Mark Carney's November 4 Budget in Context: The Politics of Deficits and the Futility of Hype

Introduction

The Canadian federal government, under Prime Minister Mark Carney and Finance Minister François-Philippe Champagne, is preparing to table its first budget on November 4, 2025.¹ This event, confirmed officially by the Government of Canada and reiterated in public statements by Champagne, represents not merely the routine presentation of fiscal plans but a defining test of the government's credibility, resilience, and vision. The significance of this budget is heightened by the fragile context: a minority Liberal government, a political environment shaped by the resignation of Justin Trudeau earlier in 2025, an ongoing struggle with affordability pressures, and a backdrop of profound global instability.

The controversy has largely coalesced around the size and scope of the expected budget deficit, with estimates ranging from $60 billion to over $90 billion for fiscal year 2025–26. Independent institutions such as the Parliamentary Budget Officer (PBO) and think tanks including the C.D. Howe Institute and the Fraser Institute have warned that the deficit outlook is larger and less controlled than previously communicated.² Yet much of the debate has been characterized less by substantive analysis than by performative hype—a fixation on deficit figures and fiscal anchors that obscures the larger truth: Canada is navigating an era of unprecedented uncertainty in which adaptability may matter more than rigid discipline.

The Manufactured Crisis of Deficit Projections

The immediate flashpoint is the government's willingness to run a large deficit in response to extraordinary circumstances. According to the Fraser Institute, based on the Liberal platform, Canada is already on track to run cumulative deficits of $224.8 billion over the next four years.³ More pointedly, interim Parliamentary Budget Officer Jason Jacques told Parliament that the government's fiscal trajectory causes "considerable concern," particularly in the absence of clear fiscal anchors such as debt-to-GDP targets.⁴

However, recent developments have exposed the inherently speculative nature of these projections. Prime Minister Carney acknowledged on Sunday that the budget will show a larger deficit than last year, given the new spending and tax cut commitments the government has made, attributing part of the increase to tariff wars and resulting economic shocks. This admission underscores a fundamental reality that deficit hawks consistently ignore: in periods of acute external volatility, precise fiscal forecasting becomes not merely difficult but meaningless.

The obsession with deficit figures functions as a form of analytical escapism, allowing critics to retreat into the false comfort of numerical precision when confronted with genuine uncertainty. The Fraser Institute's own research reveals that Canada experienced its worst five-year decline in GDP per capita since the Great Depression, with a 2.0% decrease from 2020-2024. Against this backdrop of structural economic deterioration, the fixation on whether the deficit will be $70 billion or $90 billion represents a profound misallocation of analytical attention.

Such warnings echo past deficit debates. The Harper government's 2009 stimulus budget prompted similar accusations of recklessness, as did Justin Trudeau's pandemic-era deficits in 2020–21. Yet, both episodes ultimately underscored a paradox: the deficits that critics condemned as unsustainable became broadly accepted as necessary when judged against the scale of crisis. To elevate today's projections into a narrative of looming collapse risks repeating the same error of historical amnesia.

The Illusion of Fiscal Anchors in Turbulent Times

The absence of fiscal anchors has become a recurring theme of criticism, with Jacques stating plainly that "I don't know that the government currently has fiscal anchors, which, of course, causes the people that I work with a considerable degree of concern at this point." Under former Prime Minister Justin Trudeau, the Liberal government had set fiscal anchors—capping the annual deficit at one percent of GDP and maintaining a declining debt-to-GDP ratio—to indicate Ottawa was responsibly managing public debt.

During a heated question period exchange with Conservative Leader Pierre Poilievre, Carney argued that the government does indeed have fiscal anchors guiding the budgeting process, though he dodged specific questions about the size of the federal deficit. This evasion, while politically awkward, may actually reflect sound economic judgment rather than obfuscation.

The demand for anchors presumes stability—a luxury unavailable in the current environment. Anchors are tools for steady seas; in volatile waters they risk either becoming irrelevant constraints on necessary adaptation or empty promises that undermine credibility when circumstances force their abandonment. As the C.D. Howe Institute noted in September 2025, "Canada faces a serious economic challenge—if not a crisis—emanating from the US tariff threat," requiring fundamental rethinking of economic and fiscal models.

The insistence on rigid fiscal anchors in such conditions may paradoxically increase uncertainty rather than reducing it. When external shocks make adherence to predetermined fiscal targets impossible, the mere existence of such targets becomes a source of policy confusion rather than clarity. Critics who demand fiscal anchors while simultaneously acknowledging unprecedented external volatility are, in effect, demanding that policymakers pretend certainty exists where none is possible.

Strategic Investment Versus Cyclical Constraint

The government has committed itself to what Champagne characterized as "generational investment in Canada."⁵ The platform includes measures expected to catalyze $500 billion in new investment over the next five years, with the government putting forward almost $150 billion on a cash basis to support that goal and kickstart private sector activity. The platform also includes increased spending on defense modernization, large-scale infrastructure, and a middle-class tax cut reducing the lowest marginal personal rate from 15 percent to 13.5 percent.⁶

Critics counter that such policies are mistimed given Canada's economic performance. The Fraser Institute's analysis confirms that over the 2020-2024 period, Canada's standard of living declined as GDP per person decreased by 2.0%, representing the worst five-year decline since the Great Depression.⁷ The C.D. Howe Institute has identified Canada's poor productivity performance as attracting considerable attention, with ongoing challenges including declining labour productivity and mismatches between labour force expansion and job creation. Against this backdrop, new fiscal commitments appear, to opponents, as evidence of misguided priorities. Conservative leader Pierre Poilievre has vowed to identify "billions of dollars" in potential cuts to the federal bureaucracy⁸ and has refused to pledge support for the budget until its full details are revealed.⁹

However, to judge fiscal policy solely through a cyclical lens—stimulus versus restraint—ignores the structural imperatives at play. Even the OECD recognizes that Canada faces "significant headwinds from tariffs with the United States" while dealing with high household debt and housing affordability challenges. Carney's approach reflects an attempt to reposition Canada within a shifting global order marked by trade fragmentation, demographic transitions, and energy security realignment.

The productivity crisis that critics cite as evidence against increased spending may, in fact, support the case for strategic investment. The C.D. Howe Institute's own research suggests that removing policy-relevant internal barriers to trade alone could raise Canada's GDP by as much as 4 percent—$120 billion in output, or up to $2,900 per person. Such findings indicate that Canada's economic challenges stem not from excessive government spending but from structural inefficiencies that require coordinated public investment to address.

The Futility of Precision in Uncertain Times

The timing of the budget—initially expected in October but moved to November—has drawn criticism from opposition MPs who accuse the Liberals of spending "blindly" in the absence of a formal budgetary framework.¹¹ This critique fundamentally misunderstands the nature of policymaking under uncertainty.

The Carney government assumed power amid the political upheaval of Trudeau's resignation and the turbulence of an increasingly volatile economic landscape. The PBO's June 2025 monitor showed the government's budgetary balance for 2024-25 estimated at a deficit of $46.0 billion (1.5 percent of GDP), though this projection explicitly excluded "the impact of tariffs or retaliatory measures." Any budget presented earlier in the year would almost certainly have been rendered obsolete by subsequent developments in the U.S.-Canada trade relationship.

By waiting until November, the government has sought to anchor its fiscal plan in a more informed understanding of evolving circumstances. Far from recklessness, the delay may reflect prudent governance in conditions of drastic uncertainty. The alternative—presenting detailed fiscal projections based on assumptions that everyone knows may be invalidated within weeks—would represent a triumph of procedural formalism over substantive policymaking.

Political Fragility and the Confidence Game

The budget's political stakes are heightened by the minority status of Carney's Liberals. In Canada's parliamentary system, the budget is a matter of confidence. Failure to secure its passage could topple the government and trigger another election.

The Conservatives are unlikely to provide support, given their consistent opposition to deficit spending. The NDP, while historically willing to engage in confidence-and-supply arrangements, faces growing pressure from a base frustrated with inflation and cost-of-living concerns. Polling by Abacus Data and the Angus Reid Institute throughout 2025 indicates that affordability, housing, and healthcare now dominate public priorities, outstripping even foreign policy concerns about Trump's tariffs.¹² In this climate, supporting a budget that expands deficits could expose the NDP to accusations of fiscal irresponsibility.

Thus, while the deficit controversy may be overblown in substantive economic terms, it could nevertheless prove decisive in political terms. Opposition narratives of "reckless Liberal spending" may resonate with an electorate already weary of economic insecurity, regardless of whether such narratives withstand analytical scrutiny.

The irony is palpable: the very uncertainty that makes rigid fiscal targets inappropriate also creates political pressure for their adoption. Voters, like markets, crave the illusion of certainty even when reality offers none. Politicians who acknowledge this uncertainty honestly—as Carney has done in his recent admissions about deficit size—risk appearing weak or indecisive, even when such honesty represents intellectual courage.

The Deeper Structural Challenge

Beyond the immediate political theatre lies a more fundamental question: whether Canada's economic policy framework remains adequate for contemporary challenges. Critics of excessive focus on GDP per capita argue that this measure "is not appropriate for measuring human well-being or economic progress," suggesting that the entire framework for evaluating fiscal policy may be misaligned with actual policy objectives.

Recent Statistics Canada data showing that "real GDP per capita increased 0.2%, while business labour productivity posted its largest increase (+0.6%) in four quarters" hints at the complexity underlying simple deficit narratives. Economic performance varies significantly across different measures and timeframes, making sweeping pronouncements about fiscal sustainability inherently suspect.

The obsession with deficit figures obscures more fundamental questions about Canada's economic strategy. As the C.D. Howe Institute observed, Canada needs "a new economic and fiscal model" rather than incremental adjustments to existing approaches. Such model reconstruction cannot occur within the artificial constraints imposed by rigid fiscal targets established during more stable periods.

Conclusion: Embracing Uncertainty as Policy Wisdom

As November 4 approaches, the focus on the Carney government's budget deficit risks obscuring more than it reveals. While the size of the deficit matters for long-term sustainability, its political inflation into a symbol of mismanagement reflects partisan theatre rather than serious economic analysis.

Canada faces a storm of uncertainty: shifting global trade patterns, declining productivity, demographic strain, and geopolitical instability. Recent developments have only intensified these challenges, with Carney explicitly acknowledging that tariff wars are contributing to larger deficits and the new Parliamentary Budget Officer expressing unprecedented concern about the absence of traditional fiscal frameworks.

In such conditions, adaptive governance may be more valuable than rigid adherence to anchors designed for calmer seas. The demand for precise fiscal targets in an environment of radical uncertainty represents not prudent planning but a form of analytical denial. To insist otherwise is to mistake the surface waves for the deeper currents reshaping the global economy.

What is truly senseless is not the deficit itself but the manufactured hype surrounding it. By turning fiscal projections into a spectacle, critics distract from the larger question: whether Canada is preparing itself to weather the next decade of turbulence. The recent confirmation that Canada experienced its worst five-year decline in living standards since the Great Depression suggests that traditional approaches to fiscal policy have already failed to deliver prosperity.

Mark Carney's test will not be judged by whether his 2025–26 deficit lands closer to $70 billion or $90 billion, but by whether his government can build the institutional, economic, and strategic resilience necessary for a profoundly uncertain world. In this context, the admission that deficits will be larger than expected—driven by external shocks beyond any government's control—represents not fiscal irresponsibility but honest acknowledgment of the constraints within which modern governments must operate.

The futility of deficit hysteria has never been clearer. Those who demand precision where none is possible, and anchors in unanchored seas, offer not wisdom but the dangerous comfort of false certainty. Canada's future depends not on hitting arbitrary fiscal targets but on maintaining the flexibility to respond to challenges that cannot be forecast, quantified, or contained within the neat categories of traditional budget analysis.

References

1. Government of Canada, "Canada's new government to release Budget 2025 on November 4, 2025," Canada.ca.

2. CBC News, "Budget watchdog sees 'considerable concern' over government's lack of fiscal anchors," September 2025.

3. Fraser Institute, "Upcoming federal budget likely to increase—not reduce—policy uncertainty," 2025.

4. The Hill Times, "New budget watchdog says 'deficit will absolutely be higher' than forecast, feds have no clear fiscal anchors," September 17, 2025.

5. CBC News, "Carney government to table first budget on Nov. 4," September 16, 2025.

6. Government of Canada, "Delivering a middle-class tax cut," Canada.ca.

7. Fraser Institute, "Canada's 'Ugly' Growth Experience, 2020–2024: Why GDP per Capita Declined while the Overall Economy Grew," 2025.

8. CTV News, "Poilievre says there should be 'billions of dollars' in cuts to federal bureaucracy," 2025.

9. CBC News, "Poilievre says he'll decide whether to support Liberal budget after seeing the numbers," 2025.

10. Fraser Institute, "Upcoming federal budget likely to increase—not reduce—policy uncertainty," 2025.

11. House of Commons of Canada, "Debates (Hansard) No. 11 – June 9, 2025 (45-1)," OurCommons.ca.

12. Abacus Data, "Between Scarcity and Stability: A Year-End Reflection on Canadian Public Opinion and the Road to 2025," 2025; Angus Reid Institute, "From Sunny Ways to his Final Days: How Canada changed in nine years of Justin Trudeau's leadership," January 7, 2025.