The Carney government has been on quite the spending spree since taking office, committing to potentially hundreds of billions in new spending over the coming years. To justify this, Finance Minister François-Philippe Champagne recently said the government is “investing in things that will generate growth.” But this growth is anything but certain, yet this spending will almost certainly add to Canada’s mountain of debt and deteriorating government finances.
For example, the government has committed to a major military build-up that could see Canada’s annual defence budget more than double from $63 billion in 2025 to $159 billion by 2035, and inked a new submarine deal with a German shipbuilder that could cost up to $80 billion.
Other big-ticket items include a $25 billion “sovereign wealth fund” meant to provide funding for government-favoured projects in certain sectors, a $12.4 billion increase in the GST rebate (now renamed the “Canada Groceries and Essentials Benefit”), the $13 billion Build Canada Homes agency to promote homebuilding in Canada, and a $5.4 billion top-up to the national daycare program. The government may also help bankroll (alongside the Alberta government, a private-sector partner and potentially some First Nations) a new oil pipeline expected to cost between $35.2 billion and $43.7 billion.
Of course, we don’t fully know all the details of these initiatives, and government programs often end up costing much more than initial proposals, but the headline numbers suggest this spending spree might amount to hundreds of billions of dollars once all is said and done.
What does this mean for Ottawa’s bottom line?
Before Prime Minister Carney took office, the Trudeau government planned to run budget deficits averaging $30.9 billion per year and rack up an additional $461.4 billion in total debt from 2025/26 to 2029/30. By adding this new spending without a plan to pay for it, Carney has accelerated Ottawa’s fiscal decline. According to the latest estimates (which include some but not all of the aforementioned spending items), during the same period (2025/26 to 2029/30), the Carney government will run deficits averaging $61.8 billion per year and rack up $748.5 billion more debt—in other words, outdo the Trudeau government’s plan for fiscal decline.
When asked how his government will pay for all of this, Minister Champagne said the economic activity generated by these “investments” will justify the costs. But again, there’s no guarantee this spending will produce greater overall economic growth—in fact, it might produce the opposite.
Simply put, the government assumes that policymakers are better than the market at successfully picking winners and losers. Consider Carney’s new “Major Projects Office,” which picks certain projects (such as mine expansions or new energy generation) to exempt from existing rules and regulations as a way to fast-track assessment and approvals, rather than cutting undue red tape and simplifying the rules for everyone.
But if history is any guide, we know that government lacks the information and incentives to outperform the millions of people who interact every day in the market to figure out what works and what doesn’t. There are many examples where governments invest in projects that fail (several recent electric vehicle and battery plant shutdowns, for example). And even successful projects may simply divert scarce resources away from other parts of the economy where they would have been better used.
There’s no guarantee the Carney government’s strategy of picking winners and losers will produce the promised economic growth. But it will exacerbate Canada’s fiscal decline, absent a plan to pay for it.
Grady Munro is a senior policy analyst with the Fraser Institute.
The views expressed are those of the author(s). National Newswatch Inc. publishes a range of perspectives and does not necessarily endorse the opinions presented.