Hub Podcasts Are debts and deficits about to balloon?
Jul 10, 2025
Trevor Tombe, a Professor of Economics at the University of Calgary with expertise in fiscal and macro issues, dives into Canada’s looming fiscal challenges. He discusses how the Carney government's spending promises, particularly in defense, could push deficits to over $150 billion. Tombe examines the paradox of GDP growth leading to increased military spending, and highlights the urgent need for sustainable fiscal policies to maintain market confidence. He warns that without major cuts, achieving a balanced budget by 2035 seems unlikely.
AI Snips
Chapters
Transcript
Episode notes
Deficits to Exceed $150 Billion
- Canada's deficits are expected to rise beyond previous projections, potentially exceeding $150 billion by the mid-2020s.
- Military spending increases tied to GDP growth are a major driver of growing federal debt and deficits.
GDP-Linked Military Spending Challenges
- Military spending tied to GDP means as the economy grows, military costs rise proportionally.
- Economic growth alone can't solve fiscal challenges due to simultaneous growth in spending.
Limited Spending Cuts Potential
- Federal government spending outside transfers and military is only about one-third of the budget.
- Balancing budget by cutting other spending would require eliminating 50-60% of non-transfer expenditures, which is unrealistic.