Fall budget defining moment for Carney, Canada

Opinion

Prime Minister Mark Carney is facing a harsh fiscal reality.

As the new Liberal leader tries to chart a course toward economic credibility, Ottawa’s budget numbers tell a story no amount of political spin can obscure.

The federal deficit, now estimated at a staggering $92 billion by the C.D. Howe Institute, has ballooned to levels that can no longer be ignored.

That’s why Carney’s government is getting set to unveil a fall budget that promises to be unlike any other in recent years.

In preparation, Finance Minister François-Philippe Champagne has told all cabinet ministers to comb through their departments to find significant savings.

Not efficiencies. Not “reallocations.” Real, tangible savings.

It seems the days of unrestrained spending in Ottawa may finally be coming to an end. And it’s long overdue.

The federal Liberals have not balanced the books since prime minister Justin Trudeau was first elected in 2015, despite pledging to do so at the time within three years. Running deficits during economic downturns — including during the COVID-19 pandemic — is perfectly reasonable. But what Canadians endured under Trudeau is something altogether different: a massive and growing structural deficit that has become embedded in federal budgeting.

Successive Liberal budgets under Trudeau normalized red ink. The narrative was always the same — we need to “invest in Canadians,” “build an inclusive economy,” and “help the middle class and those working hard to join it.” And yes, there were programs that made a difference, but there was also a cavalier disregard for long-term fiscal planning.

There was no exit strategy, no path back to balance.

That’s what Carney has inherited.

As a former Bank of Canada governor, he understands better than most the perils of chronic deficits and the corrosive effect they have on a nation’s economic foundation. But it’s also what makes his decision to cut middle-class income taxes so deeply disappointing.

It’s never a good idea to cut taxes when you’re posting large deficits. Doing so while simultaneously asking departments to tighten their belts sends mixed signals. Government, in effect, is borrowing money to fund a tax cut.

If the goal is to reduce the deficit and restore fiscal discipline, you don’t start by chopping away at revenues. You start by making tough decisions about spending.

Still, asking cabinet ministers to find savings is a step in the right direction. The machinery of government has grown bloated, weighed down by overlapping mandates and a public service that has expanded well beyond what’s necessary.

A 2023 Parliamentary Budget Officer report found federal government operating costs — everything from salaries to travel to consulting — have exploded since 2015. The public service has added tens of thousands of new employees and has expanded well-beyond Canada’s population growth.

Canadians are not getting value for money.

Finding savings shouldn’t be a paper exercise. It should be about reforming how Ottawa operates — streamlining services, eliminating waste and holding departments accountable for outcomes. Cutting spending shouldn’t mean gutting essential programs, but it must involve an honest reckoning with what the federal government is trying to do and whether it’s doing it well.

That’s the conversation Carney must lead. And that’s where he needs to be bold.

He must also resist the urge to delay action. Every year Ottawa runs a structural deficit, the harder it becomes to return to balance. Interest payments on the debt are already one of the fastest-growing line items in the federal budget. That’s money that could otherwise go to health care, infrastructure or even tax relief down the road.

Of course, there will be political pressure to delay austerity. The NDP, which continues to prop up the minority government, will howl at any hint of cuts to federal spending. And Conservative Leader Pierre Poilievre will seize any sign of economic pain as proof the Liberals have mismanaged the country.

But leadership is about doing what’s right, not what’s easy.

Canadians want solutions, not slogans. They want a government that manages public money as carefully as they manage their own household budgets. And they want to know someone in Ottawa is actually thinking about tomorrow, not just the next election cycle.

The fall budget will be a defining moment. If Carney is serious about restoring fiscal sanity, he’ll have to do more than ask ministers to trim around the edges. He’ll have to make hard, sometimes unpopular decisions. He’ll have to explain to Canadians why a return to balanced budgets — not overnight but within a reasonable time period — matters, not just in theory, but in practice.

And he’ll have to prove, finally, the Liberal era of endless deficits is coming to a close.

If he fails, the next government — whoever it may be — will inherit not just a fiscal mess, but a financial disaster that could take a generation to repair.

tom.brodbeck@freepress.mb.ca