From the Fraser Institute

By Jake Fuss and Grady Munro

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.

MxM News

Quick Hit:

President Donald Trump warned late Wednesday that Canada’s recognition of a Palestinian state could derail trade negotiations with the United States. The message came after Canadian Premier Mark Carney pledged to join France and the UK in backing statehood at the UN in September.

Key Details:

• Trump posted on Truth Social: “Wow! Canada has just announced that it is backing statehood for Palestine. That will make it very hard for us to make a Trade Deal with them. Oh’ Canada!!!”
• Canada’s decision comes while Hamas continues to hold at least 50 Israeli hostages, with no defined borders or functioning government for a Palestinian state.
• The U.S. and Canada are currently in sensitive trade talks ahead of an August 1 tariff deadline, which Carney has described as “intense.”

You back terror, you don’t get trade. pic.twitter.com/IxGwrfTfNn

— MxM News (@mxmnews) July 31, 2025

Diving Deeper:

President Donald Trump issued a sharp rebuke to Canada on Wednesday night, threatening to pull back on trade negotiations if the country proceeds with plans to recognize Palestinian statehood at the United Nations General Assembly this September.

The warning came in a Truth Social post following Canadian Premier Mark Carney’s announcement that Ottawa would join France and the United Kingdom in backing a Palestinian state. “Wow! Canada has just announced that it is backing statehood for Palestine,” Trump wrote. “That will make it very hard for us to make a Trade Deal with them. Oh’ Canada!!!”

Trump has long criticized Western moves to legitimize Palestinian statehood during ongoing violence in the region, calling such efforts a “reward for Hamas.” Palestinian terrorists launched a war against Israel last year, and Hamas is still believed to be holding at least 50 Israeli hostages in Gaza — including 20 reported to be alive.

Critics, including the families of the hostages, argue that recognizing Palestinian statehood while Hamas remains in control and hostages remain in captivity amounts to incentivizing terrorism. There are also practical hurdles to statehood, with no recognized borders and both Hamas and the Palestinian Authority widely seen as authoritarian regimes.

Up to this point, Trump had not taken retaliatory action against allies who pushed for Palestinian recognition during the conflict. But his post Wednesday signals a tougher stance as the U.S. navigates high-stakes trade negotiations with Canada. Carney himself has acknowledged the talks are “intense,” especially as an August 1 deadline approaches for potential tariffs.

Trump’s message was clear: any support for a Palestinian state — particularly while Hamas is holding hostages and violence continues — will carry consequences, including economic ones.