Canadians should see red over another Liberal deficit budget

The federal Liberal government’s 2025 budget is a textbook example of why successive years of deficit spending — even during relatively good economic times – eventually comes back to bite governments.

Faced with punishing new tariffs from the United States and a slowing domestic economy, Finance Minister François-Philippe Champagne and Prime Minister Mark Carney have unveiled yet another deficit budget, the tenth in a row for the governing party since 2016.

Canadians are being told the shortfall is necessary — that Ottawa must stimulate the economy, protect jobs, and support Canadians throughout this difficult time. On some level, that’s true.

Governments have a role to play when external shocks — trade barriers, global pandemics, or natural disasters — threaten to push the economy into recession.

The problem isn’t that Ottawa is running a deficit now…. The problem is that the Liberals have been running deficits every year, throughout good times and bad.

The problem isn’t that Ottawa is running a deficit now. In fact, it would be reckless to try to eliminate it this year, or even in the short term.

The problem is that the Liberals have been running deficits every year, throughout good times and bad.

The Carney government is projecting a deficit of $78.3 billion this year, more than double last year’s shortfall. It still has no plan to eliminate it in the long term.

The budget projects the deficit will fall to $56.6 billion by 2029-30, which is still higher than it was last year.

Worse, it may be the same mirage the Liberals have served up for the past nine years: claims they have a plan to shrink the deficit over time, yet missing their targets by tens of billions of dollars every year.

Meanwhile, government’s debt-to-GDP ratio continues to creep up. It’s estimated to hit 42.4 per cent this year, up from 41.2 per cent last year. It’s expected to climb to 43.1 per cent over the next two years.

In the mid-1990s when the debt-to-GDP ratio climbed to 67 per cent, the federal government was forced to make deep spending cuts, including slashing transfer payments to the provinces, or face credit rating downgrades. How far is Ottawa from that today?

When the Liberals under former prime minister Justin Trudeau first took office in 2015, they promised “modest” deficits of less than $10 billion a year for three years, followed by a return to balance by 2019.

Instead, they ran deficits every single year, including during periods of relatively strong economic growth and historically low unemployment.

Ottawa’s books were in the red before the pandemic hit. Deficits far exceeded the promised $10 billion a year.

The upshot: when the pandemic hit, Ottawa had less fiscal flexibility than it would have had it made good on its promise to balance the books by 2019.

Ottawa would still have been forced to post large deficits in 2020 and probably 2021, but it would have had more fiscal cushion to absorb the shock.

There are some cost-cutting measures in the 2025 budget, such as reducing the size of the public service. But this is a public service that has ballooned under the Liberals. Even with this year’s proposed cuts, the size of the civil service will still be bigger than it was in 2016.

This is not Carney’s fault. He wasn’t in government during those years. As a former governor of both the Bank of Canada and Bank of England, he probably knows better than most about the dangers of structural deficits. But it’s still a Liberal government that’s in office.

The 2025 budget includes more subsidies for manufacturers hit by tariffs and new “affordability” measures for consumers.

It may sound appealing in isolation, but together with overall spending increases, they add up to another year of ballooning deficits and mounting debt.

There’s a fundamental difference between short-term stimulus and permanent dependency on deficit financing. Stimulus is meant to be temporary — a targeted response to an acute problem. What we have now is a government addicted to spending, with no real plan to return to balance.

Some might ask: who cares? If the economy needs help and the government can borrow cheaply, why not keep spending?

It’s because rising debt has consequences — not just economic, but political and generational.

Every dollar borrowed today is a dollar that must be repaid by future taxpayers, many of whom are struggling under the weight of high housing costs, stagnant wages, and inflation.

A government that spends recklessly today limits what it can do tomorrow — whether it’s responding to a natural disaster, funding health care, or investing in defence.

A government that spends recklessly today limits what it can do tomorrow.

Deficits also undermine public confidence. Canadians have heard the same story for nearly a decade: this year’s deficit is justified, next year will be better.

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But “next year” never comes. The credibility gap widens, and so does cynicism toward government.

Now, when Ottawa truly needs to borrow to support the economy, it’s doing so on top of a mountain of soaring debt, with interest costs eating away at the very social programs the Liberals claim to protect.

A government that never balances its books isn’t managing the economy — it’s mortgaging it. Canada’s fiscal story under the Liberals has become a cautionary tale of how not to run a country’s finances.

Running deficits in tough times is understandable. Running them in perpetuity is negligence. Canadians have every right to demand better.

tom.brodbeck@freepress.mb.ca

Tom Brodbeck
Columnist

Tom Brodbeck is an award-winning author and columnist with over 30 years experience in print media. He joined the Free Press in 2019. Born and raised in Montreal, Tom graduated from the University of Manitoba in 1993 with a Bachelor of Arts degree in economics and commerce. Read more about Tom.

Tom provides commentary and analysis on political and related issues at the municipal, provincial and federal level. His columns are built on research and coverage of local events. The Free Press’s editing team reviews Tom’s columns before they are posted online or published in print – part of the Free Press’s tradition, since 1872, of producing reliable independent journalism. Read more about Free Press’s history and mandate, and learn how our newsroom operates.