From the Fraser Institute

By Jake Fuss and Grady Munro

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.

MxM News

Quick Hit:

GE Appliances is reshoring its washer manufacturing operation from China to Louisville, Kentucky in a $490 million move expected to create at least 800 new jobs.

Key Details:

• The company will relocate production of more than 15 washer models to its sprawling Appliance Park campus in Louisville, where it already builds top-load washers and dryers.
• GE Appliances expects to hire at least 800 full-time employees as part of the expansion, which will add the equivalent of 33 football fields of production space.
• CEO Kevin Nolan said the move aligns with the “current economic and policy environment” and reflects a broader strategy to “make appliances as close as possible to our customers.”

Diving Deeper:

GE Appliances announced Thursday it will move most of its washer production out of China and bring it home to the U.S., investing nearly half a billion dollars in expanding its Appliance Park operations in Louisville, Kentucky. The strategic reshoring decision comes as U.S. policy increasingly favors domestic manufacturing and as companies respond to shifting global supply chain realities.

“With this investment, we are bringing laundry production to our global headquarters in Louisville because manufacturing in the U.S. is fundamental to our ‘zero-distance’ business strategy,” said GE Appliances President and CEO Kevin Nolan. “This decision is our most recent product reshoring and aligns with the current economic and policy environment.”

The $490 million investment will focus on Building 2 at Appliance Park, where more than 15 new washer models will be assembled, significantly boosting the company’s clothes care footprint. The added capacity brings GE’s total laundry production space at the Kentucky facility to the size of 33 football fields.

“This move puts our production closer to our designers, engineers and consumers so we can build our most innovative laundry platforms right here in the U.S.,” said Lee Lagomarcino, vice president of clothes care at GE Appliances.

Kentucky Governor Andy Beshear applauded the decision, calling it a major boost for the state’s manufacturing base. “This investment strengthens one of our vital Kentucky assets and underscores our state’s reputation as America’s destination of choice for advanced manufacturing and job creation,” Beshear said.

The reshoring announcement follows a broader trend under President Donald Trump’s economic agenda, which includes imposing tariffs to incentivize companies to relocate production back to American soil.

Appliance Park currently employs roughly 8,000 workers and has been the centerpiece of the company’s U.S. operations. Over the last 10 years, GE Appliances has invested $3.5 billion into domestic manufacturing, with facilities in multiple states. The company says the washer production shift to Kentucky will be completed by 2027.