“Maitre chez nous” — “master in our own house” — was a rallying cry of Jean Lesage’s Quiet Revolution, a period of rapid modernization and reform in Quebec in the 1960s. Mark Carney first tried it out a year and a half ago in the shadow of Donald Trump’s America and a newly anglicized version — “masters of our destiny” — adorns the Carney government’s second budget.
“The moment in front of us is serious,” Finance Minister François Philippe-Champagne said in presenting the budget on Thursday. “The moment demands an ambitious plan to be masters of our destiny; to be maîtres chez nous.”
Carney has never claimed to be a revolutionary. Champagne’s suggestion earlier this week that this week’s budget was about “changing Canada’s growth model” is perhaps as close as the Carney government will come to declaring a rousing overthrow of the old order.
But perhaps the Carney government’s second budget can be said to be another step in the prime minister’s own version of a quiet revolution.
The primary front in the revolution remains that “growth model.”
The single largest line item in this budget is the “productivity mega-deduction,” a previously announced measure that cuts the effective tax rate on new business investment. Over the next five years it is expected to cost the federal treasury approximately $36 billion, a quarter of all new spending in the budget. Paired with a new capital-gains exemption for entrepreneurs, the government hopes the “mega-deduction” will kickstart an “investment supercycle.”
Nearly $9 billion is set aside for boosting the deployment of clean electricity — the backbone of Carney’s climate agenda — and there is a commitment to work with provinces to provide further financing going forward. Over $2 billion is set aside for transforming the forestry sector, and $1.7 billion for the development of critical minerals. There is money as well for the nuclear industry and building new charging infrastructure for electric vehicles.
The government will fully fund and construct the Mackenzie Valley Highway project in the Northwest Territories and support two hydro projects in the Yukon. It is moving forward with plans to privatize some of the operations of Canada’s biggest airports and it will begin inviting Canadians to invest in a new sovereign wealth fund.
This is the continuation of an agenda that champions the ideas of investment and building things — a tonal and now fiscal shift away from the Trudeau era.
However much this might amount to a revolution, it is also a long-term plan that may only start to be felt in the medium term. In the meantime, the short term cries out for attention.
Wrestling with affordability
To the affordability concerns that may define this moment as much as the geopolitical upheaval, the Carney government’s latest response includes enhancing both the groceries and essentials benefit (previously known as the GST benefit) and the workers benefit (an income-based tax credit), two policy changes that will particularly benefit low-income households.
Those two policies will cost $6.7 billion. A previously announced suspension of the federal gas tax is projected to cost another $2.9 billion.
The Carney government is setting a goal of eliminating homelessness over the next decade and is putting $11.2 billion over the next five years toward that goal. New funds are also being put toward affordable housing and using federal land to build more homes — a lack of new housing construction remains one of the government’s most acute vulnerabilities.
Finance Minister François-Philippe Champagne drew applause and heckling from opposition members as he spoke on Thursday, promising a federal budget that will unlock Canada’s ‘full growth’ potential.
Though it might make fewer headlines, the budget also includes $26 billion over five years for housing, infrastructure and social supports in Indigenous communities.
Looming over all such new expenditures are the ever-lingering questions about the sustainability of the federal government’s balance sheet.
Fretting about the fiscal framework
Due to higher oil prices, the federal government managed to record a lower-than-projected deficit for the last fiscal year and it has also managed to avoid projecting higher deficits for the next four years than it had in the spring. The debt-to-GDP ratio — the size of the federal debt when measured against the size of the Canadian economy — is now projected to settle in around 40 per cent, three points lower than what the Carney government predicted a year ago.
In that sense, it might vaguely claim to have held its widely drawn line on the deficit.
But the federal government still shows a deficit of $53.4 billion in 2029. And the cost of servicing the federal debt is now showing the sorts of big numbers — $78.4 billion in 2029 — that tend to attract attention.
“This budget would be better titled, ‘masters of increasing debt and interest payments,'” Michael Chong, the Conservative finance critic, charged after Champagne had concluded delivering the budget. “The budget fails to establish a credible fiscal anchor to reduce the debt and balance the budget.”
Conservative Leader Pierre Poilievre says the Liberals should have named the budget, ‘mastered by debt,’ saying their plan will inflate the prices of essentials and make life more unaffordable for Canadians.
The Carney government argues it has reduced the cost of government operations such that the borrowing it is doing will be put toward “capital” spending — building the sorts of things that should grow the economy. (The parliamentary budget officer has quibbled with the government’s methodology.)
The cost of servicing the debt also doesn’t look like a crisis when measured against the economy. As a share of GDP, the public debt charge will be 2.2 per cent in 2030. It was higher as recently as 2006. And it remains much lower than it was when Canada experienced a real fiscal crisis in the mid-1990s (when it peaked at 6.5 per cent).
In the long term, the federal government might face real fiscal questions, particularly as defence spending is projected to increase. For the moment, the Carney government is presumably hoping that economic growth will drive increased revenues.
But it also remains the case that no party in the House of Commons is really particularly interested in balancing the budget.
Can Carney’s revolution show results?
The greater challenge for Carney to master is results — demonstrating that the style, direction and extent of his government’s spending has been wise and productive.
“All of this borrowing isn’t showing up in the numbers,” Chong said. “Business capital formation has declined in five of the last six quarters. Unemployment remains a full [percentage point] above pre-pandemic highs and GDP is flatlining.”
The Liberals might plead that the Canadian economy is currently beleaguered by American tariffs. And opinion polling conducted over the last year and a half would suggest that Canadians don’t blame the prime minister for recent economic troubles.
It also might be fairly argued that building big things — ports, transmission lines, businesses, a new national economic growth model — takes time.
The challenge for the Carney government over the next three years — or between now and the next federal election — is to execute on its plans, demonstrate progress and find proof points that make the case that Canada is, in fact, mastering its destiny.
Revolutions may thrive on energy, spirit and purpose. But they can only be sustained by results.
