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A protracted trade war with the United States and a weakening domestic economy has forced Mark Carney to run a deficit tens of billions larger than initially forecast in his first-ever federal budget.
The spending plan, titled “Canada Strong” envisions significant new defence spending, a reduction of the country’s civil service and “generational investments” that would reshape the nature of the country’s economy.
“The world is undergoing a series of fundamental shifts at a speed, scale, and scope not seen since the fall of the Berlin Wall,” the opening pages of the budget say. “This is not a transition. It is a rupture – a generational shift taking place over a short period of time.”
Prior to unveiling his economic vision for the country, Carney had repeatedly stressed the need for Canada to seek out new markets as trade with the US stagnates, large corporations flee and tariffs batter key industries.
As part of its massive spending plan, the Canadian government is increasing defence spending by C$8bn over five years to combat an “increasingly dangerous and divided world.” Carney has previously pledged to meet Nato’s goal of spending 3.5% of gross domestic product on defense, but the spending document does little to indicate how close Canada is to meeting that target.
The budget envisions a reduction to the federal workforce by 2028-29 that would bring the civil service to a size similar to what is was in 2021. The government envision changes to retirement rules – not firings – to achieve that goal.
But the costs associated with the capital spending needed to avoid a recession are laid out in the document.
In last December’s fiscal update, the federal deficit was projected to be $C42.2bn in 2025-26. But the Liberal plan will run a deficit of C$78.3bn in 2025-26. The government says it will aim to reduce the federal deficit to C$56.6bn by 2029-30.
Conservative leader Pierre Poilievre quickly posted on social media that Carney had “nearly doubled [former prime minister Justin] Trudeau’s deficit and kept Liberal taxes on groceries, work, energy, and homebuilding.”
Despite criticism from opposition parties that the budget goes both too far in its spending or not far enough, one Conservative lawmaker announced he would join the Liberal caucus.
“Prime Minister Mark Carney is offering that path with a new Budget that hits the priorities I have heard most in my riding, to build strong community infrastructure and grow a stronger economy. That is why I am joining the Government caucus,” said Nova Scotia MP Chris d’Entremont, adding the move came after “thoughtful conversations with constituents and my family”.
The floor crossing is a key win for Carney’s Liberals, who govern with a parliamentary minority. Until Tuesday, the party needed the support of three lawmakers from other parties to pass this budget and avoid an election. With d’Entremont now sitting with the Liberals, that figure drops to two.
Parliament is expected to debate the budget for four days, before voting on the spending plan on 17 November.
