To get straight to the point about the federal government's spring economic update: the Liberals are spending even more of our money than they previously estimated. This fiscal year, program spending is now expected to be $536.2 billion, which is $7.6 billion higher than in the fall budget. The new spending projections for the following year are also higher than in the fall budget, and the same for the year after that, and even the year after that. All told, the Liberals' economic update raises program spending by a cumulative $25 billion over four years versus their fall budget, and they now propose to push spending to $575.4 billion by 2029-30.
Spending projections likely to rise further
In fact, the final bill will likely be much higher, because the Liberals tend to revise their expense projections upward — sometimes dramatically so — with each fiscal update. Case in point: the $536.2 billion program spending now expected in 2026-27 is not only $7.6 billion over budget, it is $25.8 billion higher than the projection for 2026-27 in Trudeau's final fiscal document tabled a month before he resigned. As analysts with the Fraser Institute concluded, Carney's economic update is “a continuation — or even an acceleration — of Trudeau's policy approach.”
A sovereign wealth fund funded by debt
In true Liberal form, Carney's economic update is also packed with confusing mumbo-jumbo and nonsense. For example, the Liberal government is launching a “sovereign wealth fund” that is not actually funded by wealth, but by debt. While running heavy deficits, the Liberals are committing $25 billion of taxpayers' money over three years to this initiative.
“Carney's expenditure,” Conservative MP Michelle Rempel Garner wrote of the fund, “would be entirely debt-financed at a time of widening structural deficits, which can be likened to an individual investor who is already in serious debt borrowing more money to buy stocks.” But in fact, that is too generous a comparison — the Liberal government's $25 billion fund is worse than that.
Political interference in investment strategy
Most investors who borrow money to buy stocks would pick the stocks they expect to deliver the best risk-adjusted return, but this isn't what Carney is doing. Instead, he seems determined to mix political interests and objectives into the fund's investment strategy, such as by stipulating that the fund will invest in Canadian projects and companies from certain sectors consistent with the federal government's economic plans. All else equal, this would increase risk and reduce financial returns.
In addition to a sovereign wealth fund that is not really a sovereign wealth fund, the Liberals' economic update also includes a capital budget that is not really a capital budget. In their fiscal plan, the Liberals classify six categories of federal measures as a capital investment: 1) capital transfers, such as transfers to government or organizations to invest in infrastructure or productive assets; 2) amortization of federal capital assets; 3) measures to grow the housing stock; 4) capital-focused tax incentives; 5) funding or tax incentives for private sector research and development; and 6) financial support designed to increase private capital investment.
