David Clinton
How would provinces and cities survive if the federal government collapsed?
How Resilient Are Canadian Provinces?
Suppose one fine day the federal government was unable to show up for work. Perhaps it wasn’t feeling well. Or maybe it had borrowed so much money that it maxed out its line of credit, defaulted on its interest payments, and just couldn’t pay its bills. What then?
Let’s say – and I’m just spitballing here – let’s say that exploding, uncontrolled public debt is a bad thing. All the smart people tell us that taking on too much credit card debt won’t end well, right? Well I can’t think of any solid reason that such logic shouldn’t also apply to governments.¹
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As you can see from the graph, our federal public debt climbed from $351 billion in 1990 all the way to $884 billion in 2024. The 50 percent leap between Q4 2019 and Q4 2021 was the generous gift of COVID. Things started to recover in mid-2023, but they’ve since nose dived once again.
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Ah, but that’s just debt you say. It’s someone else’s problem.
Not exactly. You see, even if we’re not paying down the principle on the debt, you can be sure that we’re covering interest payments. Which, it just so happens, have become a lot more expensive ever since massive government borrowing drove up interest rates.
How much more expensive? As of Q1 2024, our annual interest payments totaled $11.7 billion, compared with $6.2 billion back in Q1 2022. Put differently, the interest we pay each year comes to seven percent of our total federal budget.
I’m certainly not going to confidently predict that the federal government will soon default on interest payments, lose access to capital markets, and begin laying off government workers and shutting down services. But I wouldn’t say that it can’t happen either.
Given that possibility, what can provinces and cities do right now to prepare for a sudden (hopefully brief) disruption? First off, though, what exactly is a province?
As defined by the British North America Acts, areas of the exclusive responsibility of the federal government include:
- Public debt and property
- Regulation of trade and commerce
- Criminal law
- Militia, military and naval service, and defense
- Navigation and shipping
- Banking, incorporation of banks, and the issue of paper money
- Bankruptcy and insolvency
- Naturalization and aliens
- Unemployment insurance
Provinces are responsible for:
- Property and civil rights
- Administration of justice (including policing)
- Municipal institutions
- Education
- Health and welfare
- Natural resources
So a short-term federal disruption might not have much of an impact on most Canadians’ day-to-day activities. Federal employees and UI recipients would have to figure out how to survive without their paychecks and border entry points would shut down. But great news! Your criminal prosecution can go ahead on schedule because, while criminal law is controlled by the feds, lower criminal courts are provincial.
On the other hand, consider how federal transfers contribute between around 15 percent (Alberta) and 40 percent (Atlantic provinces) of provincial budgets. And Toronto’s municipal budget, for instance, includes around 15 percent in transfers from the province, and another five percent from the federal government. So it wouldn’t take long before all levels of government begin to feel the heat.
I’m not suggesting we change Canadian federalism (good luck trying). But a province that’s reduced or eliminated its own budget deficit and successfully weaned itself from incoming federal transfers would probably enjoy a smoother trip through a shutdown. Exploring the legality of temporarily taking over the payroll for critical federal roles (like Border Services), for instance, might also pay dividends when push came to shove.
I would suggest that thinking formally about these issues would be an important part of any government’s emergency planning preparedness. Yesterday was the best time to start. But today is the next best option.
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Post-COVID, the claims of Modern Monetary Theory proponents didn’t age well.
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Back in March 2024, I wrote about some early indications that Canada’s legalization of cannabis was, on balance, causing more harm than good. Well it looks like we’ve now moved past “early indications” and entered the “nervously searching for the exit” stage.
The new concerns follow the recent release of a couple of groundbreaking Canadian studies: Cannabis Use Disorder Emergency Department Visits and Hospitalizations and 5-Year Mortality which found evidence relating cannabis use to early death, and Convergence of Cannabis and Psychosis on the Dopamine System which describes a possible biological mechanism linking cannabis use to psychosis.
Canadian governments had very little moral liability for the medical consequences of cannabis use before they legalized it in 2018. However, legalization predictably led to a near doubling of consumption. In 2012, according to Statistics Canada, just 12.2 percent of Canadians 15 and over had used cannabis in the previous 12 months. By 2022, that number had climbed to 22 percent – representing nearly seven million Canadians. Cases of cannabis use disorder (CUD) treated in Ontario hospitals increased from just 456 in 2006 to 3,263 in 2021.
The government’s decision to legalize the drug¹ has arguably placed millions of additional people at risk of serious health outcomes.
Let’s take a look at the new evidence. The mortality study used hospital care and mortality data for more than eleven million Ontario residents. The researchers were given meaningful access to raw data from multiple government sources and were apparently compliant with all appropriate privacy regulations. They tracked 107,103 individuals who, between 2006 and 2021, were treated in an Ontario hospital for cannabis use disorder.
The main control group used for statistical comparison was all Ontarians. And the secondary control group was made up of individuals with incident hospital-based care for other substance use disorders, like alcohol, opioids, stimulants.
The primary outcome tracked by the study was all-cause mortality. The secondary outcome was mortality subdivided into alcohol poisoning, opioid poisoning, poisoning by other drugs, trauma, intentional self-harm, cancer, infection, diseases of the circulatory system, respiratory system, and gastrointestinal system.
The researchers adjusted for age, sex, neighborhood income quintile, immigrant status, and rurality (urban vs rural residence). They also controlled for comorbid mental health and care for substance use during the previous 3 years.
In other words, this looks like a well-constructed retrospective study based on excellent data resources.
What did they discover? People who received hospital-based care for cannabis use disorder were six times more likely to die early than the general population. And those CUD-related deaths lead to an average 1.8 life-years lost. After adjusting for demographic factors and other conditions, the added risk of early death was still three times greater than the general population. (Although people with CUD incidents were less likely to die young than those with other substance abuse disorders.)
CUD incidents were associated with increased risks for suicide (9.7 times higher), trauma (4.6 times higher), opioid poisoning (5.3 times higher), and cardiovascular and respiratory diseases (2 times higher).
The Convergence of Cannabis and Psychosis study was performed in and around London, Ontario. This one is a bit beyond my technical range, but they claim that:
Elevated dopamine function in a critical SN/VTA subregion may be associated with psychosis risk in people with CUD. Cannabis was associated with the hypothesized final common pathway for the clinical expression of psychotic symptoms.
Which does indicate that there may be more connecting cannabis to overall harm than just social or economic influences.
I’m not suggesting that the government should restore the original ban on cannabis. Like alcohol prohibition, the moment when that might have been possible is now long past. But I am wondering why politicians find it so difficult to wait for even minimal scientific evidence before driving the country over the cliff?
To my great surprise I recently noticed that, despite being deeply engaged in wars against at least four determined enemies, Israel doesn’t spend all that much more on their military than Canada does on its forces. What might that tell us about government efficiency?
There’s fairly universal agreement that Canada doesn’t spend enough on its military. But before we can even ask how much we should be spending, we should understand how much we’re already spending. And figuring that out isn’t nearly as easy as I’d expected.
According to the 2025–26 Expenditures by Purpose data released by the Treasury Board Secretariat, the Department of National Defence (DND) was allocated $35.7 billion (CAN). However, the New York Times recently reported that Primer Minister Carney’s $9.3 billion increase would bring the total defence-related spending to $62.7 billion – which suggests that, prior to the increase, we were set to spend $53.4 billion (CAN).
So I’ll work with both of those figures: $35.7 billion ($26 billion USD) and the pre-announcement $53.4 billion ($39 billion USD). By contrast, Israel currently spends around $37 billion (USD) on the Israel Defense Forces (IDF) which is in the neighborhood of 18 percent of their total budget.¹ The IDF is (literally) getting a much bigger bang for their buck.²
I’m going to compare the military inventories of both countries to get a sense of what a dollar of government spending can get you. I understand that this isn’t an apples-to-apples comparison and there are many complicating factors here. But I think the exercise could lead us to some useful insights. First off, here’s a very rough estimate of existing inventories:
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I’m sure there are plenty of caveats we could apply to those numbers, including how much of that equipment is actually fit for service on any given day. But they’ll have to do.
In addition, there are currently 68,000 regular troops in the Canadian Armed Forces (CAF) along with 22,500 reserves, while the IDF employs 169,500 regular troops and 465,000 reserves. They also cost money.
Based on some very rough estimates,³ I’d assess the value of IDF assets at around 2.6 times the value of comparable CAF assets. That means that the IDF – using their procurement systems – would need to spend just $14.4 billion (USD) to purchase the equivalent of the current set of CAF assets.
Now compare that with our actual (pre-increase) expenditures of either $26 billion USD or $39 billion USD and it seems that we’re overspending by either 80 percent or 270 percent.
I think we’d be wise to wonder why that is.
For full context, Israel receives around $3.8 billion (USD) in military aid annually from the U.S.
Speaking of which, for simplicity, I completely left the ongoing costs of ordinance out of my calculations.
If you’re really interested, you can see my calculations here.
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