Kim Moody argues that the federal government's spring economic update is akin to the Pied Piper's tune—charming but ultimately misleading. Writing from St. Malo, France, where he stood before Jacques Cartier's tomb, Moody contrasts the explorer's genuine risk-taking with the government's fiscal narrative.
The Deficit Numbers
The update projects a 2025-26 deficit of $66.9 billion, an improvement from the $78.3 billion forecast in November. However, Moody emphasizes that this is due to windfall revenues, not prudent management. A $66.9-billion deficit remains historically significant.
Deceptive Accounting
The government employs an artificial split between capital and operating budgets. Under this framing, operating spending balances with revenues by 2028-29, but deficits of $53 billion to $63 billion persist annually through 2030-31. Bondholders, Moody notes, do not distinguish between budget categories—a deficit is a deficit.
Debt-to-GDP Ratio
The update touts a net debt-to-GDP ratio of 10.2 per cent, compared to the G7 average of 101.8 per cent. However, this figure nets Canada Pension Plan and Quebec Pension Plan assets against federal debt—assets not available to the government. Moody calls this statistic misleading.
Rising Debt Charges
Public debt charges are projected to rise to $80.9 billion by 2030-31, up from $54 billion this year. Federal health transfers to provinces will grow to $67.5 billion by 2030-31 from $57.4 billion next year. Within five years, debt servicing will exceed health transfers—a fiscally irresponsible trajectory, according to Moody.
Tax Measures
The update's tax highlights are minimal. The $10-million capital gains exemption for employee ownership trusts becomes permanent. Initially estimated to cost $23 million over four years, the update now projects $205 million over six years. Moody expresses skepticism about this figure.
Moody concludes that Canadians should stop following the music and question the government's narrative, urging a return to genuine risk-taking and fiscal seriousness.
