One of the emerging narratives from this week’s federal budget is that Ottawa’s finances are in better shape than expected.
asserted
finances → emerge → shape
The deficit for 2025–26 came in well below the government’s earlier projection.
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deficit → come → projection
The implicit message is that the Carney government is exercising greater fiscal discipline than its spendthrift predecessor.
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government → exercise → predecessor
But if one looks more closely at the numbers, the story gets more complicated and strikes at the heart of Prime Minister Mark Carney’s own policy agenda—what we’ve previously called Carneynomics.
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we → look → what
The budget confirmed that last year’s direct program spending came in roughly $14 billion lower than projected in the spring economic and fiscal update.
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spending → confirm → update
But it’s not that the forgone spending has been permanently reduced.
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spending → ’ → ?
A lot of it is spending that was supposed to happen but didn’t happen and has been pushed into subsequent years.
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that → suppose → years
The following year provides useful context.
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year → provide → context
Year-over-year program spending is projected to rise by $44 billion or 8.9 percent in 2026–27.
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spending → project → 2026–27
The deficit in turn is set to increase from $39.3 billion to $62.3 billion—a jump of nearly 60 percent.
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deficit → set → percent
And it remains above $50 billion in every year of the forecast.
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it → remain → forecast
The government’s preferred interpretation depends on Canadians paying considerable attention to the revised numbers for last year and rather less to what follows.
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what → prefer → year
The improvement looks far less impressive when placed alongside the subsequent upward adjustments to spending and borrowing.
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improvement → look → spending
Yet treating this solely as a fiscal story misses its larger significance.
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treating → treat → significance
The gap between spending plans and actual expenditure raises questions about the political economy underlying the prime minister’s agenda.
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gap → raise → agenda
Ottawa is claiming credit for fiscal restraint that mostly reflects its inability to execute its own Carneynomics.
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that → claim → Carneynomics
As I’ve written before, Carney may understand the importance of capital formation and productivity better than his predecessor.
uncertain
Carney → write → predecessor
He seems to recognize that Canada needs more private investment to generate stronger growth and rising living standards.
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Canada → seem → growth
But Carney retains a distinctly progressive confidence in the state’s capacity to engineer economic and social outcomes.
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Carney → retain → outcomes
Over his 20 months or so as prime minister, his preferred policy instruments have frequently involved new programs, public institutions, and large pools of public dollars intended to “catalyse” private capital.
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instruments → prefer → capital
The 2026 federal budget suggests that Ottawa’s finances are healthier than expected, with a lower deficit and reduced spending.
uncertain
finances → suggest → deficit
However, a deeper analysis reveals that much of the supposed fiscal restraint is due to unspent funds being deferred to future years.
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funds → reveal → years
The projected increase in program spending for 2026-27 raises concerns about the sustainability of this fiscal narrative.
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increase → project → narrative
Prime Minister Mark Carney’s agenda, while aiming for increased private investment, faces challenges in execution and governance.
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agenda → aim → execution
The budget’s positive figures may mask underlying issues, prompting questions about the effectiveness of the government’s economic strategy.
uncertain
figures → mask → strategy
The Aporia
