EDITORIAL: Carney’s books as bad as Trudeau’s?

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New concerns expressed by the parliamentary budget officer suggest the financial books of the Mark Carney government could be as bad as those of the Justin Trudeau government.   

In his June economic and fiscal monitor released June 19, Yves Giroux said that given Carney’s decision to delay the budget until fall, he doesn’t know if Carney’s claim he will balance the operating budget by 2028-29 is credible.  

That’s because Carney has also said he will run deficits on capital spending, without explaining what he means by capital versus operating spending.  

“There is no commonly accepted definition of what is defined as ‘operating’ or ‘non-operating/capital’ spending,” Giroux wrote.  

“Hence (the) PBO is unable to assess whether the government’s recent fiscal policy initiatives presented in Parliament … are consistent with achieving its new fiscal objective.”  

Giroux warned, “The government could fulfil its operating budget goals, and yet at the same time the federal debt-to-GDP (gross domestic product) ratio could grow because of additional borrowing for non-operating spending (for example, new acquisitions of weapons systems for the Canadian military.) This means the government could achieve its fiscal objective and yet be fiscally unsustainable.”  

Giroux also said that due to a lack of information, he can’t assess whether Carney will meet his pledge to increase Canada’s NATO spending to 2% of GDP within this fiscal year through an additional expenditure of $9 billion.  

“Since the NATO 2% target is based on actual expenditures — not just plans — and, given (the defence department’s) historical record of lapses, it is difficult to assess whether Canada will reach the target this fiscal year,” Giroux told the Ottawa Citizen.  

Given the information he has, Giroux estimates that for the 2024-25 fiscal year, the federal deficit will be $46 billion, with interest payments on total debt costing $53.5 billion.  

Giroux’s concerns are similar to those he expressed in January, over the fall economic statement released by the Trudeau government, before the PM resigned.  

He found its economic scenarios downplayed potential economic risks, made demographic assumptions that were not transparent and likely inconsistent with government policies and failed to account for growing contingent liabilities, mainly having to do with the settlement of Indigenous claims.  

Giroux warned that the government’s “ability (or willingness) to produce high-quality, timely financial statements continues to deteriorate.”