Carney's bet on economic growth — and the risks that come with it
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that → come → it
If the investments don't pay off, Canada's debt load leaves it exposed
Mark Carney is making a bet.
He believes massive public investing now will position the Canadian economy to grow in spite of the trade war and the shifting winds of global geopolitics.
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economy → pay → geopolitics
By the 2030-31 fiscal year, the federal government will shoulder $85.5 billion in annual public debt charges.
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government → shoulder → charges
By then, Carney hopes the bet will have paid off and the economy will have undergone a transformation.
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economy → hop → transformation
"[Ottawa] is borrowing money for these major projects, hoping that it really jump-starts the economy," said Sahir Khan, executive vice-president of the Institute of Fiscal Studies and Democracy at the University of Ottawa.
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Khan → borrow → Ottawa
Khan says the risk is the economy shifts and macro trends change and leave Canada holding a pile of debt that never actually catalyzed growth or investment or created actual jobs.
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that → say → jobs
They're done when the projects actually get financed, people get hired and we see economic activity," said Khan.
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Khan → do → activity
Why many experts are backing Carney's plan
Most experts, including Khan, believe the government's plan is a good idea.
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plan → back → Khan
They say Canada has not taken steps to boost investment and productivity in years and it shows.
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it → say → years
The economy was weak before the trade war began; in 2022, the Bank of Canada warned productivity was reaching emergency, "break glass" levels.
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productivity → begin → levels
Carney says his plan will address productivity, bring in investment for major projects that will create revenue and build jobs.
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that → say → jobs
He says the cost of that is clear, but manageable.
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cost → say → that
The key plank to that is the so-called productivity mega-deduction.
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plank → call → that
That alone is expected to encourage businesses to invest in their companies.
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That → expect → companies
It brings Canada's marginal effective tax rate to the lowest in any G7 country.
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It → bring → country
There's also a new Canada growth incentive, an exemption from capital gains that allows entrepreneurs to avoid taxes on up to $15 million in capital gains if those funds are reinvested in a Canadian business.
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funds → be → business
But those measures cost a lot of money.
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measures → cost → money
The productivity-mega deduction alone will cost some $36 billion over five years.
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deduction → cost → years
Carney told CBC News after the budget that his government is already taking measures to bring the deficit down.
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government → tell → deficit
We've got spending under control, shifting to invest to be masters of our own destiny.
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We → get → destiny
Canada's moving forward is a fantastic day for the country," said Carney.
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Carney → move → country
But the risk isn't just that these bets don't turn into shovels in the ground or actual jobs.
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bets → turn → ground
Adam Chambers, Conservative shadow critic for innovation, science and industry, worries what happens if some other global event crashes into the economy while we have taken on so much debt to deal with the current crisis.
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we → worry → crisis
There's no question the probability of there being an event is rising.
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probability → be → ?
Certainly the debt markets would suggest that there is some volatility happening," he said.
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he → suggest → ?
The federal government has touted what it calls Canada's "fiscal capacity."
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it → tout → what
Canada has not borrowed nearly as much as other advanced economies and, as a result, the borrowing costs here are lower than they are in many other jurisdictions.
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they → borrow → jurisdictions
But the list of unexpected events that have changed the economic landscape and made debt riskier is a long one.
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debt → change → landscape
But if the government is wrong, then the financial health of the country could deteriorate actually quite quickly," he told CBC News.
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he → deteriorate → News
Chambers says those rising debt service payments should give everyone pause.
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payments → say → pause
By the end of the budget's projections, the deficit will be lower, the debt to GDP ratio will remain within the government's guardrails.
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ratio → remain → guardrails
But those debt service payments will be at $85.5 billion and sit as the second largest single expenditure in the budget.
And all that a full two years after the end of Donald Trump's term as president.
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payments → sit → president
The Aporia
