Time for bold action with Carney’s deficit numbers spiking

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Canada’s federal deficit is expected to come in at $68.5 billion, about 33% higher than the estimated $51.7 billion for the last fiscal year. This after the fiscal update released by the Trudeau government last December had projected a deficit of $42.2 billion for this coming year.

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The figures come from the Economic and Fiscal Outlook report put out Thursday by the parliamentary budget officer.

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“The current path we’re on in terms of federal debt as the share of the economy is unsustainable,” parliamentary budget officer Jason Jacques told the House of Commons operations and estimates committee.

What is shocking is this figure doesn’t even include all of the proposed spending to get Canada to its promised 5% of GDP spending on defence or other Liberal spending vows.

“There’s about $20 billion or so in spending that has not yet been included in our outlook from the Liberal platforms, if it does come to pass. So we will see on Nov. 4 what they will announce and what they don’t announce,” said Kristina Grinshpoon, an analyst at the PBO who worked on the report.

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As Jacques and his team appeared before the committee, Liberal MPs tried to get him to say that Canada is doing better than other countries when it comes to debt and spending. While Jacques admitted that we are performing better than some countries, that doesn’t mean we’re in a good spot.

“At the same time, it doesn’t obviate the fact that the path that we’re on right now isn’t sustainable and we might have more time than those other countries, but we’re going to end up in a very similar place without changes,” Jacques said.

There will be plenty of talk about how this is driven by Donald Trump and his tariffs and that’s what Finance Minister Francois-Philippe Champagne claimed heading into a cabinet meeting.

“With everything that’s happened in the world, when you look at the deficit of Canada, a large part of that is in response to what has happened,” Champagne said.

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FEDS HAVE SPENDING PROBLEM

Look, Trump and the tariffs are factors, but the federal government has a spending problem and that is driving most of this bigger deficit. The tariff impact is projected to decrease government revenue by about $12.9 billion per year over the coming few years.

That amounts to less than 20% of the deficit, which was growing and out of control due to increasing spending long before Trump returned to the White House

In the House of Commons, Champagne spoke as if the coming budget would see even more spending.

“We are going to present a budget that is going to build this nation. It is going to be a generational investment in our future. We are going to build the country. We are going to build jobs. We are going to create the opportunities for young people in this country,” Champagne said.

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Canada’s economy needs a shot in the arm and that doesn’t mean more government spending. Our unemployment rate is up to 7.2% and for 15- to 24-year-olds, the rate is at 14.5% nationally and higher in some parts of the country.

Real GDP from the natural resources sector decreased by 2.4% in the second quarter, retail sales are down, housing starts are down; there are so many other economic indicators pointing in the wrong direction.

“Our economy was weak before we got to the point of these threats from President Trump,” Mark Carney said in February, when running to become Liberal leader and prime minister.

He was right then and that’s why what we should be doing what he promised during the election — that Canada would think big, act bigger and move at speeds not seen in generations.

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To deal with this massive deficit increase, the one the PBO said it not sustainable, the government has just a few options, such as cutting spending (they probably should) and increasing taxes (they probably shouldn’t).

The third option is to grow the economy, live up to Carney’s words and promises and not move forward in baby steps like he is doing now. We are in a moment where the public is giving him permission to act boldly on the economy.

He should seize that moment because the current path we are on is not sustainable.

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