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Instead of a kitty (the Generations Fund), make Basic Income our intergenerational legacy

The Institut du nouveau monde (INM), a non-partisan organization whose mission is ̂to promote citizen participation in democratic life, is currently conducting a vast online public conversation on intergenerational solidarity and equity in Quebec. Here is my contribution to the debate. It goes, of course, to Basic Income.

Without (top) and with the Generations Fund

"If the payments into the Generations Fund had been spent directly on debt reduction (or rather on reducing borrowing), the gap between the two lines in this chart[which shows the change in the debt-to-GDP ratio] in 2016 would not be 2.5 percentage points (57.5 - 55.0 = 2.5), but only 0.12 percentage points, or 20 times less! This allows the government to apply even more austerity measures without having to justify them." — Jeanne Emard

A government can look at this graph and congratulate itself on being at the same point after 12 years. During this period, how many opportunities for investment in human capital were sacrificed?

Austerity and the Generations Fund are smoke and mirrors!

The history of the past two years is well documented. The government is imposing austerity measures because public finances seem to be deteriorating. Nevertheless, it continues to contribute to the Generations Fund.

Now we learn that it was a mistake. Actually, everything's fine. The government has even managed to create a considerable amount of room for manoeuvre. Too bad for those who have been hurt by this fake austerity.

If the government does not believe in the harmful effect of austerity on the economy, it is mistaken. — Pierre Fortin

I have two points to make. Both are based on the following premise: Quebec's public finances are sound. If I'm wrong, what am I not understanding? I'm listening...

  • A government that manages its finances well should have the ability to weather the storms. It is not accountable to shareholders who may demand short-term results. The Quebec public is entitled to stability and continuity. It does not have to tolerate sharp changes in direction and drastic cuts when there is no emergency. Austerity is incompatible with the government's duty to ensure the well-being of the population. It is a great disappointment. I don't think politicians are lining their pockets (perhaps indirectly in their re-election funds). Perhaps it is simply an ideological question. Or they don't understand the role of the state in a modern society. We do not manage public finances like a family manages its budget. This brings me to my second point.

  • The Generations Fund is money set aside specifically by law to service the debt. It is a large savings account that accountants subtract from debt without any payments having been made. Money sleeps there: it collects interest or is invested in the private sector. When I say that the funds are asleep, I mean that they are not used for public spending, which stimulates the economy, nor are they devoted to providing the services that ensure the well-being of Quebeckers. And what justifies this policy? Cleaning up public finances for future generations. So I repeat, Quebec's public finances are sound. Is it the government's responsibility to pass on a certain level of debt to future generations? What will it change in their lives? If, however, we invest now in infrastructure and a healthy environment, all our descendants will benefit. Improving the wellbeing of our grandchildren's parents (many are still infants today) by eliminating poverty, improving education, stimulating their creativity, encouraging their community involvement, etc. is better than leaving them a piggy bank! Even if it overflows, it will be too late to improve the lives of an entire generation and all subsequent generations. So much for the degeneration fund!

The moderator of the Institut du Nouveau Monde asked me to elaborate:

Why does inheriting a higher debt level not affect future generations?

It is a matter of priority and reality.

The Minister of Finance Leitão who takes the taxpayer's money and puts it into the Generations Fund

The wellbeing of humans is more important than an accounting result.

If, in thirty years, the service of the debt has increased, do we want it to be after 30 years of infrastructure development; after 30 years of intensive efforts in education and health; after 30 years of cleaning up the environment; after 30 years of eliminating poverty by introducing a guaranteed minimum income?

Or do we prefer not to act, to waste time that is forever irrecoverable, to sacrifice an entire generation, just for the satisfaction of admiring a beautiful financial balance sheet?

The opportunity cost of these 30 years of investment far exceeds anything that a hypothetical increase in debt could cost us in 30 years time.

Secondly, it is a question of reality: although we live in an abstract world of human and now digital relations, the consequences bite into real flesh and blood. Money is a social convention that meets a need. Will it still exist in thirty years? Maybe another tool will replace it.

On the other hand, if the human race survives for the next thirty years, we will be either better or worse off than we are today.

What is more likely to lead to an improvement in real human life? Action or a piggy bank?

The Generations Fund is a bogus response to a false problem. If the government does not know how to spend our money, let us have it. Money, especially in government hands, is an economic tool.

We can't let it sleep in the tool box!

Basic Income Financing

Geoff Crocker proposes the "radical concept of financing the basic income through the perpetual deficit" and thus a debt that grows endlessly. The Generations Fund pursues the opposite goal of stabilizing or reducing debt in a context where austerity continues unabated.

Deficit in blue; Generations Fund in red

When the government is running a deficit, it has to borrow to put money aside. It's the world turned upside down. It makes no sense!

While the Generations Fund claims to attack public debt, there is another intergenerational debt that is wreaking havoc: the cost of foregoing the development of our children and grandchildren when we "allocate available resources to one use at the expense of other choices"[Wikipedia].

It is clear that the development of our children is sacrificed to debt service when accounting strategies such as the Generations Fund lead to austerity measures.

In 1989, the Parliament of Canada voted unanimously to eradicate child poverty by the year 2000.

In Quebec alone, there are still 200,000 poor children in 2018.

What is to be done? Report the government to the Director of Youth Protection?

"Human rights are superior to creditors' rights"— Olivier Bonfond

In this short video, Geoff Crocker generally reviews the most typical arguments for and against basic income, focusing on the financing issues. Particularly, he conceives a thought experiment where all economic goods and services are produced by machines. The question then arises: how to distribute these among the population? Crocker’s conclusions, from this onset, are that basic income becomes “essential to maintain consumer demand”, and that “financial deficit is inevitable”. This, apparently, derives directly from the fact that modern economies operate at a permanent deficit and that “unearned income [is] necessary in high tech economies”.----

The ability of future generations to finance public services

Will the aging of the population and the decline in the ratio of workers to retirees not have any impact on the ability of future generations to finance a range of public services similar to those available in the past and at present?

We will not even have enough work to occupy the few young people who have not been replaced by machines. It's certainly not their work that's going to fund much, unless you attribute to these workers a tremendous productivity.

In his thought experiment, Geoff Crocker postulates the borderline case where machines do all the work. The "value" of money is always based on the GDP of production, except that humans have nothing to do with it. People will still need money to purchase the products and services provided by automation. Hence the need for a Basic Income.

In my opinion, it is not too early to start. Also, I can't wait to be deprived of work by a machine, as long as I'm not deprived of income.

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