Though he’ll do it in a (slightly) different way.
T his fall, Canada will have its first federal budget under Prime Minister Mark Carney. It is Carney’s first budget because his government neglected to present a budget in the spring, an early sign that fiscal accountability is not among its priorities.
The reasons the Carney government gave in the spring for waiting until the fall to present a budget — when half of the fiscal year would already be over — were “all feeble,” wrote Don Drummond and William Robson of the C.D. Howe Institute. The Carney government said the economic outlook in the spring was too uncertain, but as Drummond and Robson pointed out, “economic and fiscal prospects are always uncertain.” And as Fraser Institute researchers observed, “Past federal governments have been able to quickly turn around a budget following an election,” so there was no reason Carney could not do the same.
Nevertheless, after the initial delay, a budget is coming. Will Carney chart a new course after Trudeau’s disastrous decade? Will he do better, or could he, as the Conservatives suggest, be even worse? Carney has sent mixed signals. For example, he recently declared, “We need to rein in spending, we need to find efficiencies . . . that create the room for these big investments.”
In other words, Carney wants to cut spending so he can spend more on other things. I am reminded of a Milton Friedman line on the Federal Reserve’s role in causing the Great Depression. “We have learned from that failure,” he said. “The Federal Reserve will not fail in the same way again. This time it will fail in a different way.” So it is with Carney. He has learned from Trudeau’s fiscal failures and will aim not to waste money in the same way. Now the Liberal government will waste money in a different way.
The Carney government foreshadowed the drive to find savings in certain areas in July when the finance minister instructed his cabinet colleagues to find billions in spending cuts. However, that Carney had big spending plans of his own, Canadians also knew: His election platform took the spending plan he inherited from Trudeau and tacked on approximately $20 billion in new program spending annually. It included a new federal program to build houses, more funding for arts and public broadcasting, increased corporate welfare, environmental spending, Indigenous loan guarantees, and many other things.
This means some $20 billion in annual cuts need to be found just to return spending to Trudeau’s spending path, which was no model of austerity. And given that the Carney’s government’s spending review is limited to only about one-third of program spending, and that Carney proposes not to touch Trudeau’s national child care and national dental care programs, it is unlikely that such significant cuts will actually materialize.
In recent months, Carney has also promised to increase defense spending. This is a solid idea, but it adds to the budget hole. All told, the C.D. Howe Institute estimated in July that the federal deficit will be more than $92 billion in 2025–26, approximately 3 percent of GDP and nearly double the deficit projection of $46.8 billion by the Parliamentary Budget Officer in March.
While higher defense spending, a worsening economic outlook, and modest tax cuts account for some of the higher deficit projection, overall the evidence of Carney delivering his first budget does not suggest that a Carney-led Liberal government will be much more careful with spending than the Trudeau-led Liberal government.
On taxes, Carney has started better than Trudeau, scrapping Trudeau’s capital-gains tax hike that was announced in the spring of 2024, but Carney does not deserve much credit for this. The tax hike was so deeply unpopular that even Chrystia Freeland, the former finance minister who had championed it in her April 2024 budget speech, had herself proposed to scrap it only eight months later when she ran to replace Trudeau as Liberal leader.
On environmental policy, Carney does not seem to be a material upgrade from Trudeau, and he, again, could well be worse. As the United Nations special envoy for climate action and finance from December 2019 to January 2025, a role he held while advising Trudeau on policy and stayed in until running for Liberal leadership, Carney advocated energy policies that would have had the effect of driving Canada’s oil and gas sector out of existence.
Now as Canada’s prime minister, Carney has continued Trudeau’s practice of spending millions of federal dollars “educating” Canadians about the climate change “emergency.” He has also maintained Trudeau’s phased-in ban on the sale of gas-powered vehicles by 2035, although with significant recent pushback as the economy struggles, he recently announced his government would review the policy.
Will Carney bring a change in direction from Trudeau? So far, he has promised only to fail in slightly different ways while maintaining many of Trudeau’s worst policies. But who knows — when the budget is finally delivered, it might signal a shift from the failures of the past decade. It might.