Globe editorial: The upside-down world of Liberal budgets

In the upside-down land of the Liberals, a spending spree is a spending cut, blowing a windfall of billions of dollars is prudent and failing to prepare for a fiscal storm is, well, just good management. Finance Minister François-Phillipe Champagne touted the government’s fiscal prowess in his speech to the Commons as he tabled the spring economic update on Tuesday. “Guided by our commitment to spend less so we can invest more, and building on the Comprehensive Expenditure Review, our government continues to reduce spending, improve efficiency, and deliver better value for Canadians,” he said. “As a result, projected deficits are lower over the fiscal horizon.”

Nine highlights, from CPP contribution cuts to new sports spending The entirety of the minister’s statement is an inversion of reality, as one might say on the floor of the House.

For a start, the government’s much ballyhooed expenditure review does not cut spending, despite much hand-wringing to the contrary. The last fiscal document from the Trudeau government, the December, 2024 fall fiscal update, forecast spending for the current fiscal year at $568.1-billion. In the fall budget, the Carney government upped that total to $588.5-billion. And on Tuesday, it boosted spending even more, to $594.9-billion. At the risk of pointing out the obvious, a spending increase of $26.8-billion is not a spending cut.

Ah, but the Liberals have promised, as Mr. Champagne points out, to increase spending on productive investment while throttling back on more consumption-focused expenditures. Surely that must explain the rise in spending?

Quite the contrary. The government’s “capital investments,” an admittedly fluid category, are now projected to be $1.8-billion lower this year, even as overall spending jumps. Some of that drop is owing to unexpectedly slow uptake on clean-economy tax credits and some is due to recategorizing some expenditures. Still according to its own logic, the government is spending more, but investing less, again the opposite of what the finance minister claims.

Mr. Champagne portrays a picture of a government as a “prudent fiscal manager” that is whittling down the federal deficit. And that is his biggest misstatement. It is true that the deficit for the 2026 fiscal year that ended on March 31 is $11.5-billion lower than was forecast in November. But that is only because the government’s revenues surged by $17.7-billion.

Liberals plan to grow sovereign wealth fund by recycling money from airports, other federal assets After that, the projected deficits from fiscal 2027 through to fiscal 2030s are only marginally lower than in the November fiscal framework, despite a $42.6-billion surge in revenue over that time. Of that, just $1.1-billion goes to deficit reduction. Or look at it this way: For every $100 in new revenue, the Liberals spend $97.40 and save just $2.60. Even Justin Trudeau would have difficulties in matching that performance.

Despite Mr. Champagne’s rhetoric and Prime Minister Mark Carney’s promises, it’s clear that the Liberals have no intention of changing their high-spending ways. Any faint hope that the Liberals would use their newly acquired majority to do so vanished on Tuesday. Instead, it’s more of what Canadians have become resigned to from the past decade of Liberal budgets. Every new dollar of revenue is just another opportunity to spend.

Today’s lack of fiscal discipline is enough of a worry on its own. But compounding that concern is the failure to take action to head off the future fiscal crunch. The budget projects a slowdown in labour productivity growth by the end of the decade, a decline from an annual increase of 1.3 per cent to 0.9 per cent. (That latter number might prove to be optimistic since the average increase in labour productivity from 2015 to 2025 is much lower, at 0.2 per cent.) Ottawa announces $6-billion to boost skilled trades, smaller deficit projection of $66.9-billion

Economists have sounded the alarm that, absent aggressive measures to boost productivity, the federal and provincial governments face a future where debt loads relative to the economy inexorably creep higher, eventually to a crisis point. (The fiscal update has a much cheerier view, showing a steady decline in the ratio of long-term debt to gross domestic product.)

Such aggressive action is nowhere to be found in Tuesday’s update; no commitment to deep deregulation, no effort at broad tax reform, no dismantling of the protectionist barriers that coddle Canadian industry. Instead, there is a pablum-esque statement on a “Whole-of Government Competition Plan.”

Mr. Champagne, in his speech, urged Canadians to be ambitious. He should take his own advice to heart, and come up with a reality-based plan to stabilize federal finances.