Those hoping for a big-splash budget will be disappointed by what Mark Carney and co. have delivered in “Masters of our destiny,” the new fiscal plan outlining the government’s priorities and policy direction.
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Carney → hop → priorities
With nearly $142 billion in new spending over five years and rapidly growing debt charges, the document is not exactly a model of fiscal restraint, but nor is it as transformative as might have been expected by those claiming Canada is facing an unprecedented moment of existential threat.
uncertain
Canada → grow → threat
As for the big-picture takeaways, we’ve once again gathered some of the best and brightest at The Hub to dig into the details and offer their immediate reactions to Budget 2026.
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we → gather → Budget
Trade tensions have given Ottawa leeway to make tough, forward-looking trade-offs and fundamentally rethink the country’s economic priorities.
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tensions → give → priorities
Beyond the previously announced megadeduction (of which I am very supportive), this budget largely squanders that opportunity.
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budget → announce → opportunity
I was particularly disappointed to see how little the income tax system changed.
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system → disappoint → little
Broad-based tax relief is the most effective way to make life more affordable; preventing brain drain and attracting foreign talent requires top brackets that are competitive with the U.S. And Old Age Security, which places an increasingly unfair load on younger taxpayers, remains on an unsustainable trajectory.
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which → base → trajectory
Earlier this week, I wrote in The Hub that Ottawa’s underlying fiscal position had improved remarkably.
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position → write → Hub
That opened the door to much smaller deficits.
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That → open → deficits
But instead of borrowing less, the government opted to move into all of that fiscal space.
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government → borrow → space
On their own, stronger economic and fiscal conditions would have shrunk projected deficits dramatically.
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conditions → shrink → deficits
The chart below shows what the federal budget balance would be if the government had taken no new policy actions since Budget 2025.
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government → show → Budget
By my estimate, this year’s deficit would be $28.1 billion, not the $62.3 billion the budget projects.
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budget → project → estimate
Next year, it would fall below $15 billion.
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it → fall → billion
Instead, the government projects $62.5 billion.
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government → project → billion
By 2030–31, choices account for about three-quarters of the projected $53 billion shortfall.
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choices → account → shortfall
It is not a sign of underlying economic or fiscal weakness.
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It → underlie → weakness
That doesn’t mean those choices lack merit.
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choices → mean → merit
By far the largest contributor over the next five years is letting businesses immediately and fully expense most of their capital investments.
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businesses → let → investments
That’s a very welcome policy change that will very likely help boost Canada’s economy.
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that → ’ → economy
Others include a boost to the GST credit, a suspension of the gas tax, and higher military spending.
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Others → include → tax
But the large deficits ahead come from choices, not circumstances.
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deficits → come → choices
That’s a key point worth keeping in mind.
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That → ’ → mind
It would be too much to say “meet the new boss, same as the old boss” in response to the newly released budget—the emphasis on growth is an important shift, and revenues are buoyed by high global energy prices thanks to the Iran War.
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revenues → say → War
But a closer read reveals worrisome continuity on fundamental policy issues.
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read → reveal → issues
To name just two, the government still anticipates the arrival of hundreds of thousands of new temporary and permanent residents in the coming year, while the largest single expense item will be for OAS payments.
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item → name → payments
Reflecting on the connection between the two may give some clue to how this government really sees the future of Canada.
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government → reflect → Canada
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The debt and mastery of our fiscal fate
By Livio Di Matteo, professor of economics at Lakehead University
The 2026 federal budget is as noteworthy for what it does as for what it fails to do.
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it → view → what
It promotes an ambitious investment super cycle with a productivity mega deduction, an entrepreneurship capital gains reinvestment incentive, and a billion-dollar strategic response fund for large-scale research and development projects.
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It → promote → projects
At the same time, there is no comprehensive tax reform proposal that would broaden the base and lower rates for all Canadians and businesses to kick-start economic activity.
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that → be → activity
The Income Tax Act is being amended to increase the installment threshold from $3,000, set in 2008, to $7,500, reducing the compliance burden.
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Act → amend → burden
Is it any wonder that self-employed and small business numbers have declined in recent years?
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numbers → employ → years
All things given, Canada’s employment and GDP growth are doing better than anyone might have expected two years into a trade war with our largest trade partner.
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anyone → give → partner
At the same time, part of the reason is a surge in deficit-financed government operating spending along with assorted capital spending initiatives amounting to $37.4 billion in 2025–26, $58.8 billion in 2026–27, and over $70 billion each year after to 2030–31.
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part → finance → 2030–31
The operating deficit for 2026–27 is $62.2 billion, and by 2030–31 it is projected to improve to $52.9 billion.
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it → project → billion
The accumulated deficit from 2025–26 to 2030–31 will be $327.9 billion, but the increase in the net debt will be $524 billion, bringing that figure to $1.92 trillion by 2030–31.
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increase → accumulate → 2030–31
It remains that the splitting of the budget into capital and operating components, combined with hundreds of billions in massive capital project spending, has meant that the net debt will increase by much more than the operating deficits might suggest.
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deficits → remain → more
Graphic credit: Janice Nelson
A growing debt means growing debt charges and an increase in the share of revenues going to service the debt.
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debt → grow → debt
A 1990s fiscal crisis it is not, and yet, as the accompanying figure illustrates, debt charges were $20.4 billion in 2020–21 and are projected to quadruple to $85.5 billion by 2030–31, while the proportion of revenues going to debt service will double from 6.4 percent to 13.6 percent.
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proportion → illustrate → percent
The 2026 federal budget purports to make us masters of our own destiny but crucially glosses over the fact that growing debt and rising debt-service costs are not necessarily the best long-term approach for either individuals or countries seeking to pave their own path forward in the world.
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debt → purport → world
…and 25 more, not listed.
The Aporia
