As Canada closes out the year, the Minister of Finance confirmed that in just the six months between April and October, the federal government ran up $15 billion in new debt – an incredible $7 billion of which was racked up in October alone. And by the end of the current fiscal year, the deficit may well be as high as $40 billion. It’s way down from Canada’s pandemic highs, but it’s still among the most debt-heavy budgets of the past 50 years.
This may surprise the average Canadian given that so much of the government is noticeably threadbare and underfunded. Canadians are dying in hospital waiting rooms due to unprecedented shortages in health care. The navy’s so strapped for cash that it can only deploy one offshore patrol vessel at a time. The RCMP’s federal policing is so under-resourced that Parliamentarians are now calling it a threat to national security. And even $600 billion in cumulative debt hasn’t been enough for the Liberals to honour their 2015 campaign promise to ensure universal clean water on First Nations reserves.
It’s popular to blame all this on some easy-to-identify example of government profligacy, such as Ukraine aid, free hotel rooms for refugee claimants or Prime Minister Justin Trudeau’s noted penchant to rack up outsized travel bills. But Canada’s fiscal problems are well beyond anything like that. At the current rate of spending, the cumulative $2.4 billion in military aid that Canada has sent to Ukraine represents less than a month’s worth of new debt.
So where’s all the money going? Below, a cursory guide to how Canada is able to spend so much while seemingly obtaining so little.
Debt servicing just got way more expensive
First, an easy one: The Trudeau government borrowed an obscene amount during the COVID-19 pandemic, and with rising interest rates the treasury is getting hammered with debt-servicing costs.
As recently as 2021, interest charges on federal debt cost $20.3 billion per year. In the current fiscal year, it’s probably going to blow past $46.5 billion. Ottawa now spends about as much on debt management as it does on health care transfers to the provinces.
The phenomenon of pricier debt is not limited to Canada: Virtually every government in the world ran up record-breaking debts during COVID and are now facing the consequences. But if Canada is different, it’s that our rate of pandemic debt accumulation was at least $200 billion higher than it needed to be. And in justifying all this extra spending at the time, Trudeau argued that it was a good time to take out extra debt since “interest rates are at historic lows.”
The corporate welfare is just unbelievable
Canada has a long history of government signing over grants and bailouts to politically connected corporations. As far back as 1972, then NDP Leader David Lewis famously championed the cause of stopping Canada’s “corporate welfare bums.”
But the Trudeau government has taken corporate welfare to new heights. It was only a few years ago that Bombardier was the undisputed champion in collecting federal grants, bailouts and interest-free loans. Over 50 years, according to an analysis by the Montreal Economic Institute, Bombardier received a cumulative “$4 billion in public funds.”
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In just the last calendar year, the Trudeau government has signed two subsidy agreements that would dwarf that $4-billion figure several times over. In the spring, both Stellantis and Volkswagen agreed to build EV plants in Ontario in exchange for federal subsidy packages that could cost as much as $18.8 billion (plus another $9 billion from the Ontario government).
And that new $18.8 billion liability on the books doesn’t even account for the massive ramp-up in the corporate welfare everywhere else. To name just a couple: In 2021, Air Canada got a $5.4 billion loan package. And the Trudeau-founded Strategic Innovation Fund gets about $1.5 billion per year in handouts to green energy companies.
The day-to-day costs of running the government are through the roof
To put it simply, there are more bureaucrats making more money than ever before. The Trudeau government has expanded the size of the bureaucracy well beyond anything seen in peacetime.
In just the two years between 2021 and 2023, the operating costs of the federal government grew by 32.5 per cent, driven largely by a massive expansion in both the number of civil servants and their pay. More than 31,000 new employees were hired during that period, and Ottawa did not skimp on salaries or bonuses. Between April 2022 and July 2023 — a period marked by no shortage of noticeable failures in government performance — 7,895 public administrators qualified for bonuses and other performance payouts totalling $132,610,541.
These new Liberal programs may suck, but they’re not cheap
The Trudeau government has been particularly aggressive at hammering through “legacy” programs. Once upon a time, the idea of a national child-care program dominated headlines for weeks and defined elections. Now, it’s one of a bouquet of social welfare programs introduced in just the past few years. While the Trudeau government is still hammering out its $10/day child-care plan, it’s rolling out a national dental care plan, and it just announced that a national pharmacare program is around the corner.
Access has been about the same as Canada’s other “universal” benefit programs: $10-a-day daycare spaces are so scarce that merely getting into the program has been compared to wining a “lottery.” But even a half-cocked federal program quickly gets expensive when it’s rolled out across the country.
The federal child-care program alone is estimated to cost about $7 billion per year, according to a 2022 assessment by the Parliamentary Budget Officer. Dental care, even in its limited form, was pegged at $4.4 billion per year in the most recent budget. An October estimate by the Parliamentary Budget Officer put the starting cost of a federal pharmacare plan at $11.2 billion per year.
These three programs alone — which are not even close to reaching their final form — are already expected to cost somewhere in the neighbourhood of $22 billion per year. For context, that’s the equivalent of funding the Department of Veterans Affairs for more than 40 years.
Everything has been allowed to devolve into a hideously inefficient money sink
Last week, Conservative Leader Pierre Poilievre highlighted a Parks Canada deer cull that had spent more than $800,000 to kill 84 deer, calling it “asinine.”
While the money is a rounding error in federal budget expenditures (it literally represents about 15 minutes’ worth of deficit accumulation), it does serve to illustrate a key feature of the Trudeau government: Absolutely everything has become more expensive than it needs to be.
Basically, for nine years there’s been little to no pressure to rein in costs, and federal departments have responded accordingly. As one example, the official prime ministerial residence, 24 Sussex Drive, is an abandoned, rat-infested biohazard. Somehow, its annual maintenance costs are still $146,000 per year.
Even when the Trudeau government pledges a new culture of saving money, it notably has no effect. Earlier this year, Finance Minister Chrystia Freeland promised to find $15 billion in savings over the next five years. Instead, only a few months later the Fall Economic Update ended up earmarking $20.8 billion in new spending over the next six years.
The fiscally conservative Canadian Taxpayers Federation is one of the most dedicated monitors of rising federal spending. In comments to the National Post, federal director Franco Terrazzano summed up the state of federal finances thusly: “They’re essentially spending more money on everything forever.”