FIRST READING: The eyewatering scale of Carney's proposed debt splurge
First Reading is a Canadian politics newsletter that throughout the 2025 election will be a daily digest of campaign goings-on, all curated by the National Post’s own Tristin Hopper. To get an early version sent directly to your inbox, sign up here.
TOP STORY
With the release of the Liberals’ costed platform, the party is not just prescribing a huge increase to the deficits already planned under Justin Trudeau, it’s prescribing a peacetime debt splurge like few seen in Canadian history.
Over the next four years, the Liberal platform proposes to rack up $224.8 billion in new debt; an average of $56.9 billion per year.
Or, an average of $4 in new debt per day, per Canadian, for four consecutive years. It’s also roughly $100 billion higher than what had been previously tallied in forecasts set out by the prior Trudeau government.
Even when adjusting for inflation, that’s a rate of structural peacetime debt accumulation that’s really only been matched by two prior Canadian prime ministers: Pierre Trudeau and Brian Mulroney.
And in that case, the sustained 1980s Trudeau/Mulroney spending spree would directly precipitate Canada’s 1990s sovereign debt crisis.
Although Carney’s predecessor presided over the largest spike in net sovereign debt in Canadian history (Justin Trudeau effectively doubled the debt in 10 years), much of that can be attributed to the overwhelming expense of the COVID-19 pandemic. In 2021 alone, Canada posted a $381.6-billion deficit.
While Trudeau’s non-COVID debt accumulation still reached generational highs, it fell far short of what is now being proposed by the Liberals under Carney.
In the Trudeau government’s last full year before the COVID-19 pandemic, the deficit of $25.3 billion was high enough that Statistics Canada cited it as the “largest deficit in seven years.”
Just a few months ago, it was considered scandalously high that Trudeau’s government had forecast an unexpected deficit of $48.3 billion for the current fiscal year.
The spending overrun was so controversial, in fact, that it would ultimately precipitate Trudeau’s January resignation. His then deputy prime minister, Chrystia Freeland, resigned in December citing the government’s inability to keep its “fiscal powder dry” in the face of economic threats from the United States.
Freeland’s departure would set events in motion for Trudeau to be pushed out in favour of Carney.
But with Carney laying out average deficits of $56.9 billion, he is proposing to rack up a level of non-emergency debt that will not have been matched since Mulroney’s second term, which ran from 1988 to 1993.
In the four final budgets tabled by the Mulroney government, Canadian debt swelled by the inflation-adjusted equivalent of $280 billion.
Aside from that, there’s really only two other prime ministerial terms with that level of new structural debt: Mulroney’s first term (1984 to 1988) and the final term of Pierre Trudeau (1980 to 1984).
Mulroney’s first term, which ran from 1984 to 1988, racked up deficits equivalent to about $300 billion in 2025 dollars. Pierre Trudeau’s final term broke all spending records before and since by amassing the 2025 equivalent of $377 billion.
What’s different with the proposed Carney budgets is that Canada has a larger economy and more people, meaning that the burden is more widely shared.
However, Canada is also sitting atop an existing debt burden far higher than anything that existed in the 1980s. Sovereign debt has now peaked at about $1 trillion for the first time, with interest charges now costing Canadians $53.7 billion per year as of last count.
Canada continues to rank relatively low in international rankings of overall federal debt, but this measure often omits the fact that Canada’s subnational provincial governments are also carrying massive debt burdens.
When countries are ranked by “general government debt,” Canada emerges as one of the most indebted countries on earth. According to 2023 figures published by the International Monetary Fund, the total debt carried by Canadian governments is equivalent to 107.5 per cent of GDP.
The only countries with higher overall debt burdens are Japan, Italy, the United States, Venezuela, Greece and France.
The Conservative budget proposals put out this week also forecast four consecutive years of deficits, but at an expected total of $100 billion — about 40 per cent of what Carney is proposing.
ECONOMIST FIGHT
The University of Calgary’s Trevor Tombe has published probably the most detailed critique of Liberal spending plans. In a column for The Hub, Tombe wrote that “the entire fiscal trajectory of the federal government is now pointed in a potentially unsustainable direction.”
Tombe noted that the Liberal platform abandons two benchmarks that were previously used to set spending levels under the Trudeau government: Keeping deficits below one per cent of GDP, and ensuring that debt would continue to decline as a share of GDP. “Higher debt means higher interest costs — an estimated $2.3 billion more by 2028,” he wrote.
Liberal Leader Mark Carney is also an economist, which he mentioned immediately upon being challenged with the Tombe report at a press conference. “I have more experience than he does and it’s important to state that,” he said.
WE’RE ALL GOING TO DIE
There’s an obscure federal agency called Policy Horizons Canada whose entire job is to try to imagine the future. Their most recent forecast, profiled by Postmedia’s Bryan Passifiume, predicts a chilling dystopia in which social mobility becomes so shattered that an underclass of propertyless Canadians are forced to forage for food. “People may start to hunt, fish, and forage on public lands and waterways without reference to regulations,” it reads.
It also warns that by 2040, Canadians may see “inheritance as the only reliable way to get ahead.” Thus will begin a kind of neo-feudalism of strict class barriers, with “algorithmic dating apps” used to prevent intra-breeding.
The report came up on the campaign trail, with Conservative Leader Pierre Poilievre reading out whole sections of it at a press conference.
Get all of these insights and more into your inbox by signing up for the First Reading newsletter here.