From the Fraser Institute

By Jake Fuss and Grady Munro

In a recent news conference, Prime Minister Carney said this year’s federal budget deficit will be larger than last year’s deficit of $48.3 billion. While the prime minister was quick to pull out a laundry list of reasons why, he left out one critical reason—his government refuses to make the tough decisions necessary to avoid more red ink.

It’s been clear for months the government plans to run a larger deficit than last year, it’s simply taken this long for the government to say the words out loud. In fact, Carney’s election platform in April outlined a deficit of $62.3 billion this year, and since then his government has promised billions more in new spending.

To justify the large deficit, the prime minister points to U.S. tariffs, Canada’s response to the tariffs, increased “investments” and higher defence spending. Of course, these factors will help drive up the deficit this year—for example, new defence spending will total $9.3 billion this year. But even making the generous assumption that all the new spending is necessary (which is assuredly not the case), the Carney government could still lower spending elsewhere to avoid plunging deeper into the red.

For example, the Carney government inherited record-high levels of federal spending, including in areas of provincial responsibility and/or where government shouldn’t be involved in the first place (e.g. national pharmacare, national dental care, national daycare). There are also many examples of federal programs that are inefficient and not achieving their stated objectives—in other words, low-hanging fruit for any government looking to reduce wasteful spending and move towards budget balance.

Over the summer, the government did launch a half-hearted attempt to find savings over the next three years—which has led the prime minister to describe the upcoming budget as one of “austerity”—but this spending review will likely fall well short of actual austerity. Why? Because the government is excluding large swathes of the budget from the review, and basing its savings targets on projected levels of spending that are higher than today’s spending levels. Consequently, the review will simply slow the pace of spending increases rather than actually cut spending.

Actual austerity requires a decrease in year-over-year spending, smaller deficits and a reasonable path back to budget balance. Despite the rhetoric, the government’s upcoming budget on Nov. 4 will deliver the opposite—higher spending, larger deficits and more debt accumulation. And future generations of Canadians with face higher taxes, fewer services or some combination of both to pay for this profligate spending. Ignore the fresh new spin and promises of a different approach; the Carney government is on track to deliver a budget no different from what Canadians could expect from the Trudeau government.

Prime Minister Carney’s recent confirmation that his government will run a larger deficit this year than in 2024 surprised no one familiar with federal finances. Like his predecessor, Carney refuses to make the tough decisions to meaningfully cut spending. And Canadians will pay the price.

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Grady Munro

Policy Analyst, Fraser Institute

By Rick Findlay