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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Albertans need clarity on prime minister’s incoherent energy policy

Published on June 15, 2025

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From the Fraser Institute

By Tegan Hill

The new government under Prime Minister Mark Carney recently delivered its throne speech, which set out the government’s priorities for the coming term. Unfortunately, on energy policy, Albertans are still waiting for clarity.

Prime Minister Carney’s position on energy policy has been confusing, to say the least. On the campaign trail, he promised to keep Trudeau’s arbitrary emissions cap for the oil and gas sector, and Bill C-69 (which opponents call the “no more pipelines act”). Then, two weeks ago, he said his government will “change things at the federal level that need to be changed in order for projects to move forward,” adding he may eventually scrap both the emissions cap and Bill C-69.

His recent cabinet appointments further muddied his government’s position. On one hand, he appointed Tim Hodgson as the new minister of Energy and Natural Resources. Hodgson has called energy “Canada’s superpower” and promised to support oil and pipelines, and fix the mistrust that’s been built up over the past decade between Alberta and Ottawa. His appointment gave hope to some that Carney may have a new approach to revitalize Canada’s oil and gas sector.

On the other hand, he appointed Julie Dabrusin as the new minister of Environment and Climate Change. Dabrusin was the parliamentary secretary to the two previous environment ministers (Jonathan Wilkinson and Steven Guilbeault) who opposed several pipeline developments and were instrumental in introducing the oil and gas emissions cap, among other measures designed to restrict traditional energy development.

To confuse matters further, Guilbeault, who remains in Carney’s cabinet albeit in a diminished role, dismissed the need for additional pipeline infrastructure less than 48 hours after Carney expressed conditional support for new pipelines.

The throne speech was an opportunity to finally provide clarity to Canadians—and specifically Albertans—about the future of Canada’s energy industry. During her first meeting with Prime Minister Carney, Premier Danielle Smith outlined Alberta’s demands, which include scrapping the emissions cap, Bill C-69 and Bill C-48, which bans most oil tankers loading or unloading anywhere on British Columbia’s north coast (Smith also wants Ottawa to support an oil pipeline to B.C.’s coast). But again, the throne speech provided no clarity on any of these items. Instead, it contained vague platitudes including promises to “identify and catalyse projects of national significance” and “enable Canada to become the world’s leading energy superpower in both clean and conventional energy.”

Until the Carney government provides a clear plan to address the roadblocks facing Canada’s energy industry, private investment will remain on the sidelines, or worse, flow to other countries. Put simply, time is up. Albertans—and Canadians—need clarity. No more flip flopping and no more platitudes.

Tegan Hill

Director, Alberta Policy, Fraser Institute

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Long waits for health care hit Canadians in their pocketbooks

Published on June 13, 2025

Todayville

From the Fraser Institute

By Mackenzie Moir

Canadians continue to endure long wait times for health care. And while waiting for care can obviously be detrimental to your health and wellbeing, it can also hurt your pocketbook.

In 2024, the latest year of available data, the median wait—from referral by a family doctor to treatment by a specialist—was 30 weeks (including 15 weeks waiting for treatment after seeing a specialist). And last year, an estimated 1.5 million Canadians were waiting for care.

It’s no wonder Canadians are frustrated with the current state of health care.

Again, long waits for care adversely impact patients in many different ways including physical pain, psychological distress and worsened treatment outcomes as lengthy waits can make the treatment of some problems more difficult. There’s also a less-talked about consequence—the impact of health-care waits on the ability of patients to participate in day-to-day life, work and earn a living.

According to a recent study published by the Fraser Institute, wait times for non-emergency surgery cost Canadian patients $5.2 billion in lost wages in 2024. That’s about $3,300 for each of the 1.5 million patients waiting for care. Crucially, this estimate only considers time at work. After also accounting for free time outside of work, the cost increases to $15.9 billion or more than $10,200 per person.

Of course, some advocates of the health-care status quo argue that long waits for care remain a necessary trade-off to ensure all Canadians receive universal health-care coverage. But the experience of many high-income countries with universal health care shows the opposite.

Despite Canada ranking among the highest spenders (4th of 31 countries) on health care (as a percentage of its economy) among other developed countries with universal health care, we consistently rank among the bottom for the number of doctors, hospital beds, MRIs and CT scanners. Canada also has one of the worst records on access to timely health care.

So what do these other countries do differently than Canada? In short, they embrace the private sector as a partner in providing universal care.

Australia, for instance, spends less on health care (again, as a percentage of its economy) than Canada, yet the percentage of patients in Australia (33.1 per cent) who report waiting more than two months for non-emergency surgery was much higher in Canada (58.3 per cent). Unlike in Canada, Australian patients can choose to receive non-emergency surgery in either a private or public hospital. In 2021/22, 58.6 per cent of non-emergency surgeries in Australia were performed in private hospitals.

But we don’t need to look abroad for evidence that the private sector can help reduce wait times by delivering publicly-funded care. From 2010 to 2014, the Saskatchewan government, among other policies, contracted out publicly-funded surgeries to private clinics and lowered the province’s median wait time from one of the longest in the country (26.5 weeks in 2010) to one of the shortest (14.2 weeks in 2014). The initiative also reduced the average cost of procedures by 26 per cent.

Canadians are waiting longer than ever for health care, and the economic costs of these waits have never been higher. Until policymakers have the courage to enact genuine reform, based in part on more successful universal health-care systems, this status quo will continue to cost Canadian patients.