You’ve probably heard: The government just released its new budget – the first in a while – and it’s the talk of the nation. But what exactly is a budget and why does it matter? Let’s break it down!
What’s a Budget?
Canada’s federal budget is a plan for how the government will collect and spend money over the coming year, outlining priorities that affect everyone – from students and families to businesses and communities.
Why Does the Budget Matter?
A budget matters because it sets the direction for national spending and shows the government’s goals for the country, especially when tough choices need to be made. And as you know from class, we do need to make hard choices.
Why This Budget Really Matters
Canada’s economy is facing major challenges due to the slowing of the global economy, pre-existing productivity problems, and – of course – the ongoing trade war with America. As we’ve discussed, these problems threaten our prosperity now and in the future. This budget, according to the government, seeks to make “generational” investments in our nation’s long-term security. But generational investment? That’s pricey. And now you probably understand why this budget is getting so much attention.
Budget Highlights:
- Deficit and Spending: This year’s federal deficit is projected at $78.3 billion – a massive number that is almost double earlier forecasts. We’ll help put this into context in a moment, but what’s important to understand is that while the government is promising to cut programs and services – especially in the public sector (our bureaucracy) – they will be borrowing large amounts to increase investments in Canadian infrastructure.
- Cost of Living: This is the number one issue in the country and the budget aims to address the problem by cutting taxes and investing in the construction of new homes. The budget didn’t directly tackle the cost of food, which is a major driver of the cost-of-living crisis.
- Major Projects: As you know, the government is looking to speed up major nation-building projects, such as high-speed rail, new ports, and clean technology. The government will invest $51 billion in major projects and will be prioritizing the development of critical minerals.
- Environment: Investments in critical mineral resource development helps address climate change and the economy simultaneously, but could also negatively impact biodiversity. The proposed emissions cap will likely be scrapped, but stronger industrial carbon pricing is being promised. The government says it is trying to grow a clean economy while keeping Canada competitive.
- Military: The biggest ticket item in the budget is a massive investment in our military: over $80 billion. As we’ve discussed, Canada has long failed to meet our NATO commitments, impacting our trade relationships and leaving our country vulnerable to global threats. This investment aims to address multiple problems at once, but it won’t come cheaply.
Why Does Military Spending Matter?
Does the Deficit Matter?
In basic terms, the deficit is debt – money the government borrows that must be paid back, plus interest. It helps fund programs when tax revenues fall short, but more spending means more money that must bed repaid at a later date. Canada has a better reputation and lower debt ratios than some other G7 nations, making it easier and cheaper to borrow. Even so, as debt grows, the bill will eventually come due, which could lead to higher taxes or reduced public spending.
Expert Reactions – Budget Pros and Cons:
- According to economist Francis Fong, the push for big capital investments is bold, but there’s doubt about whether private businesses will invest as the government hopes. He notes “the budget didn’t adequately address the fundamental difficulty that firms in Canada face when it comes to tax and regulatory compliance,” which could slow job growth and business confidence.
- On the positive side, a panel at Ivey Business School argues that generational investments in infrastructure, defence, and technology position Canada to withstand global pressures and set up long-term prosperity, especially as the country adjusts to slower growth and rising security concerns.
- To help you reach your own conclusions on the budget and the issues we face as a nation, be sure to check out our series on Canadian sovereignty.
Next Steps: Confidence Bill and Minority Government
As you know from Social Studies, budgets are confidence bills. That means the government must pass the budget (receive a majority of votes in Parliament) or the government could fall, triggering an election. One problem, of course! The Mark Carney-led Liberal government is a minority government – they don’t have a majority of the seats in the House of Commons. Opposition parties might back the budget (unlikely), or some opposition members might abstain from voting (possible), allowing the Liberals to have a majority by default on this particular piece of legislation.
Floor Crossing?
There is another way for the Liberals to pass the budget. They could entice members of opposition parties to ‘cross the floor’ and join the Liberal ranks. This happens from time-to-time and, though controversial, is perfectly legal and democratic in our system of government. The Liberals are two seats shy of a majority in Parliament thanks to one Conservative MP, Chris d’Entremont, having already crossed the floor to join the Liberals and support the budget. Can Prime Minister Carney convince two more MPs to join with him, turning his minority into a majority? Stay tuned!
National Impact: Sovereignty and Key Issues
This budget lands against a backdrop of sovereignty threats, global instability, and environmental risks. Does the budget meet the moment? That’s not only a Parliamentary decision – we will have a say as well, whether in the coming months or years. But before we head to the polls, what’s your take? Is this a good budget? Is it too ambitious or not ambitious enough? Are we balancing environmental and economic challenges properly? What would you do differently?
As always, over to you!