Whatever claim Prime Minister Justin Trudeau’s Liberal government had to fiscal probity was smashed to bits after Finance Minister Chrystia Freeland resigned from cabinet in dramatic fashion, with a letter that cited the government’s irresponsible spending.
Freeland specifically mentioned the uncertainty and chaos that is likely to emerge when Donald Trump returns to the White House. The president-elect has pledged to slap tariffs on Canadian imports, and his administration is sure to upend economic predictability.
While Freeland rightly left cabinet due to the disloyalty shown to her by Trudeau, it does not absolve her poor record as finance minister. Had Freeland actually delivered the fall economic statement (FES) to the House of Commons, she would have been forced to present a deficit just short of $62 billion.
If and when the Conservatives form a majority government, they will be faced with the Herculean challenge of shoring up the budget, and this will be no easy task.
Last year, the Liberals set a hard limit of $40 billion in deficit spending. This same government also set a target of reducing their polling gap with the Conservatives to five percentage points by the start of the summer. That gap would end up at about 20 points, so their inability to meet their budgetary commitments is thoroughly unsurprising.
Tiff Macklem has earned himself a less-than-sterling reputation as the Bank of Canada’s governor, but he correctly said in 2023 that massive government spending hampered the effort to clamp down on inflation.
Freeland also ambitiously introduced a $100-billion stimulus package back in November 2020, before anyone knew the course of Canada’s economic recovery. It exemplified the attitude shown by the Trudeau government when it comes to spending taxpayer money: big numbers, big words and dramatic announcements.
Meanwhile, the Canadian dollar is slipping below 70 cents U.S., eroding the purchasing power of middle-class Canadians. And if Trump follows through on his proposed 25 per cent tariff on Canadian goods, it will have a devastating impact on the economy (following the U.S. election, Scotiabank economists estimated that a 10 per cent tariff would reduce Canada’s GDP by up to 3.6 per cent).
Even if the Liberals had adhered to their $40-billion deficit promise, there would still have only been a small fiscal buffer for unexpected shocks, such as the liabilities related to Indigenous legal settlements and falling tax revenues that were the primary contributors to the expanded deficit.
On the latter front, steady growth from Canada’s economic backbone of natural resources might have helped. The Trans Mountain pipeline expansion contributes more quarterly national economic growth than the entire province of British Columbia.
Unfortunately, a maze of regulations and uncertainty forced the federal government to step in and buy the pipeline outright after its initial investors pulled out in 2018. While this ensured the project got completed, taxpayers have been left with the bill, and it remains the only major oil and gas project to have been completed under the Trudeau government.
Oil and gas make up the largest share of Canadian exports and sustains thousands of jobs, all of which generate tax revenue.
Regarding other resources, the aquaculture sector on the B.C. coast is being shut down by the federal government on the basis of unsettled marine science, despite evidence to the contrary put forward by First Nations aquaculture operators.
The estimated cost to taxpayers of shutting down the open-net fish farm industry could be as high as $9 billion, according to a recent report. When it comes to natural resources, the treasury has spent far more than it should, and gained far less than it might have — and this is true of other industries, as well.
In their bid to entice electric vehicle manufacturers to Canada, the Trudeau government has sunk an estimated $43.6 billion into subsidizing EV battery manufacturers like Northvolt to set up or expand operations in Canada.
Northvolt is now bankrupt, and demand for EVs is falling in Europe, Canada and the United States. Trump himself is promising to end EV subsidies, which would drastically reduce demand for the vehicles themselves.
Furthermore, Trump has repeatedly demanded that members of the NATO alliance meet their defence spending obligation of two per cent of GDP. If Canada is racking up $62 billion worth of deficits, the money should at least be spent on meeting that target.
Yet instead of investing in new military equipment and recruiting new soldiers, pilots and sailors, the Trudeau government has ballooned the number of bureaucrats in the public service by 43 per cent. From 2019 to 2023, hiring in the public sector was 3.6 times higher than the private sector.
The public sector has become a massive welfare program to make up for the fact that the Liberals have failed to foster a vibrant private-sector economy, resulting in the recycling of wealth, rather than wealth creation, which Canada needs now more than ever.
This historically unpopular Liberal government has had no foresight, caution or prudence when it comes to spending, only ambition, recklessness and inefficiency. For this much money, Canadians should expect far more than a plummeting standard of living, a peso-like dollar and an under-defended country.
National Post