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Federal government’s fiscal plan raises red flags

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From the Fraser Institute

By Jason Clemens, Jake Fuss and Grady Munro

The Trudeau government recently released its fiscal update, which provides revised estimates of spending, taxing and borrowing. A careful examination of the update raises several red flags about the state of Canada’s national finances.

First, some analyses raised concerns about the state of federal borrowing, which are well founded. While the government downplays the level of potential borrowing over the six years covered in the fiscal update, the projected deficit—that is, the amount of spending in a specific year in excess of the amount of revenues—will reach $40.0 billion this year (2023-24) and $38.4 billion next year. However, the estimate for next year does not include the national pharmacare plan that the Trudeau government has agreed to as part of its governing agreement with the NDP.

The Parliamentary Budget Officer (PBO) estimated that a national pharmacare plan modelled on the Quebec system would cost $11.2 billion in 2024-25 (the provinces would likely cover some of this). The 2019 report of the Advisory Council on the Implementation of National Pharmacare, better known as the Hoskins Commission, estimated that a national pharmacare program would cost $15.3 billion in 2027.

Consequently, if the government introduces national pharmacare next year, without any offsetting reduction in other spending and/or meaningful tax increases, the deficit for 2024-25 would reach $49.6 billion, not the reported $38.4 billion. The higher borrowing needed to finance pharmacare continues each and every year, meaning that the overall level of federal debt would also increase.

A second red flag, which the fiscal update ignored, relates to Canada meeting its international commitment for defence spending. Canada is a party to the NATO agreement calling on member countries to spend 2.0 per cent of GDP on national defence. In 2022, Canada spent just 1.3 per cent of GDP on defence. According to the PBO, for the federal government to meet its NATO spending obligations next year (2024-25), it must spend an additional $14.5 billion. That means annual borrowing could be as high as $64.1 billion if both additional defence and pharmacare spending were financed entirely by new borrowing.

And there are legitimate reasons to believe the government would not raise taxes to finance a new pharmacare program. According to polling data in 2022, 79 per cent of survey respondents supported a new national pharmacare program—but support plummeted to just 40 per cent when the new hypothetical program was financed by higher taxes, specifically a higher GST.

That brings us to the third red flag. The total national debt will reach a projected $2.1 trillion next year (excluding the additional potential spending and borrowing noted on pharmacare and defence) and the interest costs on that debt are expected to reach $52.4 billion. For reference, the total national debt stood at $1.1 trillion in 2015-16 when the Trudeau Liberals took office.

By 2028-29, the last year included in the fiscal update, the federal government expects interest costs to reach $60.7 billion. That’s only slightly less than total planned health-care spending by Ottawa for the same year ($62.9 billion). And this is actually a conservative estimate since it excludes potential higher borrowing for programs such as pharmacare and thus higher debt levels. It also ignores any possibility of a downgrading in the ratings for Canada’s debt, which would result in higher interest costs. And it ignores the risk of an economic slowdown or recession that would further increase borrowing and ultimately debt interest costs.

While the federal government, particularly the prime minister and his finance minister, continue to describe their stewardship of federal finances as prudent and responsible, close examination of their fiscal update reveals that federal finances may soon deteriorate from their already worrying position.

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Carney’s carbon madness

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CAE Logo Dan McTeague

Well, we are in quite the pickle.

In nine plus years as prime minister, Justin Trudeau has waged a multi-front war on the consumption and production of hydrocarbon energy, and, with that, on our economy, our quality of life, and our cost of living.

Trudeau zealously pursued and implemented anti-energy policies, most infamously the consumer Carbon Tax, but let’s not forget his so-called ”Clean Fuel” regulations; his Industrial Carbon Tax; his proposed emissions caps; his Electric Vehicle subsidies and mandates; Bill C-59, which bans businesses from touting the environmental positives of their work if it doesn’t meet a government-approved standard; and various other pieces of legislation which make the construction of new pipelines nearly impossible and significantly reduces our ability to sell our oil and gas overseas.

Every one of these policies can be traced back to the pernicious Net Zero ideology which informs them, and in which Trudeau and his bosom buddies — Gerald Butts, Steven Guilbeault, Mark Carney, etc — remain true believers.

And yet, despite those policies contributing to his party’s collapsing poll numbers and Trudeau’s unceremonious ouster, the Liberals are on the verge of naming as his replacement Mark Carney, one of the very Trudeau consiglieri who got us into this mess in the first place!

Now, Carney is currently doing everything in his power to downplay and dance around those aspects of his career which voters might find objectionable. He’s making quite a habit of it, in fact. And on the energy file, he’s being especially misleading, walking back his long-time support of the Carbon Tax — he’s said it has “served a purpose up until now” — and claiming that he intends to repeal it, while finding other ways to “make polluters pay.

This is nonsense. In fact, Carney is a Carbon Tax superfan, and, if you listen to him closely, his actual critique of the Trudeau tax isn’t that it has made it more expensive to heat our homes, gas up our cars, and pay for our groceries (which it has.) It’s that it is too visible to voters. His vow to “make polluters pay” means, in fact, that he intends to “beef up” Trudeau’s less discussed Industrial Carbon Tax, targeting businesses, which will ultimately pass the cost down to consumers.

He’s even discussed enacting a Carbon tariff, which would apply to trade with countries which don’t adopt the onerous Net Zero policies which he wants to force on Canada.

That’s just who Mark Carney is.

And, unfortunately, Donald Trump’s tariff threats have provoked a “rally round the flag” sentiment, enabling the Liberals to close the polling gap with the Conservatives, with some polls currently showing them neck-and-neck. Which is to say, there is a possibility that, whenever we get around to having an election, anti-American animus could keep the Liberals in power, and propel Carney to the top job in our government.

This is, in a word, madness.

Let us not forget that it was the Liberals’ policies — especially their assault on our “golden goose,” the natural resource sector — which left us in such a precarious fiscal state that Trudeau felt the need to fly to Mar-a-Lago and tell the newly elected president that a tariff would “kill” our economy. That’s what provoked Trump’s “51st state” crack in the first place.

Access to U.S. markets will always be important for Canadian prosperity — they, by leaps and bounds, are our largest trading partner, after all — but without the Net Zero nonsense, we could have been an energy superpower, providing an alternative source of oil and natural gas for those countries leary about relying for energy on less-environmentally conscious, human-rights-abusing petrostates. We could have filled the void created by Russia, when they made themselves a pariah state in Europe by invading Ukraine.

In short, we might have been set up to negotiate with the Trump Administration from a position of strength. Instead, we’re proposing to double-down on Net Zero, pledging allegiance to a program which will make us less competitive and more likely to be steamrolled by major powers, including the U.S. but also (and less frequently mentioned) China.

Talk about cutting off your nose to spite your face! And all in the name of nationalism.

Here’s hoping we wise up and change course while there’s still time. Because, in the words of America’s greatest philosopher, Yogi Berra, “It’s getting late early.”

Dan McTeague is President of Canadians for Affordable Energy.

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Tariffs by Tuesday: Trump Says There Is ‘No Room Left’ For Any Negotiations On Postponing Tariffs On Mexico, Canada

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From the Daily Caller News Foundation

By Nicole Silverio

President Donald Trump said Monday that there is “no room left” for any negotiations on postponing tariffs on Mexico, Canada or China in response to their handling of the immigration and fentanyl crisis.

Trump initially planned to impose 25% tariffs on Mexico and Canada and a 10% tariff on China over its role in allowing illegal immigration and fentanyl to pour into the U.S. in record numbers. After postponing these tariffs for a month after Mexico and Canada caved to his requests, the president said he has fully made up his mind to officially impose these tariffs this upcoming Tuesday.

“No room left for Mexico or for Canada. No, the tariffs [are] all set, they go into effect tomorrow,” Trump said. “And just so you understand, vast amounts of fentanyl have poured into our country from Mexico and as you know, also from China where it goes to Mexico and goes to Canada and China also had an additional 10 [percent], so it’s 10 + 10, and it comes in from Canada and it comes in from Mexico and that’s a very important thing to say.”

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Trump postponed the tariffs on Feb. 3 after Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau caved to his requests by increasing their efforts to tackle illegal immigration and fentanyl. Sheinbaum deployed 10,000 National Guard soldiers to the U.S.-Mexico border while Trudeau invested $1.3 billion to crackdown on illegal migration and appointed a “Fentanyl Czar” to oversee a $200 million effort against the drug.

The president announced in a Feb. 27 Truth Social post that he planned to double the tariffs on China to 20% and move forward with the tariffs on Mexico and Canada over the “very high and unacceptable levels” of drugs pouring into the U.S.

“We cannot allow this scourge to continue to harm the USA, and therefore, until it stops, or is seriously limited, the proposed TARIFFS scheduled to go into effect on MARCH FOURTH will, indeed, go into effect, as scheduled,” Trump said. “China will likewise be charged an additional 10% Tariff on that date. The April Second Reciprocal Tariff date will remain in full force and effect. Thank you for your attention to this matter. GOD BLESS AMERICA!”

These three countries are being slapped with tariffs as the U.S. suffers a fentanyl epidemic, with over 21,000 pounds of the deadly drug being seized at the southern border in the fiscal year 2024, according to Customs and Border Protection (CBP). Border agents have seized over 5,400 pounds in the 2025 fiscal year thus far.

At the U.S.-Canadian border, officials encountered over 11,000 pounds of drugs in the 2024 fiscal year and over 3,200 pounds have so far been seized in the 2025 fiscal year, according to CBP data. Over 60,000 pounds and 55,000 pounds of drugs were seized in the 2022 and 2023 fiscal years.

U.S. border officials also encountered over 8.5 million migrants at the southern border during the four fiscal years of former President Joe Biden’s administration. Border crossings at the northern border skyrocketed with over 198,000 encounters and nearly 19,000 arrests occurring in the 2024 fiscal year.

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