Carney Government Escalates Deficit Spending, Surpassing Trudeau's Fiscal Plans
In the coming weeks, Prime Minister Mark Carney's government is set to update Canadians on the state of federal finances, with expectations pointing toward a continuation of expansive fiscal policies. This update follows a campaign where Carney promised a "very different approach" to federal finances to improve Canada's economy, yet recent data suggests a doubling down on the strategies of former Prime Minister Justin Trudeau.
Trudeau's Fiscal Legacy: High Spending and Debt Accumulation
During Justin Trudeau's tenure, the federal government recorded historically high spending levels, resulting in nine consecutive deficits and unprecedented debt accumulation, adjusted for population changes and inflation. Compared to the Stephen Harper and Jean Chrétien governments, Trudeau's administration oversaw the weakest economic performance in key areas such as per-person GDP growth, private-sector job creation, and per-worker business investment.
In contrast, the Chrétien government implemented spending restraint, consistently balanced budgets, and reduced government debt, which correlated with stronger economic outcomes. Based on this evidence, to fulfill its promise of a robust economy, the Carney government was expected to reject Trudeau's fiscal policies and emulate Chrétien's approach.
Carney's Budget: Higher Spending and Larger Deficits
However, according to a new study, the Carney government's first budget, released in November, reveals a different trajectory. From fiscal years 2025-2026 to 2029-2030, the government plans to spend $67.6 billion more than the Trudeau government had projected for the same five-year period. Combined with slower revenue growth, this leads to combined deficits of $321.7 billion over five years, more than double the $154.5 billion planned under Trudeau.
Consequently, total federal debt is projected to reach $2.9 trillion by 2029-2030, compared to $2.6 trillion under the Trudeau plan. This indicates that the Carney government intends to spend more, run larger deficits, and accumulate more debt than even its predecessor had envisioned.
Recent Policy Moves and Affordability Measures
In the months since the budget release, the Carney government has further reinforced this direction. For example, it introduced a new "affordability" package, including a five-year, 25% increase to quarterly federal GST payments for eligible Canadians and a one-time additional payment equal to 50% of the normal amount. This package, estimated to cost $12.4 billion, is criticized as poorly targeted, sending cash to individuals who may not need it, mirroring Trudeau's affordability strategies.
After a decade of fiscal mismanagement and economic stagnation under Trudeau, the Carney government must change course to achieve different results. Yet, so far, it has delivered more of the same: higher spending, increased borrowing, and mounting debt. The upcoming fiscal update presents an opportunity for the government to start moving in a new direction, but current trends suggest a continued adherence to expansive fiscal policies.
Grady Munro is a senior analyst and Jake Fuss is the director of fiscal studies at the Fraser Institute.
