It's Only Money

No need to panic.

Someone, somewhere, has their hand on the rudder:

Given that those who forget the past are condemned to repeat it, the fact that Finance Minister Francois-Philippe Champagne reported a drop in last year’s projected deficit from $78.3 billion to $66.9 billion — a decrease of $11.4 billion — in Tuesday’s spring economic statement should surprise no one.

It’s an old trick used by finance ministers for decades, regardless of political stripe, but perfected by the Jean Chretien Liberal government from 1993 to 2003.

During that time, the average annual budget balance came in $10.7 billion better than initially predicted, year after year.

This results from a deliberate policy of underestimating government revenues and overestimating expenditures at the start of the fiscal year, so that when the actual numbers come in, the government can boast about its sound fiscal management.

In other words, if you want to downplay the seriousness of a $66.9 billion deficit in the spring 2026 economic statement for the just-completed fiscal year of 2025-26, predict it was going to be $78.3 billion in the November 2025 budget.

Then, when the revised number comes in $11.4 billion less than predicted, Prime Minister Mark Carney and his finance minister looks like geniuses.

Of course, it could also mean they are terrible budgeters.

**

In November, Carney released his budget and said he would spend $588 billion this year.

He’s repeatedly promised to reduce spending.

“We are going to spend less to invest more,” Carney proclaimed in the House of Commons.

The budget outlined all the so-called investments. What about “spending less?”

Carney just released his budget update and now he’s going to spend $594 billion.

After only six months, Carney is on track to spend $6 billion over budget.

Why is Carney spending $6 billion over budget halfway through the budget year?

It’s not because of U.S. President Donald Trump, because he was also in the White House six months ago.

It’s not because of what’s happening in the Middle East. The budget update acknowledges that the conflict in the Middle East could “initially improve” the government’s budget because of higher revenues. In fact, federal revenues are now $6 billion higher than forecasted in November’s budget.

It’s not outside pressure that forced Carney to overspend. An extra $6 billion fell into his lap and, instead of using that money to cut the debt, he decided to blow the extra cash.

Carney is continuing former prime minister Justin Trudeau’s legacy of out-of-control borrowing.

The federal government will borrow $65 billion this year. Carney has no plan to balance the budget and stop borrowing money. The best Carney is willing to do is bring the deficit down to $53 billion in 2030.

This borrowing means more of the money the government takes from taxpayers will be given to bond fund managers.

The federal government will waste $59 billion paying interest on the debt this year.

That means the government is taking $1,400 from each Canadian and, instead of using that money to hire nurses, fix potholes or lower taxes, it’s wasting that money on interest payments.

To put things into perspective, the federal government will waste more money paying interest on the debt than it sends to the provinces in health transfers or takes in through its sales tax.

Let that sink in for a second. Then think about what we could do if it weren’t for the federal debt. We could double federal health spending. Or we could eliminate the federal sales tax.

**

Canada is not in a mild economic slowdown.

It is in a self-inflicted investment crisis — and the numbers are no longer debatable.

Over the past decade, Canada has foregone or driven away the equivalent of $1 trillion in capital investment — a scale of economic underperformance unprecedented in modern Canadian history. This was not caused by a single crisis or external shock. It was the cumulative result of policy decisions, regulatory design, and political priorities that made Canada a harder place to invest.

Not theoretical wealth. Not paper losses. Real investment that chose not to build factories, pipelines, technologies, infrastructure, or businesses in this country.

And capital responded exactly as it always does: it left, or never came.

And the consequences are staggering.

Using conservative assumptions, the missing investment has cost Canada $1.5 to $2 trillion in GDP over the past ten years, with a forward impact that could reach $3 to $5 trillion over the next two decades. This is not theoretical modelling. It is the compounding effect of factories not built, projects not approved, and technologies not scaled.

That is not a gap. That is an economic failure.

**

The Canada Strong Fund announced Monday by Prime Minister Mark Carney would thus appear to have potential. It would have even more potential if we had any money for it. But we don’t: the spring economic update Tuesday revealed we’ll be $67 billion short of balance this year. So it appears we’ll be borrowing the money to become strong. That’s a problem right there folks.

As any bankrupt can tell you, spending more than you make, consistently, for years on end, usually comes to a bad ending. Imagine a homeowner announcing a personal Mortgage Strong Fund, involving a housing loan that never gets paid, grows larger with each passing year, is dependent on whatever interest rates lenders choose to charge, which declares itself open to “investors” willing to kick in money to help meet the next payment, the return being that the guy owning the house doesn’t go broke.

Wouldn’t be much of a waiting list of opened wallets, I’m inclined to think.

Those factors may be the reason the government’s introduction of the fund … which isn’t really a plan yet but more a pledge to work up a plan… was met with some doubts.

“Normally, a country sets up a sovereign wealth fund with excess money they have, but Canada has debt, rather than extra money,” the CBC perspicaciously noted, and wasn’t alone in doing so.

“I don’t think anyone is interested in a government slush fund, but they are interested in a properly independently minded wealth fund free from political influence,” noted John Ruffalo, managing partner of Maverix Private Equity fund.

The Canada Pension Plan Investment Board suggested the fund could possibly work as planned, “depending on its final design.” Bank of Nova Scotia economist Derek Holt agreed that the devil, as always, “will be in the details,” a shortage of which was notable. “The way this new fund should be structured very much depends on its mandate,” said Sebastien Betermier of McGill University’s Desautels Faculty of Management. “So it will be critical to get the governance right.”

Media people did their best to explain how the fund would work, a difficult task given no one really seems to know. It would start with $25 billion from the government, over three years. Outside investors would be welcome to contribute if they spotted anything worth investing in. The money — plus any profits, presumably — would be spent making Canada stronger, though just what that might mean was also not clear.

“The Fund will strategically invest, alongside the private sector, in Canadian projects and companies driving our economic transformation,” explained the official government announcement. “This includes projects in clean and conventional energy, critical minerals, agriculture, and infrastructure.”

Fine, but, like, how? Building bridges? Expanding airports? Adding pipelines? Funding Canadian tech-bro start-ups? Buying stocks? Carney indicated the opportunity for ordinary Canadians would be “something consistent with buying a government bond,” though you can already do that.

The “returns” … assuming there are some … would be reinvested “to grow the fund.” And presumably also be shared with investors, so would have to be substantial enough to satisfy both. To win the confidence necessary to produce that level of success, emphasized former Teachers Pension Plan boss Jim Leech, the fund would have to operate 100 per cent free of political meddling.

“Government would have to be totally passive.”

That’s a requirement that underlies much of the outside apprehension. As many a doubter noted , Ottawa already has a collection of supposed investment vehicles tasked with attracting, distributing or creating extra cash for the government to “invest,” a term which, under the Trudeau government, became synonymous with “spend.” If any of them had done a great job, would this new one be needed?

As was also pointed out, a number of provinces and territories already have wealth funds of one sort or another, best known among them being the ever-disappointing Alberta Heritage Fund , whose initial promise in 1976 was whittled away by regular government fiddling. If a conservative-minded province with a gushing oil industry can’t manage to save enough to stay away from deficits, how’s a federal government with a history of fiscal blundering supposed to do better?

There’s the rub. For very good reasons — history and experience for starters — Canadians’ faith in the competence of its governments and the institutions they operate has been drastically reduced. It certainly suffered severe damage over the nine years of Justin Trudeau and his ever-escalating spending binges, during which a pledge of temporary “modest” deficits somehow managed to double a national debt that had taken almost 150 years to compile. Public debt charges on federal borrowing are expected to hit $59 billion this year.

Carney’s people appear to realize there is a degree of skepticism amongst the people, emphasizing that the fund will be “focused on performance” with “consistent expert management.” It will operate “at arm’s length” as part of what it calls its “federal ecosystem of Crown corporations.” Such reassuring terminology might carry greater weight if another member of that ecosystem, Canada Post, hadn’t just revealed it lost another $1.57 billion last year, up almost 87 per cent from the already-chokeworthy losses of the year before.

Of course the post office is a dying operation struggling against declining demand with an expensive workforce resistant to change. But it’s been haemorrhaging money for years and all the brave press releases and determined statements in the world haven’t managed to introduce a jot of improvement.

We can pretty much guarantee the new fund won’t be shovelling money into Canada Post — and if it tries you’ll need a new nation-building high-speed rail project to handle the fleeing investors. But that’s just the point: a Liberal prime minister — though not the current one — announced just such a project: the “transformative” Alto rail link joining Quebec City and Toronto, which would “turbocharge the Canadian economy” at a cost of $60-billion to $90-billion, starting around 2029 or so.

**

The macro context in which Carney is announcing this is not flattering. Nearly 12 months since his election, Canada has managed only modest net job gains while shedding over 100,000 full-time jobs in the downturn of early 2026. The sharpest monthly drop in more than four years, 84,000 jobs lost in February 2026 alone, was concentrated in private-sector industries like manufacturing, retail, and resources. Canada also became the only G7 economy to contract in the most recent quarter, underpinned by continued weakness in business investment and productivity, and one of the highest unemployment rates in the group.

The specifics of this remarkably light-on-details proposal deserve some attention.

 Typically, a sovereign wealth fund is employed when a country has a surplus and wants to avoid frivolous spending. Sovereign wealth funds are like endowments: take a chunk of excess wealth, invest in profitable ventures to generate return, reinvest a portion, and spend a portion. More precisely, they fall into a few categories: stabilization funds, savings funds like Norway’s GPFG, and strategic investment vehicles like Singapore’s Temasek. On the limited details available, the Canada Strong Fund looks closest to the third type, which is most prone to political direction of capital toward favoured ends.

Real sovereign wealth funds are typically drawn from resource royalties where the wealth-generating asset is owned by the state running the fund. Ottawa doesn’t own that asset. Control of resources belong to the provinces under Section 92A of the Constitution, so what’s being borrowed against is future federal tax revenue.

Ottawa does have a habit of forgetting about Alberta, except for when there’s money to be milked or vaguely-defined corporate villains to be ritually flayed on the altar of climate action.

Even setting the constitutional problem aside, wagering borrowed capital is inherently costlier and riskier. A debt-funded vehicle is a leveraged bet by the Crown, and one that is worse than not running the fund at all if it underperforms its cost of capital, because the liability persists either way. And it joins a crowded field of state-directed capital vehicles — the Canada Infrastructure Bank, the Business Development Bank, Export Development Canada, the Canada Growth Fund — whose mandates the government has now promised to “review” in lieu of explaining what gap this one fills.

Not only does Canada lack a healthy surplus, the country is actually buried so deep in the debt pit that the surface is a dim and distant glimmer.

The smarter move would be to generate that wealth in the first place by getting government out of the way. With sound fundamentals, a competitive private sector can carry the risk and deliver wins for the public purse.

Our broader productivity gaps come from regulatory drag, an uncompetitive tax structure, and weak domestic competition. To boot, much of Canada’s headline GDP growth this past decade came not from productivity, but now-slowing population growth.

Adding $25 billion in federal debt, even if somewhat offset by federal asset sales, only worsens the burden of public-debt-per-capita.

These factors require a bit more work to resolve than more borrowing and spending.

Also:

Canada’s high youth unemployment rate flies in the face of Prime Minister Mark Carney’s boast about the “resilience” of the economy in the government’s spring economic update this week.

While high unemployment is a concern across all age groups, Statistics Canada’s most recent labour force survey reported that the youth unemployment rate of 13.8% in March was more than double the national average of 6.7%.

A study by the Fraser Institute released Thursday by Philip Cross, former chief economic analyst for Statistics Canada, reported that last year, 437,000 young people between 15 and 24 years of age looked for a job but could not find one, up a staggering 57% from 290,000 in 2022.

Over the last three years, youth unemployment increased from 10% in 2022 to 13.8% in 2025, the largest three-year increase on record when the economy was not in a recession, the report noted.

“Canada’s youth unemployment is a crisis and will have serious consequences in later years when youths today who are unable to secure work try to find steady employment as adults,” Cross warned, describing the recent increases in youth unemployment as “extraordinary.”

The dismal state of youth unemployment was also reflected in a survey released by the Angus Reid Institute this week that found rising concerns over jobs and unemployment among those aged 18 to 24, with 38% in that demographic choosing it as a top issue, more than double the 18% who said this at the beginning of 2025.

Cross noted the previous Justin Trudeau government’s high immigration polices, which dramatically increased the supply of young workers without the necessary economic growth to absorb them, is one of the main reasons for high youth unemployment today.

Another factor, he said, were the simultaneous hikes to the minimum wage in many provinces.

While increasing minimum wages is popular among politicians because it puts the onus on the private sector to pay for a policy politicians then take credit for, its practical impact in a struggling economy is to reduce the demand for young workers because of the increased costs imposed on businesses.

“The extraordinary surge in youth unemployment in Canada is a homegrown problem, and policymakers in Ottawa and in provincial legislatures should review the policies that are making it worse,” Cross said.