When my wife and I had young children we were getting cheques from government right and left. HST rebate cheques, child tax credit cheques – multiple times a year. As we started earning more income those cheques dried up and, now instead of cheques, I get stern reminders from government that I need to pay instalments on the future taxes I am expecting to pay in the year ahead. I calculated last year we paid more taxes to government than my wife and I earned in total income when we first got married.
And that’s OK. People that earn more money should be paying a lot more taxes and should not be getting direct cash from governments.
I worry that governments are going in the other direction. The NDP always knew that universal social and income support programs would be a winner with the public but the other parties have figured it out too.
Direct government transfers to individuals in New Brunswick (excluding CPP which is self-sustaining) as a share of total income rose by more than 11% between 2014 and 2019 – pre-pandemic. New Brunswickers received nearly $800 million more in cash direct from government in 2019 than in 2014.
The following table shows the percentage increase in income transfers direct to individuals from government sources between 2014-2019. This doesn’t include things like the subsidized cost of institutionalized Long Term Care.
Now we are getting proposals for broad-based, non-means tested child care, free post-secondary education and other programs.
The new thinking on this is that if you give everyone the benefit – regardless of need – you will get far more support. People think it is ‘unfair’ if someone else gets a benefit and not them. So why not give it to everyone!
The CERB was highly popular because everyone got it (although they announced later there would be tax implications). In the U.S. the stimulus cheques went to everyone rich and poor and for some experts, that was the reason why the program was very popular. We have rich relatives in Boston that got their cheques in the mail.
I think we need to get back to means testing. If people need income support or tax incentives to achieve social goals like reducing poverty, access to the workforce, access to education, etc. let’s develop high quality programs to support these goals. Let’s not just dump out bags of money from the top of the legislature because it is popular.
I know that deficits and debt have fallen out of fashion because of low interest rates and new theories such as MMT. But I am starting to worry that interest rate rises are acomin’ and that could require very painful adjustments down the road.
Some of you will push back and say how far do we take means testing? Should health care be means tested? Should education? How about toll roads?
We can have this debate all day long. I’m on the record supporting some form of means-tested payment for basic health care services. I want the public system to fully cover the big stuff $10k, $100k – costs that could cause hardship/bankrupt people – but $15 for a blood test, $35 to visit the doctor, etc. I think would make the system stronger.
At the risk of sounding like an old fogie, I remember the deep cuts of the early-mid 1990s that came about because public spending growth in real terms continued to outpace economic growth.
Politicians should avoid the seduction of income transfer programs for all and get back to means testing programs based on need.