Hub Podcasts Mark Carney is facing a fiscal reckoning
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Jul 10, 2025 Trevor Tombe, a Professor of Economics at the University of Calgary and director of fiscal and economic policy at the School of Public Policy, dives into Canada’s pressing fiscal challenges. He discusses Mark Carney's commitments and the daunting question of funding them. The conversation highlights rising military spending and its impact on deficits and public programs. Tombe calls for a re-evaluation of budget priorities amid increasing national debt, urging for a comprehensive understanding of spending and revenue dynamics.
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Canada's Fiscal Dilemma
- Meeting Canada's NATO military spending target will require larger deficits, higher taxes, or spending cuts, possibly all three.
- Current fiscal commitments and tax cuts point to growing deficits and debt beyond sustainable levels by 2035.
Debt and Deficit Forecasts
- Increased military spending and tax cuts could drive deficits above $160 billion by 2035.
- Federal debt could exceed 50% of GDP, a trajectory deemed unsustainable by Trevor Tombe.
Spending Constraints
- Transfers to seniors and provinces dominate federal spending, limiting areas for fiscal cuts.
- To balance the budget, non-transfer and non-defense program spending would need cuts of 40-60%, which is highly unrealistic.