MNI: Carney Election Plan Runs Bigger Deficits Over Four Years

Mark Carney's election platform shows larger deficits over a four-year mandate aiming to reach a 2% NATO spending target, moving further away from his Liberal Party's fiscal "anchors" ahead of the April 28 election with polls showing he's on track for victory. 

The deficit will grow to CAD62.3 billion in the fiscal year that began April 1 or 2% of GDP according to the plan released Saturday. That's greater than a baseline from Parliament's budget officer for a CAD46.8 billion shortfall equal to 1.5% of GDP and is about a record cash deficit excluding the Covid pandemic. 

The four-year plan ends with a CAD47.7 billion deficit or 1.4% of GDP, breaking a past commitment for keeping it around 1%. Carney's only fiscal anchor is for debt to decline as a share of GDP over time in a nation that hasn't clearly balanced the books since 2008, though it's retained triple-A credit ratings and the red ink is a fraction of American deficits of more than 5% of GDP. 

"The biggest threat to the Canadian and global economy today is the uncertainty caused by Donald Trump’s tariffs," the policy document said. "For decades, the U.S. has been our partner, but their unjustified tariffs have ruptured that relationship, and we must focus on other, more reliable, partners."

Most new spending is CAD30.9 billion on defense including submarines, icebreakers, new ports and drones. Carney intends to seek an Arctic security cooperation deal with Europe, underlining a shift away from the U.S., and said northern security must be enhanced “so that we are prepared to face a hostile Russia or emboldened China.” (See: MNI: Canada Will Struggle To Wean Off U.S. Trade Dependence)

The plan rests heavily on cost savings from capping the size of the civil service and finding other efficiencies in operating costs, plans that have often been difficult for governments to fully realize. 

Canada will also seek to shift contract awards from the U.S. to domestic suppliers. The Liberals restated past commitments on boosting domestic free trade and said that can boost GDP by CAD200 billion and offset damage from the U.S. trade war. (See: MNI INTERVIEW: Canada Factories Suffer From US Tariff Threats)

Carney will "respond to existing U.S. tariffs on our economy for as long as is necessary while also ensuring that we are safeguarding Canadian industry from the threat of trade diversion," the platform document said. "Every dollar raised from these tariffs will support Canadian workers and businesses." Canada will also tighten up foreign takeover rules to prevent predatory acquisitions amid U.S. threats of economic domination.  

Major resource projects will be approved or rejected within two years instead of the previous five years, and Canada will develop an east-west electricity grid. The platform didn't lay out any specific oil and gas pipeline, at a time when uncertainty had left no private company willing to build one.