goldstein: mark carney and the magical, mystery decreasing deficit
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minister of finance francois-philippe champagne (left) and prime minister mark carney meet before the spring economic update is delivered on parliament hill in ottawa on april 28, 2026.
blair gable
/
postmedia network
given that those who forget the past are condemned to repeat it, the fact that finance minister francois-philippe champagne reported a drop in last year’s projected deficit from $78.3 billion to $66.9 billion — a decrease of $11.4 billion — in tuesday’s spring economic statement should surprise no one.
it’s an old trick used by finance ministers for decades, regardless of political stripe, but perfected by the jean chretien liberal government from 1993 to 2003.
during that time, the average annual budget balance came in $10.7 billion better than initially predicted, year after year.
this results from a deliberate policy of underestimating government revenues and overestimating expenditures at the start of the fiscal year, so that when the actual numbers come in, the government can boast about its sound fiscal management.
in other words, if you want to downplay the seriousness of a $66.9 billion deficit in the spring 2026 economic statement for the just-completed fiscal year of 2025-26, predict it was going to be $78.3 billion in the november 2025 budget.
then, when the revised number comes in $11.4 billion less than predicted, prime minister mark carney and his finance minister looks like geniuses.
of course, it could also mean they are terrible budgeters.
what we know is that the same thing will, in all probability, happen again this fiscal year (2026-27).
that’s because the government is assuming the average price of oil this year will be us$73 a barrel, when its currently hovering around us $100, with no end in sight, and higher oil prices mean higher tax revenues for the government.
in reality, the liberal government’s lowering of last year’s deficit by $11.4 billion is less impressive when you consider that the parliamentary budget officer says the government misclassified $94 billion worth of operating expenses in its november budget as revenue-generating capital investments, contrary to standard accounting practices.
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if the $94 billion is properly reclassified as government operating expenses, the pbo said, the prime minister will fail to achieve his promise to balance the government’s operating budget by 2028-29.
in reality, the carney government’s spring economic statement also lacks any path to balancing the capital budget, with the federal government projected to pay $58.7 billion of taxpayers’ money this year alone servicing canada’s $1.4 trillion public debt.
that’s more than the $57.4 billion the federal government will transfer to the provinces for health care, this year.
to be fair, conservatively estimating government revenue while overestimating government expenses — if done properly — is a sensible fiscal policy, helping the government to manage unexpected economic shocks such as a war.
during the liberal government of jean chretien from 1993 to 2003, for example, martin as finance minister successfully used economic prudence to steer the government away from huge deficits into surpluses.
that said, the chretien government did it mainly by cutting federal transfers to the provinces which, in turn, downloaded their costs on to municipalities, leading to a widespread loss of public services and years of labour strife in the public sector.
as for the carney government, as don drummond, alexandre laurin and william robson wrote recently in a paper by the c.d. howe institute:
“canada can no longer pride itself on its fiscal discipline … restoring (it) will take a real change in direction. governments (federal and provincial) must rein in spending, set a credible path to balance, and pursue reforms that boost (business) investment and productivity, including shifting the tax mix away from income towards less distortionary taxes.”
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