New Prime Minister Carney’s Fiscal Math Doesn’t Add Up

For the first time in Canada’s history, the Prime Minister has never sought or won a democratic election in any parliament. Mark Carney’s victory to replace Justin Trudeau as the leader of the Liberal Party means he is now the Prime Minister. Carney’s resume and achievements make him one of the most accomplished prime ministers ever. Still, there are a number of basic questions about Carney’s fiscal and economic math that Canadians need to consider carefully as we enter an election.

Carney’s accomplishments should be recognized. He has a bachelor’s degree in economics from Harvard and both a masters and doctoral degrees in economics from Oxford University. He spent over a decade at Goldman Sachs, a leading US-based financial firm then left to take up senior positions at both the Bank of Canada and later the Department of Finance. He became the Governor of the Bank of Canada in 2007 and then the Governor of the Bank of England in 2012. After his tenure at the Bank of England, Carney took up a number of private sector posts including chairman at Brookfield Asset Management, a major Canadian company.

Despite these obvious accomplishments and a deep CV, Carney’s proposed fiscal policies pose a number of serious questions.

Carney self-characterizes as a pragmatist and someone who will bring the Liberal Party back to the political centre after having been pushed to the left by former prime minister Justin Trudeau. Even former prime minister Jean Chrétien, one of the country’s most electorally successful prime ministers called for the party to move back to the centre.

Specifically, Carney said he would “cap” the size of the federal government workforce and reduce federal spending through a review of program spending as was done in 1994-95. He also indicated that the operating budget would be balanced within three years. He criticized the current government for spending too much and not investing enough, and for missing spending targets and violating its own fiscal guardrails. The implication of all these policies is that the role of the federal government will be rolled back with reductions in spending and federal employment, and reducing regulations. In many ways, these policies mirror those of former prime minister Chrétien.

However, there are numerous statements by Carney that seem to contradict these policies, or at the very least, water them down significantly. Consider, for instance, that Carney has indicated there will be no cuts to transfers to provincial governments (19.8 per cent of budget spending), no reductions in the income-transfers to individuals and families (25.8 per cent), and the government doesn’t determine interest charges on its debt (another 9.7 per cent). So, Carney has already taken over half the federal budget off the table for reductions.

It’s not clear whether he would reduce what’s referred to as “Other Transfers” which includes support for EV programs and investment incentives. This represents 17.9 per cent of the current budget. And if you read any of Carney’s climate-related initiatives, it appears this category of spending will actually increase, not decrease. Moreover, Carney stated he won’t touch some transfers such as the national dental care and pharmacare programs.

The major remaining category of federal spending is “operating expenses”, which includes the costs of running more than 100 government departments, agencies and Crown corporations. It’s expected to reach $130.6 billion this year and represents 23.4 per cent of the federal budget. But again, Carney has only committed to “capping” the federal workforce despite significant growth since 2015 and then review programs. Unless he’s willing to actually reduce federal employment and/or challenge existing contracts with the civil service, it’s not clear how he can find meaningful savings in the short term.

Recall that the expected deficit this year is $42.2 billion and to balance the budget over the next three years, Carney needs to find roughly $30 billion in savings. (Some of the deficit reduction is expected to come from economic growth, which increases government revenues).

However, this ignores the pressure on the federal government to markedly and quickly increase defense spending. A recent analysis estimated that the federal government would have to increase defense spending in 2027-28 by $68.8 billion to meet its NATO commitment, which is what President Trump is demanding. This single measure of spending could materially derail the new prime minister’s commitment to a balanced budget within three years.

But Carney has complicated the nation’s finances by committing to separating operating spending from capital spending. The former are annual spending requirements like salaries and wages to federal employees, income transfers to people through programs like EI and Old Age Security, and transfers to the provinces for health and social programs. Carney has committed to balancing the revenues collected for these purposes against spending.

However, he wants to remove anything that is deemed an “investment” or “capital”. That means spending on infrastructure like roads and ports, defense spending on equipment, and energy projects.

While Carney has committed to only running a “small deficit” on such spending, the commitment is eerily similar to Trudeau’s commitment in 2015 to run “small deficits” for just “three years” and the budget will balance itself through economic growth. The total federal gross debt has increased from $1.1 trillion when Trudeau took office in 2015 to an estimated $2.3 trillion this year.

The clear risk is that a Carney government will simply reduce spending in the operating budget and move it to the capital budget, thus balancing the latter while still piling up government debt.

Clarity is required from the new prime minister with respect to: 1) What operating expenses does he plan to reduce (or perhaps more generally is open to reducing) over the next three years to reach a balanced operating budget? 2) What specific commitment is Carney making on defense spending over the next three years? 3) What current spending will the new prime minister move or potentially move from the budget to his new capital budget? And finally, 4) What measures will be taken if revenues don’t materialize as expected and/or spending increases more than planned to ensure a balanced operating budget in three years?

Until greater clarity and details are provided, it’s hard, even near impossible, to know the extent to which the new prime minister is pragmatically offering a plan for more sustainable government finances versus playing politics by promising everything to everyone.

Jason Clemens

Executive Vice President, Fraser Institute

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Related Topics:#FraserInstitute #JakeFuss #MarkCarney feature JasonClemons MarkCarney'sMath

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Carney government should privatize airports—then open airline industry to competition

Published on December 3, 2025

Todayville

From the Fraser Institute

By Alex Whalen and Jake Fuss

This holiday season, many Canadians will fly to spend time to with family and friends. But air travellers in Canada consistently report frustration with service, cost and choice. In its recent budget, the Carney government announced it will consider “options for the privatization of airports.” What does this mean for Canadians?

Up until the 1990s, the federal government served as both the owner and operator of Canada’s major airports. The Chrétien government partially privatized and transferred the operation of major airports to not-for-profit airport authorities, while the federal government remained the owner of the land. Since then, the federal government has effectively been the landlord for Canada’s airports, collecting rent each year from the not-for-profit operating authorities.

What would full privatization of airports look like?

If the government allows private for-profit businesses to own Canada’s major airports, their incentives would be to operate as efficiently as possible, serve customers and generate profits. Currently, there’s little incentive to compete as the operating authorities are largely unaccountable because they only report to government officials in a limited form, rather than reporting directly to shareholders as they would under privatization. Private for-profit airports exist in many other countries, and research has shown they are often less costly for passengers and more innovative.

Yet, privatization of airports should be only the first step in a broader package of reforms to improve air travel in Canada. The federal government should also open up competition by creating the conditions for new airports, new airlines and new investment. Currently, Canada restricts foreign ownership of Canadian airlines, while also restricting foreign airlines from flying within Canada. Consequently, Canadians are left with little choice when booking air travel. Opening up the industry by reversing these policies would force incumbent airlines to compete with a greater number of airlines, generating greater choice and likely lower costs for consumers.

Moreover, the federal government should reduce the taxes and fees on air travel that contribute to the cost of airline tickets. Indeed, according to our recent research, among peer countries, Canada has among the most expensive air travel taxes and fees. These costs get passed on to consumers, so it’s no surprise that Canada consistently ranks as a very expensive country for air travel.

If the Carney government actually privatizes Canada’s airports, this would be a good first step to introducing greater competition in an industry where it’s badly needed. But to truly deliver for Canadians, the government must go much further and overhaul the numerous policies, taxes and fees that limit competition and drive up costs.

Alex Whalen

Director, Atlantic Canada Prosperity, Fraser Institute

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Business

Ottawa’s gun ‘buyback’ program will cost billions—and for no good reason

Published on December 2, 2025

Todayville

From the Fraser Institute

By Gary Mauser

The government told Cape Bretoners they had two weeks to surrender their firearms to qualify for reimbursement or “buyback.” The pilot project netted a grand total of 22 firearms.

Five years after then-prime minister Justin Trudeau banned more than 100,000 types of so-called “assault-style firearms,” the federal government recently made the first attempt to force Canadians to surrender these firearms.

It didn’t go well.

The police chief in Cape Breton, Nova Scotia, volunteered to run a pilot “buyback” project, which began last month. The government told Cape Bretoners they had two weeks to surrender their firearms to qualify for reimbursement or “buyback.” The pilot project netted a grand total of 22 firearms.

This failure should surprise no one. Back in 2018, a survey of “stakeholders” warned the government that firearms owners wouldn’t support such a gun ban. According to Prime Minister Carney’s own Privy Council Office the “program faces a risk of non-compliance.” And federal Public Safety Minister Gary Anandasangaree was recently recorded admitting that the “buyback” is a partisan maneuver, and if it were up to him, he’d scrap it. What’s surprising is Ottawa’s persistence, particularly given the change in the government and the opportunity to discard ineffective policies.

So what’s really going on here?

One thing is for certain—this program is not, and never has been, about public safety. According to a report from the federal Department of Justice, almost all guns used in crimes in Canada, including in big cities such as Toronto, are possessed illegally by criminals, with many smuggled in from the United States. And according to Ontario’s solicitor general, more than 90 per cent of guns used in crimes in the province are illegally imported from the U.S. Obviously, the “buyback” program will have no effect on these guns possessed illegally by criminals.

Moreover, Canadian firearms owners are exceptionally law-abiding and less likely to commit murder than other Canadians. That also should not be surprising. To own a firearm in Canada, you must obtain a Possession and Acquisition Licence (PAL) from the RCMP after initial vetting and daily monitoring for possible criminal activity. Between 2000 and 2020, an average of 12 PAL-holders per year were accused of homicide, out of approximately two million PAL-holders. During that same 10-year period, the PAL-holder firearms homicide rate was 0.63 (per 100,000 PAL-holders) compared to 0.72 (per 100,000 adult Canadians)—that’s 14 per cent higher than the rate for PAL-holders.

In other words, neither the so-called “assault-style firearms” nor their owners pose a threat to the public.

And the government’s own actions belie its claims. If these firearms are such a threat to Canadians, why slow-roll the “buyback” program? If inaction increased the likelihood of criminality by law-abiding firearms owners, why wait five years before launching a pilot program in a small community such as Cape Breton? And why continue to extend the amnesty period for another year, which the government did last month at the same time its pilot project netted a mere 22 firearms?

To ask those questions is to answer them.

Another question—how much will the “buyback” program cost taxpayers?

The government continues to block any attempt to disclose the full financial costs (although the Canadian Taxpayers Federation has launched a lawsuit to try to force the government to honour its Access to Information Act request). But back in 2020 the Trudeau government said it would cost $200 million to compensate firearms owners (although the Parliamentary Budget Officer said compensation costs could reach $756 million). By 2024, the program had spent $67.2 million—remember, that’s before it collected a single gun. The government recently said the program’s administrative costs (safe storage, destruction of hundreds of thousands of firearms, etc.) would reach an estimated $1.8 billion. And according to Carney’s first budget released in November, his government will spend $364 million on the program this fiscal year—at a time of massive federal deficits and debt.

This is reminiscent of the Chretien government’s gun registry fiasco, which wound up costing more than $2 billion even after then-justice minister Allan Rock promised the registry program would “almost break even” after an $85 million initial cost. The Harper government finally scrapped the registry in 2012.

As the Carney government clings to the policies of its predecessor, Canadians should understand the true nature of Ottawa’s gun “buyback” program and its costs.