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The Liberal Party's Spending: A Game-Changer for Progress or a Recipe for Disaster?

(Photograph of Trudeau by David Kawai)

It was 2015 when Justin Trudeau led the Liberal Party to one of the most significant election wins in its history. Justin Trudeau led the Liberals to the party’s second-largest seat count in Canadian history. The Liberals won 148 seats more seats in 2015 than in 2011. Trudeau promised change, Trudeau preached “positive politics” and was coming into the election as a young progressive looking to dethrone the olden and bigoted ways of Stephen Harper. His campaign focused on protecting progressive social values, legalizing marijuana, reforming the electoral system (which he hasn’t done), and passing key liberal transfer payment policies like the Canada Child Benefit.

Justin Trudeau promised change; and change he has certainly delivered. But that change comes with a fiscal price, which Canadians will pay for years to come. 

From legalizing marijuana, introducing the Canada Child Benefit, increasing payments for retirees, healthcare expansion, a national dental care plan, a national child care program, historic funding for Indigenous peoples, $10s of billion committed to the environment and climate change, and record investments in industry. 

All this new spending for programs has led to a large increase in both federal spending year over year and the number of public servants required to upkeep such policies. CBC News reports that the cost of Trudeau’s government is spending $151 billion more per year than before his reign in office. His government has also marked a 30% increase in federal workers, from a previous total of 257,000 in 2015 to over 335,000 in 2022. Naturally, as the government looks to expand its role in people’s lives, the more money and people the government needs to ensure program implementation and preservation. 

Although the government loves to show off its financially healthy books, the plain truth is that Canada’s total debt has hit a record high of $1.2 trillion, nearly double compared to when Trudeau initially took power. Nearly $327 billion of this spending came from the emergency fiscal response during the pandemic. The rest however is from the government’s policy initiatives.

Canadians will be paying nearly $44 billion in 2023 in public debt charges (interest charges) and that is expected to increase to $50 billion by 2030. However, CBC notes that the current amount of interest charges is still lower as a percentage of GDP compared to the 1990s (2% in 2022 - 6% in 1991).

The New Age for the Liberal Party

Most political pundits recognize that Trudeau’s Liberal Party is fundamentally different than other past iterations of the Liberals party. Namely, Jean Chretien’s and Paul Martin’s Liberals. Chretien was Prime Minister for 10 years before Martin took reign from 2003 until 2006. Both of the Liberals are currently described as relatively centrist compared to Trudeau. Trudeau has shifted the Liberals to a bold centre-left and has forgotten the centrist ways of his predecessors.

But as Trudeau’s “sunny ways” resulted in too much spending? The Liberals may be looking to clinch back to the centre as inflation, the economy, and unprecedented government spending are increasingly scrutinized. With the government now looking to balance its budgetary balance beyond 2028, the government has all but abandoned its initial promise to balance the budget by 2028. Is the government’s recent ploy of maintaining "fiscal responsibility" an attempt to return to the party's more centrist years?

Even though critics of the federal government argue that spending has been irresponsible and erratic. The government still maintains long-term fiscal sustainability, according to the Parliamentary Budget Office. The PBO estimates that the federal government could spend $45 billion more per year while maintaining fiscal sustainability. 

The PBO further states that “public debt is sustainable when it does not grow continuously as a share of the economy.” So as long as Canada’s economy grows faster than the share of debt it incurs, then the country will eventually be able to pay off its debt in the long term. 

Do Canadians Even Care about Government Debt? 

According to the latest polls, the government debt doesn’t even clinch the top 5 biggest issues for Canadians. Only 4% of Canadians think it’s the biggest issue for the country. And considering that government debt will diminish over time, this issue will likely subside to near irrelevancy for Canadians. If Canadians are reluctant to even classify debt as a major issue at a time when the government is at record highs, then it’s unlikely the issue will be any more important in the future when the debt reduces. 

The Liberal's childcare program alone costs taxpayers nearly $10 billion a year starting in 2026 and dental care comes in at $4.4 billion starting in 2025. These programs also required initial investments of $30 billion and $14 billion respectively to get them up and running.

But from the standpoint of the average citizen, are Canadians willing to give up or reduce funding for key programs in exchange for less debt? Most certainly not. Canadians have waited decades for policies like childcare and dental care, At the end of the day, having affordable quality childcare for children and healthy teeth for 9 million Canadians is a fundamental good for the country. Any debt incurred as a result of that is likely an afterthought for any person. To that point, any future government will find it impossible to defund or repeal such legacy programs.

And indeed, Trudeau is likely to take advantage of the social benefits of his policies. In a recent interview with ‘Tout le monde en parle’, Trudeau’s rhetoric indicates that he is staunch in defending his spending by appealing to why those policies were necessary for the social good of the country. Trudeau argues that spending was necessary during the pandemic, as is spending on keeping teeth healthy and implementing a national childcare program. Against such reasoning, any critic will have a hard time arguing against a deliberate effort by the Liberals to advance the social good.

Spending $56 billion for clean tech tax breaks may be expensive, but it supports Canada’s commitment to reaching net-zero emissions by 2050. Any reasonable Canadian would likely agree with the spirit of why the tax breaks exist, even if the spending amount is higher than they are comfortable with. Climate change will bite Canada sooner or later so any effort put in now will have lasting environmental and economic cost savings on a much warmer future Earth.

Stakeholder Capitalism

Knowing all this, one cannot truly believe that the Liberals are far gone from the clutches of centrist politics. The Liberals are still very much a party that worships ‘stakeholder capitalism’; ensuring that all sides of the political spectrum are satisfied with any policy enaction. 

Budget 2023 is a clear example of this, with the Conservatives being the exception, the social democratic NDP praised the advancement of key social programs, and Canada’s industry leaders have praised the Budget’s provisions to support clean tech development. Considering both sides, the Liberals have struck a balance between what the country's economy requires for ‘greenification’ while simultaneously advancing key social policies for everyday Canadians.

For the NDP, they don't seem concerned with spending because as long as the Liberals compromise on passing key NDP priorities, the NDP gains reputable talking points for the next election. Canadian industry also doesn’t seem concerned as long as government money benefits them. The only primary complainant of the party's spending is the Conservatives and their voter base. Outside of that, not many factions within Canada’s political discourse care much about the country's debt or deficit balance; even if it’ll have lasting effects on taxpayers for decades to come.

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