Canada’s Fall Budget 2025: Between Bold Promises and Fiscal Reckoning

Canada’s Fall Budget 2025: Between Bold Promises and Fiscal Reckoning by Maj (ret’d) CORNELIU, CHISU, CD, PMSC FEC, CET, P.Eng. Former Member of Parliament Pickering-Scarborough East On November 4, Prime Minister Mark Carney will table his government’s first budget since assuming office. Canadians should be aware that this will not be a routine fiscal update. This budget will be nothing less than a test of credibility; a balancing act between urgent promises and the cold arithmetic of national finances. For years, Ottawa has grown accustomed to deficit financing as a political safety valve. Every government since the pandemic has justified red ink with appeals to crisis. However, the Parliamentary Budget Officer (PBO) has found that the federal budget deficit will grow beyond previous projections. The total of just over $132 billion between 2025 and 2028 projected in Budget 2024 has escalated to the nearly $255 billion now projected for those years. Moreover, the debt-to-GDP ratio — the Liberals’ so-called “fiscal anchor” — is no longer guaranteed to decline. Much of this is driven by a considerable decline in federal tax revenues due to the personal income tax cut and other measures, as well as even larger increases in federal program spending. Total operating spending alone (excluding many federal transfers) is projected to be more than $10 billion per year higher than previously anticipated. Adding unannounced measures back into the PBO estimates will make cumulative deficits over the next four years exceed $360 billion—almost three times the amount last year’s budget anticipated. Even more concerning is the fact that federal debt is set to grow at a faster rate than the economy. In recent testimony to a parliamentary committee, the PBO noted that this was the first time in 30 years he had seen a projection where this key measure of fiscal sustainability continued to rise over time. Simply put, federal finances are at a precipice. This should trouble Canadians. Debt is not abstract. It is a mortgage on future taxpayers; a quiet siphon on every program we prize. The more Ottawa borrows, the more billions they sink into debt servicing, leaving less for housing, health care, or pensions. To govern as if fiscal gravity does not exist is reckless, and Prime Minister Carney knows it. Nowhere are expectations higher than in housing. For years, governments of all stripes have promised affordability but delivered little relief. Prime Minister Carney has already unveiled the Build Canada Homes initiative, a sprawling plan to accelerate construction. In this budget, the Liberals are expected to sweeten the pot with tax credits, subsidies, and incentives to coax builders and pension funds into action. However, here lies the contradiction: pouring billions into subsidies without tackling municipal bottlenecks, zoning gridlock, or labour shortages risks throwing money into a void. Canadians want roofs, not rhetoric. Unless Ottawa coordinates with provinces and cities to streamline approvals and mobilize labour, the housing crisis will remain a slow-burn national scandal. Also, beyond our borders, allies are losing patience. NATO’s 2 % of GDP target is no longer aspirational; it is a demand. The liberal government is poised to announce significant defence spending increases — new equipment, recruitment campaigns, and modernization of our aging forces. Canadians seems to be split on this. Many resent the idea of billions for tanks and jets while mortgages crush families. Yet the reality of a turbulent world — Russia’s ambitions, China’s assertiveness, American unpredictability — leaves Ottawa with little choice. Defence spending is not charity; it is insurance. Ignoring it only postpones and increases the bill. Whispers of a GST hike hang over this budget like a storm cloud. No government relishes raising taxes, but arithmetic is unforgiving. With deficits swelling, revenue must come from somewhere. Closing corporate loopholes, trimming boutique tax credits, and modestly raising consumption taxes are all on the table. Opponents will howl, but consider this: Canadians already pay the price of deficits, not in taxes today but in higher borrowing costs. A transparent, modest tax increase coupled with serious spending reform would be more honest than endless borrowing masked as generosity. Pre-budget consultations have revealed widespread anxiety about affordability. Groceries, rents, and energy bills are draining households. The government will likely respond with targeted relief measures — perhaps expanded child benefits or new credits for low-income families. These are politically irresistible, but they raise uncomfortable questions: how many more patchwork programs can Canada afford? And do such measures solve the underlying problems — productivity stagnation, weak wages, and supply shortages — or merely mute the symptoms for another year? For decades, Canada has lagged in productivity growth. Our economy too often relies on debt-fuelled consumption rather than investment. Prime Minister Carney, a former central banker with global gravitas, knows this better than anyone does. Yet productivity is the unsexy word missing from political stump speeches. If this budget does not deliver bold measures — from R&D incentives to trade diversification beyond the United States — then Canada will continue its slide toward mediocrity. Housing relief may win headlines; productivity reform would win the future. All of this unfolds under the shadow of minority politics. The Liberals must craft a budget palatable not only to their base but also to opposition parties whose votes are essential for passage. That means sprinkling in enough social supports to appease the New Democrats, while avoiding measures so fiscally reckless that Conservatives can paint the government as irresponsible. Budgets in minority Parliaments are less about economics than about survival. Yet survivalism cannot be Canada’s economic plan. Ultimately, the Fall Budget 2025 is a referendum on credibility. Can the Liberals admit that fiscal resources are finite? Can they deliver tangible progress on housing without throwing money into bureaucratic black holes? Can they prepare Canada for geopolitical storms while safeguarding households at home? Prime Minister Mark Carney’s reputation as a disciplined, globally respected technocrat will be on the line. If he bends to the temptation of pleasing everyone, the result will be a document that satisfies no one and deepens the deficit hole. If he seizes the moment with a clear, tough-minded plan — pairing targeted investments with genuine spending reform and honest revenue measures — he could reset Canada’s trajectory. This upcoming budget is not simply about numbers. It is about the social contract between Canadians and their government. Do we believe Ottawa can make hard choices, or only easy promises? Do we measure success by the billions spent, or by results delivered? Come November 4, Canadians will hear more than a speech. They will hear whether their government has the courage to level with them, or whether it will continue the comfortable illusion that Ottawa can spend without consequence. The country deserves better than illusions.