The Carney conundrum

This year it will cost $486.9 billion to run Canada.

Less than half this amount comes before MPs for debate, approval or modification. The rest ($264 billion) is called ‘statutory’ spending. Hands off.

Of that total national overhead, almost three hundred billion (63%) is transferred by the feds to the provinces and individuals, like you. More than $85 billion goes to the wrinklies, about $55 billion gets pumped into the health care system and $50 billion goes to pay interest on our substantial (and growing) debt.

So to run the government, the armed forces, the bureaucracy, the CRA, Parliament, courts, immigration and veterans affairs, foreign aid ($12 billion) indigenous programs ($32 billion) , employment plans and crown corps, like CMHC, Canada Post etc. plus capital expenditures takes 26% of the pie. That’s $120 billion.

By the way, some of these costs are going to rise all by themselves. In fact, they will erupt – unless we decide as a nation to cap money for old people or health care. OAS and GIS pogey for the wrinklies will soon pass $100 billion a year and fly past that when the Millennials start collecting. Health care? You know all about that. There’s never enough spent and an aging population means more demands. Over 80% of your lifetime medical costs occur after age 70.

So, statutory spending will increase. It could edge up to 70% of the total federal budget, and it is essentially untouchable. Political suicide. Voters would throw the bums out. And already we are borrowing money every year to cover the total nut. Yet the population wants dentacare, shorter wait times, $10-a-day babysitting and more cash for the oldies.

Into this vortex drops the new prime minister, elected after our main trading partner decided to go protectionist and bring in 19th Century trade tariffs. That means fewer exports, more unemployed, industrial dislocation, a shrinking GDP and – yes – more pressure on government. Expenditures go up while revenue falls. Meanwhile a whopping 40% of Canadian households pay no net income tax.

But wait. How do we get out of this messy dependency on a country that’s gone rogue?

That’s what the last election was about. Carney was given a mandate to ‘build, baby, build’ so Canada gets more national infrastructure, expands its trade focus and stops relying on the US military to defend our sovereignty. All that takes money. But we’re already in the red, mostly due to transfers to provinces, individuals and bondholders.

This is why we’ll get a mother of a deficit on November 4th. Mabe a hundred billion. In fact rearming our military alone, to achieve the NATO target of 5% of GDP, will take more than a trillion over the next decade.

Where will this money flow from? “Will that come,” asks Scotia economist Derek Holt, “at the expense of core programs, higher taxes or bigger deficits?”

“I’ve been warning about above-consensus estimates for deficits all year long and watched consensus move higher,” adds Holt. “The numbers we’ll get on November 4th will merely start the debate as the plans evolve and the costs get revised.”

We are reminded that right now Canada has a AAA debt rating. The highest. The best. It lets us borrow at a premium rate, while investors feel they have minimal risk in holding Canada’s debt. But this can change. The US has been downgraded, and its bonds impacted. No wonder, since the debt situation there is so much worse than ours.

Not so bad?

Source: Scotia Economics

So, would a Conservative prime minister do things differently, or better? What statutory spending would be cut, since trimming operational expenses alone does not balance the books. Not even close. And what of investing in a pipeline, or a port, reactors, mines or the military? Do we turtle, or build?

This is no cover for Carney. It’s just reality. He wanted the job. The opposition guys can fearmonger about a swollen, bloated deficit, but to be credible there have to be alternatives. “Trimming government waste” is a mythical solution, akin to demanding that Trump give us free trade. Or else.

So, gang, do we stay on this path?

Raise taxes for everyone?

Cut to the bone?

Or just watch the Jays?

About the picture: “Hey Garth, hope all is well. Back on Koh Tao in Thailand for a bit, and met this little pup last night,” writes Tony. “No name yet..  Figured you might need some extra cute pup picks for these crazy times   Thanks for all your efforts, they are truly appreciated.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/10/14/the-carney-conundrum/