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The thing about Senator Eggleton’s “Three things to end poverty”

January 13, 2015

Monday, January 12, the Vancouver Province, and other newspapers across Canada ran an opinion piece by Art Eggleton, in which the Liberal senator laid out three ways that Canada can eliminate poverty: Education, a basic income plan and tax reform.

In his 11 years as the longest-serving Mayor of Toronto (1980-1991), Eggleton was considered a good administrator; a pro-development bean-counter but, contrary to his suspiciously glowing Wikipedia entry, he was never known as a particular champion of the poor.

For a further eleven years as a federal minister (1993-2004) he was a capable, if lacklustre, administrator.

It’s praiseworthy if, after an elected career as as a dull, fiscally-responsible moderate, Eggleton the appointed senator has discovered a passion for Canada’s poor. That it’s not very much passion and that he’s still dull shouldn’t surprise anyone.

Words of encouragement

He’s still the same tired old pol, content to pitch his wares using a jumble of buzzwords, catch-phrases and statistics. And he remembers to reduce complex issues to simplistic matters of the pocketbook so that they will resonate with the voter:

“Poverty costs the government about $30 billion a year”, he writes in his op-ed piece and “numerous studies have found that it costs three or four times more to leave someone on the street (in and out of shelters, hospitals, jails) than to give them a home with support services”.

And, good fiscal conservative that he is, he decries the millions spent on provincial welfare that, he says “entrap people with thousands of bureaucratic rules”.

He quotes another Canadian senator (the late David Croll) to complain that welfare “merely treats the symptoms of poverty but leaves the disease untouched”.

And then, as if to remind us that it was politicians of his calibre that helped get us where we are today, the first of his three antipoverty points takes aim at one of those symptoms.

Some politicians never learn

Education is Eggleton’s first point. He rightly cites the importance of education as a factor in a person’s economic success and then dismisses any problems with access to post secondary education in Canada; he says we do “fairly well” in this area. Instead he points to the high dropout rate among aboriginal high-school students as something that needs to be addressed.

Yes it does but isn’t this high dropout rate also symptomatic of a much larger problem? I’m referring to the problem of the federal Indian Act and its failed reserve system which works to suck opportunity and hope out of the lives of so many young aboriginals.

How hard  must it be for an aboriginal child to get a first world education when her family lives in third world conditions without even clean drinking water, just “shacks and slop pails” to use the CBC’s phrase?

Eggleton, the former federal minister, knows all this even if he doesn’t want to address the thorny issue directly; instead he touches on the broadest aspect of child poverty, declaring that children shouldn’t go to school hungry.

“They can’t learn on an empty stomach”, he thunders.

Doing the minimum to fight poverty

Eggleton then softly as cats suggests we should “explore” a basic income plan for Canadians. He describes this as an income-tax system to replace the “costly” social-welfare system. He refuses to use the jaggedly straight-forward term “guaranteed minimum income” (GMI) but that’s what he means.

He’s talking about a kind of “no-fault” tax credit to automatically lift all Canadians above some poverty line. This would be every Canadian’s right, a helping hand as it were.

I think this would be a very good thing, in the same way that I think that giving everyone a duffel bag filled with $100,000 would be a very good thing.

What I cannot get my head around — and what Mr. Eggleton doesn’t begin to explain — is how Canada can sustainably afford a GMI.

The idea of a guaranteed minimum income isn’t new, it originated in the 1940s as a feature of a so-called negative income tax: people earning above a certain amount would pay taxes but people earning below a certain amount would instead receive a supplement from the government.

In the 1960s, the GMI was embraced, along with the negative income tax, by the American supply-side economist Milton Friedman, a figure revered by laissez-faire-loving neoliberals such as Ronald Reagan and Britain’s Margaret Thatcher.

Neoliberals (conservatives who believe in liberalization of trade) are attracted to the GMI and negative income tax for the way it might streamline and simplify the tax system.

As the Atlantic magazine records, by the late 1960s and early 1970s, the GMI was picking up advocates across the political spectrum.

In 1967 Martin Luther King, Jr. saw the GMI as the solution to poverty and a few years later U.S. President Richard Nixon unsuccessfully tried to pass a version of Friedman’s negative income tax. Even Nixon’s 1972 Democratic opponent, George McGovern, talked about a guaranteed annual income.

But while the U.S. government actually conducted a few tests of  the GMI in the early 1970s, the longest and best known test was carried out in a small Canadian town on the Manitoba Prairies.

The town that eliminated poverty

Eggleton refers to the brief “Mincome” experiment conducted in Dauphin, Manitoba. Between 1974 and 1978 the federal government and the government of Manitoba gave monthly cheques to about 1,000 Dauphin families that fell below a certain income level.

The Daupin Mincome program (short for Minimum Income) topped up people’s income to reach at least 60 per cent of the low income cut-off line (LICO), a complicated and subjective measure of low income that the federal government has used since apparently 1965.

In 1975 the yearly LICO for a single person in a town the size of Dauphin was: $3,386 and for a two person family it was $4,907.

Dauphin LICO (1975)
60% Dauphin LICO (2014) 60%
Individual $3,386 $2,031 $16,094 $9,656
Family of two $4,907 2,944 $20,443 $12,265

Whether the experiment was a success or a failure remains to be seen because it was abruptly called off during the recession of 1978 and the collected data still sits in boxes waiting to be analyzed.

It is known that the four year Mincome test cost Canada and Manitoba a combined total of $17 million.

Not exactly a wealth of available data

In 2009, an estimated 5.1 percent of Canadians may have been receiving provincial welfare but other measures suggest that in 2009 nearly twice that number of Canadians, 9.6 percent, were considered to be living in poverty.

These are dubious numbers because Canada doesn’t officially recognize a clear poverty line but there is no doubt that there are always more Canadians living in poverty than collecting provincial welfare, for the simple reason that welfare doesn’t lift a person out of poverty.

Vancouver LICO (2012) 60% B.C. Welfare (incl. shelter)
Individual $23,647 $14,188 $7,320
Family of two $29,440 $17,664 $10,526.64

Eggleton provides no specifics of how his income tax managed GMI might replace the “costly” social welfare system. The only Canadian example at hand is the 1970s Mincome experiment, which Eggleton cites.

Mincome sought to lift a person’s income by an amount equal to about 60 percent of the low income cut-off (LICO); that meant that a single person in Dauphin in 1975 would see their income topped up to an annual maximum of $2,031.

Today, the LICO for a single person living in a city the size of Vancouver, B.C., is $23,647.By Mincome standards a single person in Vancouver would see their income topped up to annual maximum of $14,188.

But B.C.’s welfare rate for a single individual is only 31 percent of the LICO. The Dauphin standard of 60 percent of the LICO would give B.C.’s welfare recipients a huge raise.

A single person on basic welfare in B.C. currently receives $610 (including the shelter portion) per month. Swapping welfare for a Dauphin-style guaranteed minimum income would give them $1182 per month — an extra $572 each month!

Somewhere between healthcare and constitutional reform

A GMI would require a new level of cooperation between the federal and provincial governments and probably a few first ministers’ conferences to hammer out the details.

Because I can’t seem to envision a GMI costing Canada less than the present provincial welfare system. I see it necessitating income redistribution. The program would require inputs from the increased taxation of higher income brackets.

While some conservatives, including Canada’s David Frum, favour a GMI as part of a negative income tax system, I don’t see Canadian conservatives embracing a GMI that increases the corporate tax rate from the current 15 percent back in the direction of 29 percent, which is what it was when Canada tested Mincome in the 1970s.

Taking from the rich and giving to the poor is the worst sort of red flag for conservatives who only believe in governments leveling the playing field for large corporations, not for human beings.

All in all, any national guaranteed minimum income plan would be a big deal to implement. It would represent a huge break with the past; it would require a major overhaul of the Canadian tax system and it would demand a new level of cooperation between the federal and provincial governments.

And we have no real idea how to do it in a sustainable way.

Maybe we should dust off and open up those boxes of records from the experiment in Dauphin, Manitoba.

It might also help to look at the experience of other countries that have implemented a minimum income — Wikipedia has a page thst lists 17 such countries. But we may need to narrow our definition. The list, which includes France, also includes Canada.

Ending poverty will be quite taxing

Eggleton’s third way to end poverty in Canada is — surprise! — tax reform, which, correctly speaking, was also actually the second way he wanted to end poverty.

He suggests that corporate tax rates should rise (this really is part of his second point); that dropping them to 15 percent, he says, has done nothing to reduce poverty. But of course no one expected them to. How many people living in poverty own corporations?

And Eggleton advocates a carbon tax.

A carbon tax supposedly helps the poor because governments can use the new tax revenue to reduce poverty. Some of that poverty, advocates admit, will actually be aggravated by the carbon tax increasing the fuel costs of low income earners.

British Columbia is currently the only jurisdiction in North America that has any kind of a carbon tax (since 2008). A study by the Canadian Centre for Policy Alternatives in 2008 suggested that B.C.’s carbon tax would become more regressive over time, with the tax revenue increasingly benefiting higher income earners and becoming more of a tax burden on low income earners.

So that’s Mr. Eggleton’s three ways to end poverty. I wonder why the senator didn’t go so far as to suggest legalizing marijuana and using that tax revenue to help reduce poverty — in 2002 his Canadian Senate issued a report recommending the complete legalization of cannabis.

But more than that, I wonder why he wasn’t willing to come right out and tell Canadians the most important thing he obviously believed we could do to end poverty.

Namely, don’t reelect Stephen Harper!

The thing about Art Eggleton’s op-ed piece is that he makes it sound as if ending poverty is straightforward. He tosses off his three solutions as though they are obvious and reasonably easy to implement.

He knows otherwise. Not only does he skip the cost and difficulty of implementation but in the case of both a GMI and a carbon tax he is indulging in wishful thinking — palming off untested ideas as proven solutions to poverty.

How does that old antipoverty saying go again…give a person a wish and they can dream for a day but teach them how to wish and they can be a senator for life?

Talk isn’t cheap after all

It was Canada’s first Prime Minister, Sir John A. Macdonald, who described the Canadian Senate as the house of sober second thought; no one can say for certain if he was either entirely sober himself or entirely serious when he said it.

After reading and reflecting on Art Eggleton’s three ways to end Canadian poverty I decided that rather than simply being critical, I should try to be part of the solution, even though, as a homeless person, I’m clearly part of the problem.

I thought about ways to help finance the guaranteed minimum income.

Now, bear with me. This is a little tricky.

According to Statistics Canada, in 2011, 3 million (8.8 percent) Canadians lived in low income after taxes. If we abolished the Canadian Senate and gave its entire annual operating cost of $106,264,111 (also as of 2011) to those low income Canadians, we could annually enrich each of them by — wait for it — $35.42!

No need to thank me Senator Eggleton, I’m happy to help.

  1. Slowcrow permalink

    Well, figures can lie, and liars can figure, and around and around we go. I see the mayor of Seattle is calling for more tent cities, and the discussion and debates and misinformation, and the fear (is poverty contagious??), pops out with the rest of the worms in THAT can. BTW, Wish you could assemble your posts into an e-book. On she has details on doing that.


    • I could’ve just gone with the eight words before your first comma and saved myself an entire day’s writing!

      Is poverty a problem in our society or is society a problem causing our poverty? And if the latter is the case, are the people who gain the most from the status quo — the business leaders and politicians — the ones we should look to “solve” poverty?

      I’ll check out Kim Komando’s website but ebooks aren’t that hard to make if one wants to, there are lots of tools available.

      If someone wants to make their own portable copy of a website, so they can read it offline, there are easy-to-use website rippers like the venerable HTTrack which will download an entire site while preserving all the content and links.


  2. Oilybird permalink

    Is poverty a problem in our society or is society a problem causing our poverty? And if the latter is the case, are the people who gain the most from the status quo — the business leaders and politicians — the ones we should look to “solve” poverty?

    What a great question. That has got me thinking……

    I would also say that whenever I have seen poverty reduction schemes the major objection has come from slightly better off people feeling that others are getting something for nothing. There is a feeling that for people to improve in life they have to suffer in order for them to improve. A kind of embracing of Survival of the Fittest evolutionary theory.

    There was a scheme a couple of years ago in the UK called Surestart that sought to give children a better start in life regardless of their background. I attach a link to an article in a right of centre newspaper. The comments section is the most interesting as it always seems to unleash the hidden bigots in everyone.

    Personally I don’t think you can ever prevent poverty but I do think you can make the landing softer. It sounds Orwellian but maybe people do need parenting classes. Proper parenting may not solve everything but it will make people more resilient and able to cope with crises later in life.


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