Canada unlikely to meet NATO commitments without significant debt accumulation

At this year’s NATO summit, held in Washington, D.C., Canada will undoubtedly face renewed pressure by our allies to increase defence spending to reach the alliance’s spending target of two per cent of gross domestic product (GDP)—a target that is increasingly viewed as the bare minimum. Despite recent increases to defence spending, the Trudeau government has yet to chart a course that gets Canada to two per cent, and it will be hard-pressed to do so without accumulating significantly more debt than what is already planned.

The days are long gone where Canada was simply one of many NATO members that failed to meet the alliance’s defence spending target, and we are now one of only eight countries that spends less than two per cent of GDP on defence. Indeed, NATO estimates we will spend 1.37 per cent of GDP on defence in 2024. Worse still, Canada is the only country that has not articulated a plan to reach that target by the end of the decade.

It is because of this that Canada has faced mounting pressure from our allies to release a plan that gets us to two per cent of GDP—with a recent example being a bipartisan letter sent to Prime Minister Trudeau from 23 U.S. senators, urging him to make good on our commitment.

In the face of this pressure, the Trudeau government recently released an updated defence policy, which commits an additional $8.1 billion over the next five years and $73.0 billion over the next 20 years, towards national defence. As a result of these new commitments it’s expected that Canada will spend 1.76 per cent of GDP on defence by 2029/30, which gets us closer to the NATO target but still ultimately falls short.

The problem facing the federal government is that, due to its own failures to responsibly manage the nation’s finances, Canada is currently in a weak fiscal position from which to increase defence spending.

During its time in office, the Trudeau government has demonstrated a complete lack of discipline regarding federal spending and debt accumulation. From 2015/16 to 2024/25, annual federal program spending (total spending minus debt charges) is expected to have increased nominally by $210 billion (76.7 per cent), which has resulted in ten consecutive budgetary deficits. These deficits have contributed to a $986.9 billion (89.4 per cent) increase in federal gross debt during the Trudeau government’s tenure.

It’s worth noting that the large majority of federal spending increases have gone towards programs and services other than national defence. Of the $210 billion in new annual spending since 2015, just 8.1 per cent ($17.1 billion) went to the defence budget.

Based on the latest federal budget, Canadians can expect much of the same fiscal mismanagement in the years to come. Indeed, over the next four years the Trudeau government plans to run deficits averaging $29.1 billion and accumulate an additional $400.1 billion in gross debt.

Due to the poor state of federal finances, the Trudeau government has little to no fiscal room with which to increase defence spending—unless of course, it chooses to fund new spending entirely using debt or cut spending in other areas. The government has already chosen the former to pay for its recent defence spending increases, given cumulative deficits from 2024/25 to 2027/28 are $44.7 billion higher in Budget 2024 than in Budget 2023, but continued debt accumulation comes at a cost to Canadians—largely in the form of high and increasing debt interest costs.

Despite recent increases, the Trudeau government still has yet to chart a course to spend two per cent of GDP on defence. But due to the government’s poor fiscal discipline, it will be hard-pressed to reach the target without significant debt accumulation.

Authors:

Grady Munro and Jake Fuss

Related Topics:#CanadaNATO #DefenceSpending #FraserInstitute #GradyMunro #JakeFuss #JustinTrudeau CanadaNATOCommitments

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armed forces

Mark Carney Thinks He’s Cinderella At The Ball

Published on June 26, 2025

Todayville

Trish Wood is Critical

And we all pay when the dancing ends

How to explain Mark Carney’s obsession with Europe and his lack of attention to Canada’s economy and an actual budget?

Carney’s pirouette through NATO meetings, always in his custom-tailored navy blue power suits, carries the desperate whiff of an insecure, small-town outsider who has made it big but will always yearn for old-money credibility. Canada is too young a country, too dynamic and at times a bit too vulgar to claim equal status with Europe’s formerly magnificent and ancient cultures — now failed under the yoke of globalism.

Hysterical foreign policy, unchecked immigration, burgeoning censorship and massive income disparity have conquered much of the continent that many of us used to admire and were even somewhat intimidated by. But we’ve moved on. And yet Carney seems stuck, seeking approval and direction from modern Europe — a place where, for most countries, the glory days are long gone.

Carney’s irresponsible financial commitment to NATO is a reckless and unnecessary expenditure, given that many Canadians are hurting. But it allowed Carney to pick up another photo of himself glad-handing global elites to whom he just sold out his struggling citizens.

From the Globe and Mail

“Prime Minister Mark Carney has committed Canada to the biggest increase in military spending since the Second World War, part of a NATO pledge designed to address the threat of Russian expansionism and to keep Donald Trump from quitting the Western alliance.

Mr. Carney and the leaders of the 31 other member countries issued a joint statement Wednesday at The Hague saying they would raise defence-related spending to the equivalent of 5 per cent of their gross domestic product by 2035.

NATO Secretary-General Mark Rutte said the commitment means “European allies and Canada will do more of the heavy lifting” and take “greater responsibility for our shared security.”

For Canada, this will require spending an additional $50-billion to $90-billion a year – more than doubling the existing defence budget to between $110-billion and $150-billion by 2035, depending on how much the economy grows. This year Ottawa’s defence-related spending is due to top $62-billion.”

You’ll note that spending money we don’t have in order to keep President Trump happy is hardly an elbows up moment, especially given that the pledge followed Carney’s embarrassing interactions with Trump at the G7. I’m all for diplomacy but sick to my teeth of Carney’s two-faced approach to everything. There is no objective truth to anything our prime minister touches. Watch the first few minutes of the video below.

Part of the NATO top-up we can’t afford is more billions for Ukraine which is pretty much considered a lost cause. NATO must keep that conflict going in order to justify its existence and we will all pay dearly for it.

The portents are bad. This from the Globe:

We are poorer than we think. Canadians running their retirement numbers are shining light in the dark corners of household finances in this country. The sums leave many “anxious, fearful and sad about their finances,” according to a Healthcare of Ontario Pension Plan survey recently reported in these pages.

Fifty-two per cent of us worry a lot about our personal finances. Fifty per cent feel frustrated, 47 per cent feel emotionally drained and 43 per cent feel depressed. There is not one survey indicator to suggest Canadians have made financial progress in 2025 compared with 2024.

The video below is a basic “F”- you to Canadians from a Prime Minister who smirks and roles his eyes when questioned about his inept money management.

He did spill the beans to CNN with this unsettling revelation about the staggering numbers we are talking about:

Signing on to NATO’s new defence spending target could cost the federal treasury up to $150 billion a year, Prime Minister Mark Carney said Tuesday in advance of the Western military alliance’s annual summit.

The prime minister made the comments in an interview with CNN International.

“It is a lot of money,” Carney said.

This guy was a banker?

We are witnessing the political equivalent of a vain woman who blows her entire paycheque to look good for an aspirational event even though she can’t afford food or rent. Yes, she sparkled for a moment, but in reality her domaine is crumbling. All she has left are the photographs of her glittery night. Our Prime Minister is collecting his own album of power-proximity photos he can use to wallpaper over his failures as our economy collapses.

The glass slipper doesn’t fit.

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armed forces

It’s not enough to just make military commitments—we must also execute them

Published on June 26, 2025

Todayville

From the Fraser Institute

By Jake Fuss and Grady Munro

To reach 2 per cent of GDP this year, the federal government is committing an additional $9.3 billion towards the military budget. Moreover, to reach 3.5 per cent of GDP by 2035, it’s estimated the government will need to raise yearly spending by an additional $50 billion—effectively doubling the annual defence budget from $62.7 billion to approximately $110 billion.

As part of this year’s NATO summit, Canada and its allies committed to increase annual military spending to reach 5 per cent of gross domestic product (GDP) by 2035. While this commitment—and the government’s recent push to meet the previous spending target of 2 per cent of GDP—are important steps in fulfilling Canada’s obligations to the alliance, there are major challenges the federal government will need to overcome to execute these plans.

Since 2014, members of the North Atlantic Treaty Organization (NATO) have committed to spend at least 2 per cent of GDP (a measure of overall economic output) on national defence. Canada had long-failed to fulfill this commitment, to the ire of our allies, until the Carney government recently announced a $9.3 billion boost to defence spending (up to a total of $62.7 billion) that will get us to 2 per cent of GDP during the 2025/26 fiscal year.

However, just as Canada reached the old target, the goal posts have now moved. As part of the 2025 NATO summit, alliance members (including Canada) committed to reach an increased spending target of 5 per cent of GDP in 10 years. The new target is made up of two components: core military spending equivalent to 3.5 per cent of GDP, and another 1.5 per cent of GDP for other defence-related spending.

National defence is a core function of the federal government and the Carney government deserves credit for prioritizing its NATO commitments given that past governments of different political stripes have failed to do so. Moreover, the government is ensuring that Canada remains in step with its allies in an increasingly dangerous world.

However, there are major challenges that arise once you consider how the government will execute these commitments.

First, both the announcement that Canada will reach 2 per cent of GDP in military spending this fiscal year, and the future commitment to spend up to 3.5 per cent of GDP on defence by 2035, represent major fiscal commitments that Canada’s budget cannot simply absorb in its current state.

To reach 2 per cent of GDP this year, the federal government is committing an additional $9.3 billion towards the military budget. Moreover, to reach 3.5 per cent of GDP by 2035, it’s estimated the government will need to raise yearly spending by an additional $50 billion—effectively doubling the annual defence budget from $62.7 billion to approximately $110 billion. However, based on the last official federal fiscal update, the federal government already plans to run an annual deficit this year—meaning it spends more than it collects in revenue—numbering in the tens of billions, and will continue running large deficits for the foreseeable future.

Given this poor state of finances, the government is left with three main options to fund increased military spending: raise taxes, borrow the money, or cut spending in other areas.

The first two options are non-starters. Canadian families already struggle under a tax burden that sees them spend more on taxes than on food, shelter, and clothing combined. Moreover, raising taxes inhibits economic growth and the prosperity of Canadians by reducing the incentives to work, save, invest, or start a business.

Borrowing the money to fund this new defence spending will put future generations of Canadians in a precarious situation. When governments borrow money and accumulate debt (total federal debt is expected to reach $2.3 trillion in 2025-26), the burden of this debt falls squarely on the backs of Canadians—likely in the form of higher taxes in the future. Put differently, each dollar we borrow today must be paid back by more than a dollar in higher taxes tomorrow.

This leaves cutting spending elsewhere as the best option, but one that requires the government to substantially readjusts its priorities. The federal government devotes considerable spending towards areas that are not within its core responsibilities and which shouldn’t have federal involvement in the first place. For instance, the previous government launched three major initiatives to provide national dental care, national pharmacare and national daycare, despite the fact that all three areas fall squarely under provincial jurisdiction. Instead of continuing to fund federal overreach, the Carney government should divert spending back to the core function of national defence. Further savings can be found by reducing the number of bureaucrats, eliminating corporate welfare, dropping electric vehicle subsidies, and many other mechanisms.

There is a fourth option by which the government could fund increased defence spending, which is to increase the economic growth rate within Canada and enjoy higher overall revenues. The problem is Canada has long-suffered a weak economy that will remain stagnant unless the government fundamentally changes its approach to tax and regulatory policy.

Even if the Carney government is able to successfully adjust spending priorities to account for new military funding, there are further issues that may inhibit money from being spent effectively.

It is a well-documented problem that military spending in Canada is often poorly executed. A series of reports from the auditor general in recent years have highlighted issues with the readiness of Canada’s fighter force, delays in supplying the military with necessary materials (e.g. spare parts, uniforms, or rations), as well as delays in delivering combat and non-combat ships needed to fulfill domestic and international obligations. All three of these cases represent instances in which poor planning and issues with procurement and supply chains) are preventing government funding from translating into timely and effective military outcomes.

The Carney government has recently made major commitments to increase military funding to fulfill Canada’s NATO obligations. While this is a step in the right direction, it’s not enough to simply make the commitments, the government must execute them as well.