income other than the basic income), but apply it to the entire earned income, not just $25,000 and above: allow all households, in poverty or not, to be eligible for a basic income of poverty guideline+$1, subject to a 50% surtax on earned income.

Now, in the earlier example, a household with earned income of poverty guideline-$1 and another with earned income of poverty guideline+$1, each can receive the basic income of poverty guideline+$1, and the difference of their incomes after the 50% surtax would be only $1. The benefit of the basic income ends when a household’s earned income reaches twice the poverty guideline, above which claiming the basic income becomes disadvantageous.

With this surtax, households under the poverty line most likely would not need to take up the average without-surtax figure of $312 billion (or the lower estimate of $296 billion), because many of them have some earned income. The question is how far the $312 billion can stretch to cover the households with modest income above the poverty line.

Consider an example where a hypothetical 3-person Household #1 has an earned income of $10,530, i.e., $8,000 under the poverty guideline. With the basic income and after the surtax, this household’s actual income should be $18,530+$1+$10,530/2 = $23,796. The surtax amount of $10,530/2, i.e., $5,265, saved from the $312 billion government spending, can cover the basic income subsidy for a hypothetical 3-person Household #2 with an earned income of $26,530, i.e., $8,000 above the poverty guideline, as follows: Household #2 should get the actual income of $18,530+$1+$26,530/2 = $31,796; so the actual basic income amount from the government should be $31,796-$26,530 = $5,266.

In a hypothetical scenario, when the earned incomes of the households that have earned income above $0 but below twice the poverty guideline are evenly spread, then the $312 billion for the 46.2 million Americans living under the poverty line, with the help of the surtax, can cover another 46.2 million Americans not in poverty but living under twice the poverty line, for a total of 92.4 million Americans.

A U.S. household with income below twice the poverty line is called a “low-income” household:

“Yet for a growing number of working families, economic security is out of reach. Between 2007 and 2011, the share of working families that are low-income—below 200 percent of the official poverty threshold—increased annually and rose from 28 percent to 32 percent nationally (see figure 1)”

(“LOW-INCOME WORKING FAMILIES: THE GROWING ECONOMIC GAP”, by Brandon Roberts, Deborah Povich and Mark Mather, Winter 2012-2013, Working Poor Families Project)

Low-income American families had increased from 28% to 32%, from 2007 to 2011.

The number of Americans in low-income households in 2011 can be found in a Census Bureau report: it was 106.011 million, 34.4% of the 308.456 million population.

(“Table 5. People With Income Below Specified Ratios of Their Poverty Thresholds by Selected Characteristics: 2011”, U.S. Census Bureau)

The hypothetical scenario when a basic income budget of $312 billion – not exceeding the 2012 federal cash aid and food aid budget of $325 billion – is sufficient for 92.4 million low-income Americans, i.e., twice the 46.2 million of Americans in poverty in 2011, likely would not cover all of the 106 million real-life low-income people; but that budget amount should be fairly close to meeting that goal.

Note that the 2012 federal cash and food aid budget of $325 billion has not included budgets of the states.

Thus, the conclusion from my simple estimations – based on U.S. government data – for a proposed household poverty guideline-based national basic income scheme incorporating an earned income surtax, to keep all Americans above the poverty line, is that the size of the existing U.S. government poverty budget should be able to cover most of the costs – without cutting the budget’s funding for medical care, housing, child development, job training and education.

The merit of this revised basic income scheme is its “simplicity”, solely characterized by two officially defined and practical parameters, poverty guideline and surtax rate, that also reflect “transparency” and “equity” – as Canadian government minister Jean-Yves Duclos would like to see.

The scheme can be implemented within the existing income tax system, with discrepancies taken care of through tax filing and assessment calculations; the only urgent adjustment mechanism needed is when a household experiences a sudden drop in income and produces proof such as job loss, whereby an increased basic income amount is dispensed by the government.

Looking forward with this basic income scheme, one can imagine that when the economy is strong, the surtax rate can be reduced so that all lower-income households get to keep more of their earned income, and more households of modest earned income can benefit from the basic income; one can also imagine that as the general living standards improve, the official annual poverty guidelines will also improve so that all people can enjoy a better basic living.

Observing the fact that in 2011 the percentage of poverty and low-income Americans was 34.4%, i.e., just over 1/3 of the total population, and taking my conclusion that a conversion of the standard welfare budget into a reasonably devised basic income scheme can lift all out of poverty and also better most of the low-income, I study the similarities to the budget numbers for Britain.

As quoted earlier from Jim Edwards of Business Insider UK, Britain’s total welfare spending for the year 2013-14 was £251 billion. The population was 64.5 million, with 15 million children, and if that budget was converted to a basic income, for all it would be £3,891/year each, while for adults only it would be £5,081/year each.

£3,891 is over $5,500 US, and £5,081 is over $7,200 US. So, while the current British welfare budget is not sufficient to cover a basic income for all, it would be enough for half of it, or for a basic income for half of the population.

But like with the U.S. budgets, the question is how much of the British total can be realistically converted to a national basic income.

According to the U.K. Office for National Statistics, the British welfare budget of £223 billion for 2009/10 consists of 6 parts:

1. Pensions (state & public service), £104,442m, 42% of total;
2. Incapacity, disability & injury benefits, £37,537m, 15% of total;
3. Unemployment benefits, £4,945m, 2% of total;
4. Housing benefits, £26,386m, 11% of total;
5. Family benefits, income support & tax credits, £44,934m, 18% of total;
6. Personal social services and other benefits, £33,028m, 13% of total.

(“How is the welfare budget spent?”, July 7, 2015, U.K. Office for National Statistics)

The figures appear better than with the U.S. budget.

Firstly, although the £223 billion spending included retirement pensions and various service programs, it did not need to cover medical care, and thus more of it could be converted into a basic income.

And secondly, the British state pension benefits, in part #1 above, do not pay out high amounts like the U.S. Social Security benefits do, and thus could be consolidated into a basic income:

“The full new State Pension will be £155.65 per week.

Your National Insurance record is used to calculate your new State Pension.”

(“The new State Pension”, Government of U.K.)

£155.65 per week comes to £8093.8 per year (52 weeks), or about $11,885 US in 2015 – close to but not exceeding the amount of $12,000 per adult in Scott Santens’s proposal for a U.S. basic income.

(last updated January 15, 2016, U.S. Internal Revenue Service)

The personal social services portion, i.e., part #6 of the Office for National Statistics’ breakdown, was not monetary benefits, according to the Institute for Fiscal Studies:

“… Total spending on social protection comes in at £251 billion in 2013-14, which is about 37% of total public spending of £686 billion (before accounting adjustments). Take off £83 billion of spending on state pensions and you get to £168 billion on “welfare” – very nearly a quarter of total spending.

What is included in that “welfare” total?

It includes £28.5 billion on “personal social services”. This is a number that in many analyses one would want to report separately from other welfare spending. It includes spending on a range of things, such as looked-after children and long term care for the elderly, the sick and disabled. Unlike other elements of “social protection” it is not a cash transfer payment and in many ways has more in common with spending on health than spending on social security benefits.

Another £20 billion of the spending counted under welfare is pensions to older people other than state pensions. That includes spending on public service pensions – to retired nurses, soldiers and so on[1]. This is not spending that would normally be classed as “welfare”. …”

(“What is welfare spending?”, November 4, 2014, by Andrew Hood and Paul Johnson, Institute for Fiscal Studies)

As stated in the above quote, for part #1, in 2014 £20 billion of it were public service pensions, not typical welfare. Still, £83 billion of the pensions were state pension, which as discussed earlier has a maximum payout similar to a basic income amount, and thus could be consolidated into a basic income – with special age consideration if necessary. 

Part #4, housing benefits, should probably be left intact as with the analysis of the U.S. budget.

The under £45 billion of part #5 was similar to the cash aid in the US budget.

The under £5 billion unemployment benefits of part #3 can probably be added to part #5 for a total of just under £50 billion. 

The under £38 billion of part #2, i.e., incapacity, disability & injury benefits, if consolidated into the basic income may require special consideration for the disabled:

“About £38 billion goes on benefits for people who are ill or disabled… Disabled people are more likely to live in deprived areas and work in routine occupations. In the 2011 Census, 18% of people (10 million) reported some form of disability.”

(July 7, 2015, U.K. Office for National Statistics)

So, if I only consider those amounts – as in the Office for National Statistics’ 2009/10 welfare spending figures – that can be easily consolidated into a basic income, namely the just under £50 billion in parts #3 and #5, it would come to about $74 billion US in 2010.

(last updated January 15, 2016, U.S. Internal Revenue Service)

Without going further into estimations that would be dependent on the British living standards and poverty data, I observe that just the under £50 billion, about $74 billion US in 2010, for Britain’s 64.5 million people is proportional to about $353 billion for the United States’ 308.5 million people – substantially more than the 2012 U.S. federal cash and food aid budget of $325 billion, or the $312 billion in 2011 in my estimation for a poverty guideline-based basic income scheme to lift all out of poverty and improve the lots of many of the low-income.

Hence, the fiscal picture for a national basic income for Britain should be even more optimistic than for the United States.

However, the official American and British poverty lines may be quite different.

The U.S. poverty guidelines were originally calculated in 1963-1964 on the basis of costs of living, and have been updated annually on the basis of the Census Bureau’s Consumer Price Index.

(“How the Census Bureau Measures Poverty”, U.S. Census Bureau)

The British poverty line can be higher, because it is calculated as 60% of the median household income in Britain:

“Each year, the Government publishes a survey of income poverty in the UK called Households Below Average income (HBAI).

This survey sets the poverty line in the UK at 60 per cent of the median UK household income. In other words, if a household’s income is less than 60 per cent of this average, HBAI considers them to be living in poverty.

…

The table below shows the HBAI poverty line for 2009 to 2012.¹

Family Composition
Lone parent	Per month	Per year
1 (under 14)	£957	£11,484
2 (1 under 14, 1 over 14)	£1,178	£14,136
Couple
1 (under 14)	£1,326	£15,912
2 (1 under 14, 1 over 14)	£1,547	£18,564

 

1.Child poverty transitions: exploring the routes into and out of poverty 2009 to 2012, Department for Work and Pensions, 2015.”

(“The UK poverty line”, Child Poverty Action Group)

For a 3-person household of lone parent and 2 children, the British poverty line was £14,136, or about $21,781 US in 2011, and for one of 2 parents and one child, it was £15,912, or about $24,518 US.

(last updated January 15, 2016, U.S. Internal Revenue Service)

At 60% of the median household income, the British 3-person household poverty line can be as high as the 4-person U.S. household poverty guideline listed earlier.

The U.S. poverty guidelines are substantially less than 60% of the median household income. For example, in 2013 the median 3-person household income in U.S. states ranged from a low of $46,062 in Mississippi to a high of $87,206 in Maryland – and the 3-person household poverty guideline was only $19,530, i.e., about 42.4% of the Mississippi median and only about 22.4% of the Maryland median.

(“Census Bureau Median Family Income By Family Size (Cases Filed Between May 1, 2013, and November 14, 2013, Inclusive)”, U.S. Department of Justice; and, “2013 POVERTY GUIDELINES”, December 1, 2013, U.S. Department of Health and Human Services)

For Canada, the fiscal picture appears less clear.

When compared to the $325 billion US cash aid and food aid in the 2012 U.S. federal budget for a total population of around 308.5 million, and the £50 billion British cash and tax credit benefits in 2009/10 for a total population of 64.5 million, the figure of $32 billion Canadian dollars, mentioned by Toronto Star columnist Carol Goar in her 2014 article on basic income, seems easily attainable, even a tad conservative:

“…

• Where do they set the income floor? A Senate committee seeking solutions to urban poverty did some rudimentary calculations six years ago. It found that bringing everyone up to 70 per cent of Statistics Canada’s low-income cut-off would cost roughly $20 billion. Using that as a yardstick — and taking inflation into account — it would cost about $32 billion to set the income floor at the poverty line.
• What programs would be collapsed into the new benefit? The wider the net is cast, the lower the cost would be. Welfare and disability support and employment insurance are the obvious candidates. Beyond those three, tensions arise. Old age security is a possibility. But very few seniors live in poverty. The national child benefit could be included. But it, too, keeps thousands of low-income youngsters out of poverty. What about war veterans’ allowances, the universal child care benefit, funding to aboriginal organizations, support for agencies that serve the poor, the mentally ill, the homeless and hungry, new immigrants and racial minorities? What about the all the tax breaks targeted at low-income Canadians? The longer the list grows, the more potential losers there are.
• …”

(Carol Goar, February 25, 2014, Toronto Star)

Canada’s population in 2014 was 35.5437 million, according to Statistics Canada.

(“Population by year, by province and territory (Number)”, September 29, 2015, Statistics Canada)

$32 billion Canadian, normally less than $32 billion US, for a 35.5 million Canadian population is proportional to about $278 billion US for a 308.5 million American population – much lower than my estimate of $312 billion US, or the lower $296 billion US, for a poverty guideline-based basic income scheme in the U.S.

But Goar based her number on a Canadian Senate committee estimate. So let’s accept it for now.

What, then, has the recent Canadian government budget fiscal picture been like, when compared to the American and the British?

Like with the states in the U.S., there was spending by the Canadian provincial governments; also like the U.S., there was Canadian federal government spending.

A Statistics Canada document on government spending on social services in 2007 – the most recent comprehensive survey I find online – showed that provincial spending on “social assistance”, i.e., cash benefits for the poor, was quite small; moreover, there was no mention of the federal funds going to regular social assistance:

“In the fiscal year ending March 2007, total social services spending in Canada amounted to $172.4 billion, compared with $79.5 billion in 1989.

…

Of the $172.4 billion, federal government spending on social services, including transfer payments to other levels of government, accounted for roughly 49% of expenditures in 2007, compared with 59% in 1989.

In 2007, the provincial, territorial and local governments’ share was 33% (34% in 1989) and the Canada and Quebec Pension Plans’ (CPP/QPP) was 20% (14% in 1989).

Federal government spending: Old Age Security and Employment Insurance are major components

The federal government is responsible for Old Age Security and Employment Insurance. Total spending for these two programs alone amounted to $44 billion, or 52% of gross federal spending on social services in 2007.

The other 48% was spent on a number of programs, including vocational rehabilitation for disabled persons, veteran’s benefits, day care assistance and social services for First Nations, as well as on contributions as an employer to workers’ compensation plans and to the CPP/QPP.

In 2007, the federal government spent $12.8 billion on Employment Insurance, representing 6.2% of program expenditures. …

…

Old Age Security, the other big component of social services spending at the federal level, amounted to $31.4 billion in 2007, or 15.1% of program expenditures. …

…

Provincial, territorial and local government spending more than doubles

Between 1989 and 2007, social services spending at the provincial, territorial and local levels of government more than doubled to $56.3 billion. This is the third largest component of spending after health and education.

…

Among social services expenditures, spending on social assistance, which consists of transfer payments to help individuals and families maintain a socially acceptable level of earnings, represented 33% of expenditures on social services in 2007.”

(“Government spending on social services”, June 22, 2007, Statistics Canada)

In short, total government spending in Canada on social services was $172.4 billion in 2007:

• About 49% came from the federal government, 52% of it spent on Old Age Security and Employment Insurance benefits, and the other 48% on a number of programs including: vocational rehabilitation for disabled persons, veteran’s benefits, day care assistance and social services for First Nations, as well as on contributions as an employer to workers’ compensation plans and to the CPP/QPP;
• Employment Insurance expenditure was $12.8 billion;
• Old Age Security expenditure was $31.4 billion;
• About 20% came from Canada and Quebec Pension Plans;
• About 33% came from provincial, territorial and local governments, totalling $56.3 billion, of which 33% was spent on social assistance.

1/3 of $56.3 billion was about $18.77 billion. According to the Bank of Canada, $18.77 billion in 2007 would be worth $21.12 billion in 2014.

(“Inflation Calculator”, Bank of Canada)

By itself, $21 billion is far short of the $32 billion needed in Goar’s estimation for the basic income. However, Goar mentioned a Senate committee estimate 6 year earlier, which should be around 2007, when $20 billion would be enough:

“… A Senate committee seeking solutions to urban poverty did some rudimentary calculations six years ago. It found that bringing everyone up to 70 per cent of Statistics Canada’s low-income cut-off would cost roughly $20 billion. Using that as a yardstick — and taking inflation into account — it would cost about $32 billion to set the income floor at the poverty line.”

(Carol Goar, February 25, 2014, Toronto Star)

My sense is that, besides inflation, the Senate committee’s notion of “bringing everyone up to …” may not be the same as Goar’s “set the income floor at …”. In my earlier estimations for the U.S. poverty guideline-based basic income, not only that the poverty households would be lifted above the poverty line, but also that the low-income households would receive partial basic income.

In the earlier quote from her article, Goar referred to several types of social spending, in addition to welfare.

Goar mentioned the Canadian Employment Insurance, which had a $12.8 billion budget in 2007. This is not an entitlement benefit, but a government-administered insurance scheme with premiums paid by both employees and employers, and thus, contrary to Goar’s opinion, cannot be easily integrated into a basic income.

(“Employment insurance (EI)”, modified December 17, 2015, Canada Revenue Agency)

On the other hand, the Old Age Security mentioned by Goar, on which the federal government spent $31.4 billion in 2007, is an entitlement benefit:

“Apart from private money squirreled away in an RRSP or other savings vehicles, the OAS and complementary Canada Pension Plan are key components in the retirement planning of many Canadians. …

…

The Old Age Security pension is a monthly payment available to Canadians age 65 and older who apply and meet certain requirements. Unlike CPP, it is not dependent on a person’s employment history and a person does not need to be retired from a job to qualify for it.

The government adjusts the OAS payment every three months to account for increases in the cost of living according to the Consumer Price Index. The average monthly amount as of October 2012 was $514.56. The maximum payout for the first quarter of 2013 is $546.07, according to Service Canada.

There are also supplementary programs, including the Guaranteed Income Supplement, which provide additional income to low-income seniors.

The government claws back OAS payments from high-income Canadians. In 2013, if you are retired but have an income of more than $70,954 (from things like pensions and personal investments), the government will reclaim part of your OAS payment — 15 cents for every dollar of income above the $70,954 threshold, which is adjusted annually for inflation.”

(“Canada Pension Plan vs. Old Age Security – the differences explained”, February 1, 2012, CBC News)

However, because high-income seniors also received this benefit, probably only a small portion of 2007’s $31.4 billion went to seniors in poverty or of low-income, as Goar noted:

“Old age security is a possibility. But very few seniors live in poverty.”

(Carol Goar, February 25, 2014, Toronto Star)

Goar’s article mentioned the national child benefit and the universal child care benefit. The Canada Child Tax Benefit and the Universal Child Care Benefit are tax credits and of sizable government spending: $11.2 billion in the fiscal year 2006-2007, and $13.1 billion in the fiscal year 2013-2014.

(“Archived – Where Your Tax Dollar Goes”, modified September 19, 2008, and, “Your Tax Dollar: 2013–2014 Fiscal Year”, modified December 19, 2014, Department of Finance Canada)

But an integration of the child benefits with the basic income appears unlikely, as indicated by Jean-Yves Duclos, the Canadian Minister of Families, Children and Social Development cited earlier.

Goar’s article also mentioned “all the tax breaks targeted at low-income Canadians”. But the most obvious of them, the Goods and Services Tax/Harmonized Sales Tax Credit and the Working Income Tax Benefit, are both of small sizes.

(“Child and family benefits”, modified January 4, 2016, Canada Revenue Agency; “GST/HST Credit”, Nisga’a Nation Knowledge Network; and, “Enhancing the Working Income Tax Benefit”, Economic Action Plan 2015, Canada’s Economic Action Plan)

Perhaps my interpretation of the Statistics Canada data for 2007 isn’t accurate.

For instance, what about the “Canada Social Transfer”, the framework touted in the 2014 Liberal Party Priority Resolution for designing and implementing a Basic Annual Income?

The Canadian Department of Finance’s definition of Canada Social Transfer does mention “social assistance”:

“What is the Canada Social Transfer (CST)?

• The CST is a federal block transfer to provinces and territories in support of post-secondary education, social assistance and social services, and early childhood development and early learning and childcare.
• …”

(“Canada Social Transfer”, modified December 19, 2011, Department of Finance Canada)

But despite its grandiose name, the transfer amount on social assistance was likely very small, because the Canada Social Transfer totalled only $8.5 billion in 2007 and was spread among post-secondary education, children’s programs and social programs – social assistance wasn’t even explicitly mentioned in this Department of Finance report:

“…

• The Canada Social Transfer (CST)—to support post-secondary education, social programs, and programs for children—gave provinces and territories cash funding representing over 3½ cents of each federal tax dollar ($8.5 billion). ”

(modified September 19, 2008, Department of Finance Canada)

In the fiscal year 2013-2014, the Canada Social Transfer has increased to $12.2 billion, but social assistance still wasn’t mentioned in the online Department of Finance report:

“The Canada Social Transfer provided $12.2 billion for post-secondary education, social programs and programs for children, representing close to 5 cents of each tax dollar spent.”

(modified December 19, 2014, Department of Finance Canada)

A fraction of $8.5 billion, or of the increased $12.2 billion, would only be a very few billions at best for “social assistance”. Adding it to the $18.77 billion provincial spending on social assistance in 2007, worth about $21.12 billion in 2014, would still be far short of Carol Goar’s estimated need of $32 billion.

Hopefully, in the huge pool of Canada’s government spending on social services – $172.4 billion in 2007 – here and there money can be found to integrate with the provincial social assistance funds, to make up the $32 billion needed for the basic income according to Carol Goar’s 2014 analysis based on a Senate committee estimate.

But again, in my view, Goar’s figure seems low when compared to my estimations with the U.S. and U.K. budgets: $32 billion Canadian, less than $32 billion US, for a 35.5 million population, compared to the $325 billion US in the 2012 U.S. cash aid and food aid budget for a 308.5 million population, or to the £50 billion in the 2009/10 British cash benefits budget for a 64.5 million population, that can be converted to basic income.

Nonetheless, the Canadian Senate committee estimate has been aimed at “bringing everyone up to 70 per cent of Statistics Canada’s low-income cut-off”, as quoted earlier from Goar’s article.

Canada does not have official poverty guidelines or thresholds, only the Low-Income Cut-Offs as measured by Statistics Canada, which have been calculated from the Family Expenditure Survey done in a base year and then updated using the Consumer Price Index – the oldest survey base year was 1959, and the most recent was 1992.

(“Low income cut-offs”, modified November 27, 2015, Statistics Canada)

While in the U.S. the low-income line is 200% of the poverty guideline, in this case the Canadian Senate committee used a generous 70%, not 50%, of LICO as a poverty line.

For 2011, the LICO amount was $30,487 for a family of 4:

“…

Thus for 2011, the 1992 based after-tax LICO for a family of four living in an community with a population between 30,000 and 99,999 is $30,487, expressed in current dollars.”

(modified November 27, 2015, Statistics Canada)

70% of $30,487 was $21,340.9 Canadian, for a family of 4 in 2011 – just in the dollar number it was already considerably less than the 2011 U.S. Department of Health and Human Services’ poverty guideline quoted earlier, $22,350 US for a family of 4.

I think the lower Canadian poverty line partially explains why Carol Goar’s $32 billion in 2014 would be enough to lift all out of poverty in a basic income for Canada’s 35.5 million people, whereas in my estimation $312 billion US would be needed for the 308.5 million Americans in 2011.

The above comparison leads to the question: why is it that the estimations based on government data do not show Canada, a country of a long social welfare tradition and reputation, to be clearly more generous than the United States in this regard?

I do not have an obvious answer. But apparently my observation, derived from my analysis, is not alone, as in 2012 the U.S. surpassed Canada in total social expenditures as a share of the GDP:

“America spends a bigger share of its national paycheck on social services than its health care-providing neighbor to the north.

New numbers published by the Organization for Economic Cooperation and Development (OECD) show that public “social expenditures” in the US have overtaken those of Canada. The report defines “social expenditures” as essentially spending by public institutions aimed at households or people to support their welfare, such as jobless aid, healthcare and pension benefits. US social spending as a share of GDP hit 19.7% in 2012, compared to Canada’s 18.3%. In 2013, the US is expected to spend about 20%, compared to 18.3% for Canada.”

(“The US spends more on social services than its health care-loving neighbor Canada”, by Matt Phillips, July 25, 2013, Quartz)

This fiscally relatively conservative course on social spending is not an exclusive trademark of the recent Conservative government under former Prime Minister Stephen Harper from 2006 to 2015, but has also been observed by the Liberal Party and the government it now leads when it comes to basic income; as discussed earlier, the Liberal Party’s resolutions on basic income in 2014 did not become a part of the party’s 2015 election platform, and are not on the Liberal government’s current official agenda.

A most often cited concern about socialist economic policies, the basic income being one, is that they would lead to loss of productivity. Jim Edwards of Business Insider UK opined in regard to the basic income numbers he analyzed, cited earlier:

“One of the criticisms of basic income is that it would kill off the desire to work. Few studies have been done of this, but those that have indicate that people only reduce their work hours by a small amount on average.

The fact that a fiscally neutral basic income scheme would pay out only £423 per month (€585 or $644) means almost everyone receiving it would still need a job. £423 a month is simply not enough to survive — or even pay rent — in most areas of Britain.”

(Jim Edwards, December 13, 2015, Business Insider UK)

Edwards’s logic is that a basic income that is simply not enough for basic living is actually good, as it would keep people continue working, if at reduced work hours.

I can imagine this argument appeals to the conservative scholar Charles Murray, whose proposed basic income would be only $7,000/year after mandatory health insurance cost is deducted.

In the 2008-2009 German aid experiment in a village in Namibia, discussed earlier, the aid organizations reported that the basic income led to improved economic activity and improved savings, although these positive conclusions have been questioned by Rigmar Osterkamp as exaggerated:

“… The number of underweight children was said to have fallen considerably because of the basic income grant. According to the figures, school attendance rose, and so did attendance at the local health clinic. The BIG Coalition reported that a number of people living in Otjivero, encouraged by the cash transfer, had started small businesses as bakers, tailors and brick layers.

According to the BIG promoters’ calculations, the per capita income (minus the BIG payments) increased by 29% in 2008, and a sample of households supposedly revealed a private savings rate of 38%. The BIG supporters concluded that popular prejudices against the basic income grant were proven wrong, at least in Namibia, since the BIG has not made people “lazy”, but rather had led to socially desirable behaviour and even motivated recipients to become economically active.

However, the question arises whether these claims are plausible. In a single year, an economic growth of 29% would be three times the rate of China (and is supposed to be sustainable on top of that). According to the World Bank, Namibia’s national growth rate averaged a mere 4.4% from 2000 to 2008, and GDP even declined slightly in 2009. The extremely high savings rate that was indicated is similarly hard to believe, given that the households concerned are quite poor.

The figures on the reduction of hunger and the improvements in children’s weight are also astonishing in a just six months period. …”

(Rigmar Osterkamp, May 3, 2013, D+C Development and Cooperation)

Less controversial benefits of the basic income, such as improvements in nutrition, health and education, were also reported for a UNICEF-supported experiment in India cited earlier:

“The preliminary findings of the SEWA project have been published, and the results are extremely encouraging. The project was accompagnied by a study conducted in 20 villages including the eight villages where the unconditional cash transfer was provided. Residents of the other 12 villages were observed as a control group. Residents could do whatever they wanted with the money.

Positive results were found in terms of nutrition, health, education, housing and infrastructure, and economic activity. Researchers found a positive impact on health and access to medical treatment. The most visible impact however was on educational attainment. School attendance in the cash transfer villages shot up, three times the level of the control villages.”

(December 2012, Global Basic Income Foundation)

Pascal-Emmanuel Gobry, a proponent-turned opponent of the universal basic income, argued that a full universal basic income would lead to a vicious cycle of economic decline:

“… Many conservatives like the idea of a simple welfare system that would replace arcane programs and nosy bureaucracies.

And indeed, right-winger that I am, I was for a very long time a strong proponent of a UBI. But now I oppose it.

What happened? I looked at the best science and changed my mind.

Here I must make a slight detour into epistemology. Most social “science” research is actually not science, technically speaking. … Most published social science studies rely on modeling and statistical analysis to try to formulate theories as to what is going on. Most studies are really elaborate thought experiments that, until they are or can be validated by experiment, are not scientific results, properly speaking. …

There is, however, one way to gain relatively reliable social-scientific evidence: randomized field trials (RFTs). …

…

What does that have to do with the UBI? Well, it just so happens that the UBI is one of the very few, if not the only, domains of social science policy where we have exactly that: extensive, long-term, repeated RFTs, which are the gold standard of evidence in social science.

… more than 30 experiments were done in the U.S. from the ’60s to the ’90s and there was another set of experiments done in Canada in the ’90s. The universal basic income is one of the few areas of social policy where we can say with some confidence “Science says…”

And science says the UBI doesn’t work.

… All the evidence strongly suggests that if you have a UBI, the outcome is exactly what many conservatives fear will happen: Millions of people who could work won’t, just listing away in socially destructive idleness (with the consequences of this lost productivity reverberating throughout the society in lower growth and, probably, lower employment, in a UBI-enabled vicious cycle).”

(“Progressives’ hot new poverty-fighting idea has just one basic problem: Science”, Pascal-Emmanuel Gobry, July 21, 2014, The Week)

Gobry’s article referred to more than 30 experiments on the basic income in the United States from the 1960s to the 1990s, and one in Canada in the 1990s.

While I am unfamiliar with the Canadian experiment Gobry mentioned, another Canadian experiment during the 1970s – first of its kind in North America in terms of coverage – in the small city of Dauphin in Manitoba province, has been ‘rediscovered’ by social science researchers:

“Between 1974 and 1979, residents of a small Manitoba city were selected to be subjects in a project that ensured basic annual incomes for everyone. For five years, monthly cheques were delivered to the poorest residents of Dauphin, Man. – no strings attached.

And for five years, poverty was completely eliminated.

The program was dubbed “Mincome” – a neologism of “minimum income” – and it was the first of its kind in North America. It stood out from similar American projects at the time because it didn’t shut out seniors and the disabled from qualification.

The project’s original intent was to evaluate if giving cheques to the working poor, enough to top-up their incomes to a living wage, would kill people’s motivation to work. It didn’t.

But the Conservative government that took power provincially in 1977 – and federally in 1979 – had no interest in implementing the project more widely. Researchers were told to pack up the project’s records into 1,800 boxes and place them in storage.

A final report was never released.

…

Why Dauphin? How did a farming community play host to such a landmark social assistance program?

Good political timing didn’t hurt.

In 1969, the left-leaning provincial NDP led by Edward Schreyer swept into power for the first time. The transition injected new rural sensitivities and democratic socialist influences into politics.

On the federal level, Pierre Elliott Trudeau was prime minister. The two men worked swiftly to set up conditions for a basic income experiment.

In 1973, Manitoba and the federal government signed a cost-sharing agreement: 75 per cent of the $17-million budget would be paid for by the feds; the rest by the province.

The project rolled out the next year.”

(“A Canadian City Once Eliminated Poverty And Nearly Everyone Forgot About It”, by Zi-Ann Lum, December 23, 2014 (updated December 19, 2015), The Huffington Post Canada)

So although in the early 1970s then Prime Minister Pierre Trudeau dodged the idea of introducing a universal basic income, as recalled in Carol Goar’s article discussed earlier, his Liberal government did fund and lead a pilot experiment that lasted 5 years, ending due to changes of the provincial and federal governments.

About 1/3 of the Dauphin residents received the basic income, with the income amount set at 60% of Statistics Canada’s low-income cut-off:

“All Dauphinites were automatically considered for benefits. One-third of residents qualified for Mincome cheques. 

How Mincome cheques were calculated:

1. Everyone was given the same base amount: 60 per cent of Statistics Canada’s low-income cut-off. The cut-off varied, depending on family size and where they lived. But in 1975, a single Canadian who was considered low-income earned $3,386 on average.

	1975	2014 dollars
Individual	$3,386	$16,094
Family of two	$4,907	$20,443

2. Base amount was modified: 50 cents was subtracted from every dollar earned from other income sources

“It was sort of something new and utopian. It was completely different,” said Dauphin’s current mayor Eric Irwin. “It was an attempt to define social services in a different way.””

(by Zi-Ann Lum, December 23, 2014 (updated December 19, 2015), The Huffington Post Canada)

Note that the recent Canadian Senate committee basic income idea cited by Goar in her Toronto Star article considered 70% of LICO as the income amount, which would be an improvement over the Dauphin “Mincome” level.

In 2005, the archived documents of the Dauphin pilot experiment was ‘rediscovered’ by researcher Evelyn Forget:

“Dr. Evelyn Forget is the researcher at University of Manitoba credited for tracking down those 1,800 dusty boxes of Mincome raw data that sat forgotten for 30 years.

She first heard about the project in an undergraduate economics class at the University of Toronto in the ’70s. Mincome cheques were still being delivered when her professors praised the experiment as “really important,” saying it was going to “revolutionize” the delivery of social programs. It stuck with her.

In 2005, she began looking for the Mincome data. After a strenuous search, she located the records at the provincial archives in Winnipeg. She was the first to look at them since they were packed up in 1979.”

(by Zi-Ann Lum, December 23, 2014 (updated December 19, 2015), The Huffington Post Canada)

The ‘rediscovery’ of the Dauphin “Mincome” experiment led more interest to similar ideas, such as that advocated by Canadian Conservative Senator Hugh Segal:

“Former Conservative senator Hugh Segal is a longtime proponent of a guaranteed annual income policy. He believes the program could save provinces millions in social assistance spending on programs like welfare.

Instead of being forced through the welfare system, people’s eligibility would be assessed and reassessed with every income tax filing. Those who don’t make above the low-income cut-off in their area would be automatically topped up, similar to Mincome in Dauphin.

How guaranteed annual income could work today:

• Distributed as a federal Negative Income Tax
• Top-ups are calculated automatically and delivered after income tax filings
• Top-ups would render people ineligible for provincial welfare
• Provincial welfare money gets reallocated to other priorities (i.e. elder care, expanded early childcare programs)”

(by Zi-Ann Lum, December 23, 2014 (updated December 19, 2015), The Huffington Post Canada)

In reference to Pascal-Emmanuel Gobry’s opposing view, I point out that Hugh Segal’s notion of an earned income top-up would discourage work, because all who make below the low-income cut-off level would get top-up to the same.

The approach of the 1970s Dauphin “Mincome” experiment, on the other hand, was remarkably similar to my universal basic income scheme adapted and modified from Charles Murray’s: household was the basic unit, each granted an mount according to the official line of poverty or low-income; the other incomes were taxed at 50%, and so the more a household earned the more it would keep; and, similar to the U.S. case where in 2011 just over 1/3 of the population was low-income, in Dauphin 1/3 of the residents qualified for the “Mincome”.

The main difference between my scheme and the Dauphin “Mincome” is that I use the U.S. official poverty guideline which is 50% of the low-income line, whereas “Mincome” used 60% of Statistics Canada’s low-income cut-off.

Evelyn Forget, the leading expert on the Dauphin experiment, has also pointed out that “Mincome” did not have the effect of discouraging work:

“The American experiments had the same results. Few people stopped working and hardly anyone with a full time job reduced the hours they worked at all. This is because a well designed guaranteed income (and this one was designed like a refundable tax credit) creates incentives for people to work. it does a much better job of supplementing the incomes of the working poor than does other kinds of social assistance.”

(“A Way to Get Healthy: Basic Income Experiments in Canada”, August 7, 2013, Basic Income UK)

Despite being a Conservative Senator, Segal criticized the Conservative government of then Prime Minister Stephen Harper for showing no interest in universal basic income:

“But the idea never took off in Canada. The lessons of Mincome never spread. Simply put: The Mincome experiment discontinued because the governments changed.

Segal says what happened in Dauphin was a “classic Ottawa initiative,” with a lot of money spent putting a program in place, but without adequate investment to evaluate if it was effective or not.

During his nine years in the Senate, Segal advocated strongly for basic income for Canadians. But in his time as a member of the Conservative caucus, he “didn’t see the tiniest indication of interest on the part of the government” in another test site or implementation.

That’s because the current government shares the Mulroney administration view that “the best social policy is a job,” he said.

The one exception was late finance minister Jim Flaherty who established the working income tax benefit to aid working Canadians living in poverty. He was the only one to engage constructively, Segal says.

Segal said he doesn’t expect the concept to gain traction again among the Harper Conservatives.

…

In Canada, the idea of an universal basic income was first presented at a Progressive Conservative policy convention in October of 1969. Then-leader Robert Stanfield argued the idea would consolidate overlapping security programs and reduce bureaucracy.”

(by Zi-Ann Lum, December 23, 2014 (updated December 19, 2015), The Huffington Post Canada)

Like the Mulroney Progressive Conservatives in the 1980s, the Harper Conservatives have shown no interest. But now after Stephen Harper’s departure from the party leadership, Conservative MP and finance critic Lisa Raitt has expressed interest that the Canadian House of Commons finance committee should study the idea, as quoted earlier from a story reporting the view of Liberal government minister Jean-Yves Duclos.

I wonder if the Canadian Liberals’ knowledge of the Dauphin “Mincome” experiment in the era of party leader Justin Trudeau’s father – despite most Canadians’ unfamiliarity with it – had to do with the party’s recent adoption of the proposal of “a federal pilot of a basic income supplement” only as an ordinary resolution, but the proposal, “to design and implement a Basic Annual Income” “under the existing Canada Social Transfer System”, as a “Priority Resolution”.

If so, the son should pick up where the father had left off.

Canada can quickly overtake Finland and the Netherlands, where, for all the latest international media publicity, only pilot experiments are being planned.

But even if that happens, Canada is behind one country in the world, Brazil, in becoming the first.

In 2004, i.e., a year before Canadian researcher Evelyn Forget searched and found the archived documents of the 1970s Dauphin “Mincome” experiment, Brazil enacted a law for a universal basic income:

“While Alaska is the only place in the world with an ongoing basic income program, they are not the only jurisdiction to have shown interest. Brazil actually has a law mandating the progressive institution of a basic income program.

The law was introduced by Senator Eduardo Suplicy of the Brazilian Workers’ Party in 2001. He had previously introduced a bill to create a Negative Income Tax model of a guaranteed livable income, but that bill failed to pass. This second bill called for a universal basic income program to be progressively instituted, beginning with those most in need.

The bill was approved by the Senate in 2002 and by the Chamber of Deputies in 2003. It was signed into law by President Lula da Silva in 2004. The bill leaves implementation in the hands of the President.

No progress has been made toward implementing a basic income since then.

However, Brazil does have an interesting, albeit conditional, income security program for the poorest Brazilians. The Bolsa Familia, or Family Grant, was created in 2003 by merging 4 existing cash transfer programs. It could be used as a stepping stone to a basic income program, even though it was not created with that intention.

The Bolsa Familia is paid to 11 million of Brazil’s poorest families, which means that the money reaches 46 million people. It has contributed to a reduction in inequality, although it is not the only factor. Brazil, one of the most unequal countries in the world, has made astonishing progress in reducing inequality since 2001. In the last five years, the incomes of the poorest Brazilians have risen 22%, compared to only 4.9% for the richest Brazilians.”

(“Basic income in Brazil”, by Chandra Pasma, July 14, 2009, Citizens for Public Justice)

So Brazil, an ambitious developing country where progress was recently made in improving the livelihood of the poor families, already has had a universal basic income law for over a decade now, even though the government does not have the money for a full implementation.

Brazilian Senator Eduardo Matarazzo Suplicy’s bill that turned the “Citizen’s Basic Income” into law had been in the works since 1991.

(“Brazil: Imagine a World Free of Hunger and Need”, Rema Nagarajan, September 6, 2012, Pulitzer Center on Crisis Reporting)

Meanwhile, in the wealthy developed countries, where such a notion had been banished until the 1960s and 1970s, and is still treated with trepidation, some have come to wonder, ponder, and dither.

Or as Tim Worstall suggests, wait until the coming of the robots and see what happens then.