EDWARDS: Carney’s interventionist philosophy not what Canada needs

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As Canadians confront stagnant productivity, geopolitical headwinds, and a deepening housing crisis, policy clarity and economic agility are more essential than ever.

Yet instead of bold reform, the Liberal government’s Canada Strong – Fiscal and Costing Plan doubles down on technocratic tactics and moralized market engineering, with little effort for fiscal restraint or reduction of bureaucratic bloat. This is a vision long championed by Liberal leader Mark Carney as articulated in his book and as evidenced by his economic counsel to former prime minister Justin Trudeau.

In his 2021 book Value(s), Carney urges policymakers to reimagine markets through a moral lens, incorporating fairness and effort into economic valuation. While compelling in theory, this framework often manifests in practice as centralized intervention, layered regulations, and tax-based behavioural controls.

The risk isn’t just philosophical, it’s fiscal, and it’s showing up in how Canada now presents its public finances.

Capitalizing services: A misleading fiscal framework

One of the most serious issues with Carney’s proposed fiscal plan is the reclassification of operating expenditures as capital investments. This manoeuvre allows the government to present shrinking operating deficits, approaching zero by 2028, while true recurring costs are pushed into the capital ledger, where they’re theoretically amortized over time.

This technique conceals the structural nature of government spending and erodes fiscal transparency.

Our analysis identified over $11 billion in proposed spending next year alone that falls into this category of “Capitalized Services.”  These are expenditures that fund personnel, program delivery, or recurring support, yet are budgeted as long-term infrastructure investments. They are not.

Among the key examples:

—  RCMP “operating investments”, which fund ongoing law enforcement needs but are treated as capital.

— Defence operating programs, climbing to $6.75 billion by 2028, labelled capital despite their recurring nature.

—  Mental health programs, DEI programs, and other health-care services, many of which deliver critical but non-permanent (non-capital) outcomes.

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The result? A distorted picture of Canada’s fiscal position and long-term obligations.

This is not just poor accounting. It is a deliberate policy choice that defers responsibility for today’s spending to tomorrow’s generations. It’s a policy choice that compromises future flexibility as rating agencies take note and debt servicing costs rise.

Productivity down, spending up

These fiscal techniques come at a time when Canada’s economic fundamentals are already weakened. Our labour productivity declined 1.8% in 2023, while the OECD average rose 1.4%.

The fact is we have trailed OECD averages for years.

Rather than correcting this with strategic reductions in taxes, unnecessary business burdens, government bloat, and capitalizing on our expansive low cost energy and natural resources, the Liberal plan introduces a wide range of low-yield social programs, scattered incentives, and some vague promises of regulatory offsets. They carry little to no measurable return on productivity or GDP, nor an improvement on our ability to compete globally.

While the plan contains initiatives around digital infrastructure, apprenticeships, and critical minerals, these are outpaced by funding for highly specific grants, PR-style commitments, and cultural subsidies.

Government hand picking the winners and losers in a “new” economy is a tired recipe with little hope of success. With new proposed spending exceeding $35 billion in 2025-26 alone, the economic philosophy is clear: We will combat U.S. tariffs (taxes) with more government and more taxes.

Broader governance concern

This budgeting approach mirrors Carney’s long-held belief in shaping markets via “moral recalibration” and centralized frameworks. In his theory, this builds a more equitable system. In practice, it leads to regulatory complexity, opaque incentives, and political micromanagement of investment flows.

Fiscal plans built on such ideals emphasize redistribution over economic growth, steering resources toward preferred outcomes rather than unleashing them through simplified, neutral tax and investment frameworks. For businesses and households alike, the result is greater uncertainty, higher costs, slower progress, and lower confidence.

A call for fiscal clarity and policy discipline

Rather than manipulating the structure of budget documents to tell a palatable political story, our governments should commit to:

— Transparent accounting standards, including public disclosure of “Capitalized Services”

— Independent review of reclassified expenditures by the Parliamentary Budget Officer

— Outcomes-based investment criteria, focusing on productivity, growth, and global competitiveness

Canada has all the tools: talent, an abundance of natural resources, and low-cost energy to thrive in a competitive global economy.

But to do so, we need streamlined, bold, and growth-oriented policy frameworks. Facing great uncertainty, the choices are stark. Should the government continue to be our largest employer, with an administrative state deciding winners and losers?

Or should it get out of the way?

Either way, we need honest budgeting and transparency. Mark Carney’s worldview, as sophisticated and well-meaning as it may be, prescribes a policy regime of government intervention, central design, and fiscal opacity.

Canadians deserve better: A government that trusts markets and tells the fiscal truth.

— Dr. Gary Edwards is a business strategist specializing in data-driven decision-making in complex organizational and regulatory environments.