Ignore the nonsense about Carney’s ‘ambitious savings’—he will outspend Trudeau

The Carney government is not making deep cuts but rather simply slowing the pace of spending increases. In fact, Prime Minister Carney is on track to be a much bigger spender than Justin Trudeau (the highest-spending prime minister in Canadian history)

Earlier this month, federal Finance Minister François-Philippe Champagne told his fellow cabinet members to present “ambitious savings proposals” to help constrain federal spending. In response, public-sector unions cried foul while some pundits inexplicably compared Champagne’s request to the Chrétien government’s substantial spending cuts in the 1990s.

Time for a reality check. Champagne told cabinet ministers to find operational savings in their respective departments of 7.5 per cent in 2026/27, 10 per cent in 2027/28 and 15 per cent in 2028/29. But the government will exclude more than half of all federal spending from this so-called “comprehensive expenditure review” on things such as individual benefits (e.g. Old Age Security) and transfers to the provinces (health care, etc.).

According to the Canadian Union of Public Employees (CUPE), these “draconian rollbacks” will produce massive “cuts to direct program spending” over the next three years. But that almost certainly will not be the case. While we won’t know for sure until the federal budget finally arrives in the fall, the “cuts” proposed by the Carney government won’t actually reduce overall spending. In fact, federal spending will likely increase.

Here’s why. In December, The Trudeau government planned to increase program spending from $504.1 billion in 2025/26 to $547.8 billion by 2028/29. According to rough calculations based on the Liberal Party election platform, the Carney government plans to further increase spending to a projected $533.3 billion in 2025/26 and $566.4 billion in 2028/29. The government also plans to substantially increase military spending on top of these increases. So, any “ambitious savings proposals” over the next three years may help cover some, but almost certainly not all, of these planned spending increases.

To put this in context, consider a household that spent $500 on entertainment in 2025 and plans to double that amount to $1,000 by 2028. Then some unforeseen circumstance makes that family scale back its plans. They decide to trim the $1,000 by 15 per cent and now only plan to spend $850 by 2028. This is not a cut or reduction in year-over-year spending—they still plan to spend 70 per cent more on entertainment three years from now than they do today. The family simply slowed the growth rate of planned spending. However, if the family reduced entertainment spending by 15 per cent from current levels ($500 in 2025), they would spend $425 in 2028.

Likewise, the Carney government is not making deep cuts but rather simply slowing the pace of spending increases. In fact, Prime Minister Carney is on track to be a much bigger spender than Justin Trudeau (the highest-spending prime minister in Canadian history) and plans to borrow a projected $224.8 billion over the next four years to pay for this profligate spending—$93.4 billion more than Trudeau planned to borrow. Again, this is not austerity.

And what about those allusions to the Chrétien spending reductions of the ’90s? Back then, the federal government did not merely slow the growth in spending, but instead reduced spending year-over-year by $11.9 billion (or 9.7 per cent) over a two-year period. Chrétien made difficult decisions and left nothing off the table in his spending review (except what was then called the Department of Indian and Northern Affairs). He reduced transfers to the provinces, reduced department expenses, and shrunk the size of bureaucracy by nearly 15 per cent.

Ignore the voices who call the Carney government’s “ambitious savings” plan the “worst spending cuts in modern history.” It’s wildly inaccurate and represents a fundamental misunderstanding of fiscal policy. Carney is actually poised to become an even bigger spender than Justin Trudeau.

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Trump’s long-promised “reciprocal tariff” regime is no longer a threat — it’s the new world order.

Business / 2 hours ago

Canada’s postal service would benefit from liberalization, privatization, new MEI publication shows

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Trump’s long-promised “reciprocal tariff” regime is no longer a threat — it’s the new world order.

Published on August 1, 2025

Todayville

MxM News

Quick Hit:

The world woke up Friday to Trump’s tariff world order — with a rate-modifying executive order enforcing the terms of Liberation Day, imposing tariffs up to 41% on countries that failed to cut a deal with the United States.

Key Details:

The executive order builds on Trump’s April Liberation Day proclamation, which declared chronic U.S. trade deficits a national emergency and imposed ad valorem tariffs on nearly 70 countries.
Thursday’s follow-up order modifies tariff levels, effective seven days after signing, with full penalties up to 41% now locked in for countries that failed to reach meaningful trade or security agreements with the U.S.
Transshipped goods — products routed through third countries to evade tariffs — will be hit with a flat 40% duty and no possibility for leniency. A blacklist of violators will be published every six months.

🚨 AUGUST 1ST.

President Donald J. Trump signs an Executive Order modifying reciprocal tariff rates, resetting decades of failed trade policies. America First 🇺🇸 pic.twitter.com/hsgQzlY1Uy

— The White House (@WhiteHouse) August 1, 2025

Diving Deeper:

President Donald Trump formalized a new phase of his Liberation Day trade strategy on Thursday, signing an executive order that rewrites tariff rates and tightens enforcement across the global economy. With this action, Trump’s long-promised “reciprocal tariff” regime is no longer a threat — it’s the new world order.

The executive order, issued from the White House Thursday, amends the original April declaration that framed persistent U.S. trade deficits as a national emergency. That earlier order imposed broad-based duties on nearly 70 countries. Thursday’s update locks in or adjusts those penalties depending on each country’s progress — or lack thereof — in negotiations with the United States.

For countries that reached or are nearing “meaningful trade and security commitments” with the United States, temporary rates will remain in place as agreements are finalized. For the rest, full penalties apply — with tariffs ranging from 10% to 41%, as outlined in Annex I of the order.

The European Union receives a tailored formula: if a product’s current U.S. tariff is under 15%, the new combined rate will be pushed to that floor. Goods already above 15% will not face additional penalties.

But the most aggressive provision of the order targets a growing tactic of tariff evasion — transshipping. Under Section 3, goods that are determined by Customs and Border Protection to have been rerouted through third countries to avoid tariffs will face an automatic 40% penalty. Mitigation or reduction of that duty is explicitly barred under the order.

Trump’s team will also release a biannual blacklist of known violators — naming countries and facilities involved in circumvention schemes. This list will inform public procurement, national security reviews, and corporate due diligence.

The order empowers the Departments of Commerce, Homeland Security, Treasury, and the U.S. Trade Representative to implement the policy, issue regulations, and take “all necessary actions” to enforce it.

Countries that failed to reach a deal by the deadline now face the consequences. Those still negotiating have little time left. And for businesses and governments around the world, the message is clear: American leverage is back — and it comes with a price tag.

Business

Canada’s postal service would benefit from liberalization, privatization, new MEI publication shows

Published on August 1, 2025

Todayville

From the Montreal Economic Institute

Canada Post has accumulated $3.8 billion in losses since 2018.
The Crown corporation is receiving a $1-billion taxpayer loan to stay afloat in 2025-2026.
Privatization should include an employee share ownership plan.

Privatizing Canada Post and opening up the sector to competition would result in better services and lower prices for Canadians, shows a new publication released by the MEI.

“Canadians are held hostage by a postal system that is inefficient, strike-prone, and, increasingly, financially non-viable,” says Vincent Geloso, senior economist at the MEI and co-author of the report. “We should follow the lead of European countries like Germany that have liberalized and privatized their postal services, with excellent results.”

Canada Post has a federal monopoly on regular letter mail, making it the only entity legally permitted to deliver non-express letters.

The Crown corporation has run deficits for seven straight years, accumulating over $3.6 billion in losses over the past decade.

Meanwhile, letter volume in Canada has fallen from 5.5 billion letters in 2006 to 2 billion in 2024, a 64 per cent decline.

Canada Post’s market share in parcel delivery has also cratered, falling from 62 per cent in 2019 to 24 per cent in 2024, as private competitors have captured more of the growing market.

In December 2024, more than 55,000 Canada Post workers went on a 32-day strike that ground mail and parcel delivery to a halt causing a backlog of nearly 10 million packages, impacting individuals and businesses alike. The strike reportedly cost small businesses an estimated $1.6 billion.

This past May, another union issued a strike notice and began a nationwide overtime ban, again obstructing delivery volumes. Currently, Canada Post employees are voting on the corporation’s latest offer; if the vote fails, there are fears that another strike would ensue.

“There is an inherent problem with monopolies,” explains Mr. Geloso. “No competition means no incentive to be efficient or innovate, which means higher prices by way of increased costs, and consumers are left with no alternative.”

In 1989, Germany decided to open up its market to a limited amount of competition, and by 2008, the sector was fully liberalized.

Privatization of Deutsche Post started in 2000, and currently, the government holds only a small minority stake in the former monopoly.

Today, over 15,000 firms offer some sort of postal service in Germany. The country’s mail service generally outperforms those of other European countries.

In Canada, the cost of sending a letter is 50 per cent higher today than it was in 1989 (inflation-adjusted).

In Germany, postage prices have fallen by 10 per cent over the same period (after accounting for inflation).

The MEI recommends the following steps to kickstart a two-year process of privatizing Canada Post:

Offer employees shares: This would give workers a stake in the company’s success and help prevent insiders from taking advantage during the transition (i.e., avoid asset-stripping).
Avoid regulatory capture: A swift reform process would reduce the risk of special interest groups lobbying regulators to lock in unfair advantages in the law.

“Canada Post’s inability to adapt to the changing market shows that it won’t get better on its own; it needs a massive overhaul,” says Mr. Geloso. “Canadians are paying a lot for a second-rate service; Germany showed us how we can turn this around.”

The MEI Economic Note is available here.

* * *

The MEI is an independent public policy think tank with offices in Montreal, Ottawa, and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.