From the Fraser Institute

By Jake Fuss and Grady Munro

Rather than directly spend money on critical infrastructure such as roads, bridges, ports or even electricity grids—things that traditionally are considered capital investments—the government plans to spend money on subsidies and tax breaks to corporations (i.e. corporate welfare) under the umbrella of “capital investment”

The Carney government’s long-awaited first budget is almost here—expected Nov. 4—but Canadians may not recognize what they get. Early on, the new government promised a new approach to spending. Thanks to a decade of record-breaking spending under Justin Trudeau, the federal deficit sits at a projected $48.3 billion while total debt has eclipsed $2.1 trillion. But the Carney government’s plan announced this week appears to rely on accounting maneuvers rather than any substantive spending reductions.

According to the latest details released by the government, the Carney government will separate spending into two categories: “operating spending” and “capital investment.” Within this framework, the government plans to balance the “operating budget” within three years.

But of course, if the government eventually balances the operating budget, that doesn’t mean it will stop borrowing money to pay for“capital investment”—a new category of spending the government can define and expand whenever it deems necessary.

Currently, according to the government, capital investment will include any spending or tax expenditures (e.g. tax credits and deductions) that “contribute to capital formation”—the creation of assets (such as machinery or equipment) that improve the ability of workers to produce goods and services.

In other words, rather than directly spend money on critical infrastructure such as roads, bridges, ports or even electricity grids—things that traditionally are considered capital investments—the government plans to spend money on subsidies and tax breaks to corporations (i.e. corporate welfare) under the umbrella of “capital investment,” so long as this spending will somehow “encourage” capital formation. But clearly, corporate welfare doesn’t belong in the same category as the expansion of a critical port, for example, and the government shouldn’t pretend that it does.

Put simply, because the term “capital investment” is so broad and malleable, the government can seemingly use it whenever it wants. For example, to meet NATO’s spending target of 2 per cent of GDP, a key point of contention in Carney’s negotiations with President Trump, the Carney government could (inaccurately) categorize some defence spending as capital spending. And in fact, the Parliamentary Budgetary Officer—Ottawa’s fiscal watchdog—views the Carney government’s definition as “overly expansive” and suggests the inclusion of corporate tax breaks and subsidies will “overstate” the government’s actual contribution to the creation of capital.

This approach by the Carney government will not help Canadians understand the true state of federal finances. While Finance Minister François-Philippe Champagne recently said that the “deficit and the debt will be recorded in the same manner as in previous budgets,” on budget day and beyond the government will undoubtedly focus on the operating budget when communicating to Canadians. So, the government will only tell part of the story.

After years of fiscal mismanagement with large increases in spending and debt under the Trudeau government, Canadians need a government willing to make the tough decisions necessary to get federal finances back in shape. But the Carney government appears poised to shirk accountability and use tricks to cloud the true state of federal finances.

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Grady Munro

Policy Analyst, Fraser Institute

From the Daily Caller News Foundation

By Melissa O’Rourke

Despite their strategic significance, the U.S. imports 80% of the rare earths it consumes, primarily from China, which dominates global production and controls roughly 92% of the world’s refining capacity.

President Donald Trump on Friday threatened China with a massive tariff hike and hinted his upcoming summit with Chinese President Xi Jinping could be canceled as a result of Beijing’s latest escalation in trade hostilities.

China ramped up its economic pressure campaign this week, first by imposing new export controls Thursday on rare earth minerals critical to the production of vehicles, weapons systems, and other advanced technologies. On Friday, Beijing escalated further, announcing new port fees on American ships and launching an antitrust investigation into U.S. tech giant Qualcomm.

In response to what he described as “great trade hostility,” Trump said there was “no reason” to meet with Xi in South Korea later this month.

“Dependent on what China says about the hostile ‘order’ that they have just put out, I will be forced, as President of the United States of America, to financially counter their move. For every Element that they have been able to monopolize, we have two,” the president posted on Truth Social.

Trump announced later on Friday that the U.S. would impose a 100% tariff on China starting Nov. 1, in addition to existing levies, and implement export controls on “any and all critical software.” He added that the tariffs could go into effect sooner, “depending on any further actions or changes taken by China.”

Despite their strategic significance, the U.S. imports 80% of the rare earths it consumes, primarily from China, which dominates global production and controls roughly 92% of the world’s refining capacity.

Under the new rules, foreign suppliers must obtain Beijing’s approval to export any product made with Chinese rare-earth processing technology or containing rare-earth materials that comprise as little as 0.1% of the item’s value. The restrictions also extend to the export of technology used in rare-earth mining, smelting, and magnet manufacturing, and add five more rare-earth elements to China’s existing control list.

Trump warned that Beijing’s move could “clog” global markets and “make life difficult for virtually every country in the world.”

“I have always felt that they’ve been lying in wait, and now, as usual, I have been proven right! There is no way that China should be allowed to hold the World “captive,” but that seems to have been their plan for quite some time,” the president wrote.

“But the U.S. has Monopoly positions also, much stronger and more far reaching than China’s. I have just not chosen to use them, there was never a reason for me to do so — UNTIL NOW!” Trump said.

The Chinese Transport Ministry also said it will begin collecting port fees on vessels owned by U.S. companies or individuals — and even those built in America — starting Oct. 14. The rollout overlaps with Washington’s plan to impose new charges on large Chinese vessels docking at U.S. ports the same day.

The president also noted that Beijing’s timing was “especially inappropriate,” noting that it coincides with the peace deal he helped broker between Israel and Hamas to bring the two-year conflict to an end.