Federal fiscal anchor gives appearance of prudence, fails to back it up

The Parliamentary Budget Officer (PBO)—which acts as the federal fiscal watchdog—released a new report highlighting concerns with the Carney government’s fiscal plan. Key among these concerns is the fact that the government’s promise to balance its “operating budget” does not actually ensure the nation’s finances are sustainable. Instead, the plan to balance the operating budget by 2028/29 gives the appearance of fiscal prudence, but allows the government to continue running large deficits and borrow more money.

First, what’s the new government’s fiscal plan?

While the Carney government has chosen to delay releasing a budget until the fall—leaving Canadians and parliamentarians in the dark about the state of government finances and where we’re headed—the Liberal platform and throne speech lay out the plan in broad strokes.

The Carney government plans to introduce a new framework that splits federal spending into two separate budgets: The operating budget and the capital budget. The operating budget will include “day-to-day” spending (e.g. government salaries, cash transfers to provinces and individuals, etc.) while the capital budget will include spending on “anything that builds an asset.” Within this framework, the government has set itself an objective—also called a ‘fiscal anchor’—to balance the operating budget over the next three years.

Fiscal anchors help guide policy on government spending, taxes and borrowing, and are intended to prevent government finances from deteriorating while ensuring that debt is sustainable for future generations. The previous federal government made a habit of violating its own fiscal anchors—to the detriment of national finances—but the Carney government has promised a “very different approach” to fiscal policy.

The PBO’s new report highlights two critical concerns with this new approach to finances. First, the federal government has not yet defined what “operating” spending is and what “capital” spending is. Therefore, it’s difficult to know whether any new spending policies—such as the recently announced increase in defence spending—will hurt efforts to achieve the government’s goal of balancing the operating budget and how much overall debt will be accumulated. In other words, the government’s plan to split the budget in two simply muddies the waters and makes it harder to evaluate federal finances.

The PBO’s second, and more alarming, concern is that even if the government achieves its goal to balance the operating budget, federal finances may still continue to deteriorate and debt may rise at an unsustainable rate (growing faster than the economy).

While the Liberal election platform does outline a fiscal path that appears to balance the operating budget by 2028/29, this path also includes higher deficits and more borrowing than the previous government’s plan once you factor in capital spending. Specifically, the Carney government plans to run overall deficits over the next four years that are a combined $93.4 billion more than was previously planned in last year’s fall economic statement. This means that rather than the “very different approach” that Canadians have been promised, the Carney government may continue (or even worsen) the same costly habits of endless borrowing and rising debt.

The PBO is right to call out the major transparency issues with the Carney government’s new budget framework and fiscal anchor. While the devil will be in the details of the government’s fiscal plan, and we won’t know those details until it releases a budget, the government’s new fiscal anchor gives the appearance of prudence without the substance to back it up.

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How Much Dollar Value Does Our Military Deliver?

Published on June 22, 2025

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David Clinton

To my great surprise I recently noticed that, despite being deeply engaged in wars against at least four determined enemies, Israel doesn’t spend all that much more on their military than Canada does on its forces. What might that tell us about government efficiency?

There’s fairly universal agreement that Canada doesn’t spend enough on its military. But before we can even ask how much we should be spending, we should understand how much we’re already spending. And figuring that out isn’t nearly as easy as I’d expected.

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According to the 2025–26 Expenditures by Purpose data released by the Treasury Board Secretariat, the Department of National Defence (DND) was allocated $35.7 billion (CAN). However, the New York Times recently reported that Primer Minister Carney’s $9.3 billion increase would bring the total defence-related spending to $62.7 billion – which suggests that, prior to the increase, we were set to spend $53.4 billion (CAN).

So I’ll work with both of those figures: $35.7 billion ($26 billion USD) and the pre-announcement $53.4 billion ($39 billion USD). By contrast, Israel currently spends around $37 billion (USD) on the Israel Defense Forces (IDF) which is in the neighborhood of 18 percent of their total budget.¹ The IDF is (literally) getting a much bigger bang for their buck.²

I’m going to compare the military inventories of both countries to get a sense of what a dollar of government spending can get you. I understand that this isn’t an apples-to-apples comparison and there are many complicating factors here. But I think the exercise could lead us to some useful insights. First off, here’s a very rough estimate of existing inventories:

I’m sure there are plenty of caveats we could apply to those numbers, including how much of that equipment is actually fit for service on any given day. But they’ll have to do.

In addition, there are currently 68,000 regular troops in the Canadian Armed Forces (CAF) along with 22,500 reserves, while the IDF employs 169,500 regular troops and 465,000 reserves. They also cost money.

Based on some very rough estimates,³ I’d assess the value of IDF assets at around 2.6 times the value of comparable CAF assets. That means that the IDF – using their procurement systems – would need to spend just $14.4 billion (USD) to purchase the equivalent of the current set of CAF assets.

Now compare that with our actual (pre-increase) expenditures of either $26 billion USD or $39 billion USD and it seems that we’re overspending by either 80 percent or 270 percent.

I think we’d be wise to wonder why that is.

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For full context, Israel receives around $3.8 billion (USD) in military aid annually from the U.S.

Speaking of which, for simplicity, I completely left the ongoing costs of ordinance out of my calculations.

If you’re really interested, you can see my calculations here.

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High Taxes Hobble Canadian NHL Teams In Race For Top Players

Published on June 22, 2025

Todayville

From the Frontier Centre for Public Policy

By Lee Harding

Canada’s steep income taxes leave NHL players with less cash in their pockets, putting Canadian teams at a serious disadvantage against their U.S. rivals. Find out why it’s not just bad luck that Canada hasn’t won the Stanley Cup in decades.

NHL commissioner Gary Bettman badly underestimates how much higher income taxes in Canada put Canadian teams at a serious competitive disadvantage by reducing players’ take-home pay and limiting their ability to attract top talent.

The NHL salary cap limits how much teams can spend on player salaries each season, so higher taxes mean players on Canadian teams effectively take home less money for the same salary, putting those teams at a disadvantage when competing for talent.

In a recent TNT broadcast, Bettman dismissed the idea that teams might adjust the salary cap to offset income tax differences, calling it “a ridiculous issue” and saying taxes were only “a little bit of a factor.” Pointing to high state taxes in California and New York, he asked, “What are we going to do? Subsidize those teams?”

What Bettman either ignored or didn’t understand is that every Canadian NHL player faces significantly higher income taxes than any of their U.S. counterparts. According to the Fraser Institute’s 2023 study, Ontario’s top marginal tax rate is 53.5 per cent, and even Alberta’s is 47 per cent. Compare that to the highest U.S. state rate among NHL locations—Minnesota at 41.85 per cent, California at 41.3 and New York at 38.85. Several states, including Florida, Texas, Nevada and Tennessee, impose no state income tax at all.

This tax gap translates into huge differences in players’ actual take-home pay, the money they keep after taxes. With a 2024-25 NHL salary cap of US$88 million, Toronto Maple Leafs players collectively earn $5.7 million less after taxes than Edmonton Oilers players, and a staggering $18.9 million less than players on the tax-free Florida Panthers. That difference alone could sign a star player and shift competitive balance.

Leafs fans frustrated by two decades of playoff disappointment should look less to coaches and management and more to Canada’s punishing tax system that drives talent south of the border or limits how much teams can pay. Lower taxes are a proven magnet for high-priced talent, driving better results and stronger teams.

University of Calgary economist Trevor Tombe calls this the “great divergence,” referring to the growing gap between the U.S. and Canadian economies. He points out that U.S. GDP per capita outpaces Canada’s by 43 per cent, and the gap is widening. This economic advantage means U.S. teams operate in wealthier markets with more financial flexibility, enabling them to offer players better after-tax compensation and attract top talent more easily than Canadian teams can.

Canadian teams also face more intense media and fan pressure in smaller markets, adding to their challenges. The NHL’s prolonged Stanley Cup drought for Canadian teams since 1993 isn’t just bad luck. Statistically, the odds of no Canadian team winning the Cup in over 30 years are about one in 781. Tax policy plays a major role in this unlikely streak.

Don’t blame Bettman or the NHL. Blame the Canadian governments that keep imposing high taxes that punish success, stifle economic growth and keep Canadian teams from competing on a level playing field. Unless tax policy changes, Canadian hockey fans should expect more frustration and fewer championships.

Lee Harding is a research fellow for the Frontier Centre for Public Policy.