The Parliamentary Budget Officer (PBO) recently released new fiscal projections for the federal government, revealing a projected annual deficit of approximately $60 billion for the next five years. This figure does not account for the defense commitments made by Mark Carney, which aim to meet NATO's target of five percent of GDP. The report highlights ongoing concerns about the management of public finances under the Liberal governments led by Justin Trudeau and Mark Carney.

During the 2015 election campaign, Trudeau promised to run "modest" deficits of no more than $10 billion for three years to stimulate the economy and enhance infrastructure. This commitment was pivotal in securing the Liberals' victory but marked a shift away from previous fiscal prudence. As deficits became a regular part of government policy, spending increased significantly. A former member of the Senate’s National Finance Committee noted that expenditures for new social programs were often labeled as "social infrastructure," allowing them to align with the Liberals' infrastructure goals.

The situation worsened during the pandemic, when the government abandoned any pretense of careful financial management. The Trudeau administration introduced the concept of "fiscal anchors" to downplay the alarming dollar amounts of the deficit and debt, suggesting that their share of GDP was decreasing. However, the PBO's latest projections indicate that the federal debt as a percentage of GDP is expected to rise to 43.7 percent by 2028-2029, contrary to earlier government forecasts that anticipated a decline to 39 percent.

This deterioration in fiscal health comes ahead of anticipated increases in defense spending and other investments in the upcoming November budget. Carney has introduced a new narrative, focusing on balancing the "operations budget" while increasing new investments. The C.D. Howe Institute criticized this approach in its own budget projections, calling it "a serious blow to transparency and accountability." Their analysis predicts a staggering $92.2 billion deficit for the current year, factoring in the rise in defense spending.

While the Liberals may argue that capital and operational spending are distinct, the reality remains that rising debt will lead to significant interest payments—projected at $55 billion this year alone. Finance Minister François-Philippe Champagne has instructed government departments to implement a 15 percent cut in expenditures. However, economist John Lester from C.D. Howe estimates that even if successful, this would only save $22 billion annually by 2028-2029, leaving a persistent deficit of $63 billion.

Critics argue that the Liberal government has been irresponsible in managing the country’s finances over the past decade. Carney's promise of a budget that balances "austerity" with "investment" is viewed by some as another tactic to justify continued high levels of spending. The ongoing fiscal challenges raise questions about the government's ability to effectively manage public resources and deliver services to Canadians.