A budget that doesn’t quite hit the mark

Will the real Mark Carney please stand up?

Is the prime minister a bold economic transformer, or a technocratic economic tinkerer?

That’s the question many Canadians are asking in the wake of his Liberal government’s version of a “big, beautiful budget.” It was definitely “big” — on spending, deficits, and debt — and it was obviously a “budget.” Two in fact, with separate capital and operating budgets presented.

But beauty is very much in the eyes of the beholder. On this measure, beautiful in confronting Canada’s economic challenges, the jury is still out.

Flogged as a “bold” budget, a “generational” budget, and at one point even a “sacrifice” budget, the final product reflected this mixed messaging with a confused, complicated narrative of what it is trying to accomplish. A post-budget poll by Abacus posed this question: “In your view, what was the main purpose of the budget?” The highest percentage — 27 per cent — chose this answer: “It’s unclear what the main purpose of the budget is.” This 500-page bound book turned out to be “tome”-deaf.

That’s a problem for a government seeking sustained public support to transform Canada’s economy in what the prime minister repeatedly, and correctly, calls a “hinge moment.” It means the budget failed to match the rhetoric surrounding it. More critically, it failed to match Canadians’ anxieties about the moment we are in and expectations the government would act boldly to meet that moment.

Budgets don’t just generate market reactions; they generate emotional reactions too, sometimes angry, sometimes positive, often disappointed. The collective exhale after this one was a giant “meh,” as in, “That’s it?”

Sure, there was much to be angry or happy or disappointed in this budget. Conservatives are angry about the massive $78-billion deficit but happy with more defence spending. New Democrats are happy about the increased spending it contains but angry about the cuts to the public service. Business is disappointed in more spending and higher deficits, but happy to have more investment tax incentives.

But in Ottawa political terms, this was anything but a “meh” budget. It is, in fact, a defining budget. Not so much for the 10 years ahead, but for the 10 years past. Carney has decisively closed the door on the demand side path of Justin Trudeau’s social program expansionism, climate change evangelism, and public service escalation. Instead, there is a clear supply side shift towards spending more on the economy and defence with a deliberate reduction in the size of the federal public service.

One example suffices. Having already eliminated the consumer carbon charge in the spring, the Carney Budget wound down Trudeau’s signature program to plant two billion trees. This is as symbolic a demarcation from the Liberal past as you can get. Costing $3.2 billion, it would have generated just 12 megatonnes in carbon reductions 25 years from now in 2050, amounting to only a two per cent reduction from today’s emissions levels.

But Canadians already knew Carney was different enough from Justin Trudeau to vote him in as prime minister in April. That curiosity has been satisfied. Now they’re curious about where we are going and how are we going to get there. The budget can only offer a partial answer to these questions. That’s because the real answer is up to the private sector and whether they respond positively to the dim sum array of financial tax incentives and investment fiddling holding centre stage in the capital portion of the budget.

Right now, their answer is “we’re not sure.” Initial reactions were that it was neither transformational nor bold enough to confidently unlock new business investment. In short, the budget was “good” but not “good enough” for Canada’s economic circumstances.

What is bold in the budget is the bet Carney is making that spending $140 billion more now and accepting bigger public debt levels as a result will unleash $1 trillion in reciprocal investments from the private sector over the next five years. How risky this bet is can be seen in a government report two days after the budget showing that $9 billion of expected investment through new clean energy and technology tax incentives already in place simply did not materialize. The reason: policy and economic uncertainty that makes investment money skittish.

The prime minister is trying to rectify this across the economy. For good reason. Canada has a notably risk-averse private sector. With Carney, it now has a risk-accepting public sector. These need to align if the country is to achieve the “Canada Strong” emblazoned on the budget cover. Economic uncertainty is with us as long as U.S. President Donald Trump exists. Policy certainty requires clear, long-term direction, significant public money, and better government execution. But will they get that from this budget and this Liberal government?

There’s an old saying in politics: You campaign in poetry, but you govern in prose. Mark Carney’s Budget Day metamorphosis from campaign transformer to government tinkerer shows he resembles that remark.

David McLaughlin is a former clerk of the executive council and cabinet secretary in the Manitoba government.