Carney uses creative linguistics to explain artistic accounting and the costed Liberal platform

Trudeau government "investments" did not have the multiplier effects that Liberals claim will result from an additional $130 billion in spending, so colour this economist skeptical

Imaginary illustration of Liberal leader Mark Carney created by Grok

Normally, The Rewrite focuses on media. But we also like to do what other media don’t and there’s an election going on. So we invited a leading Canadian economist, Dr. Steve Ambler, professor emeritus of economics in the École des sciences de la gestion, Université du Québec à Montréal, to offer his impressions of the Liberal’s costed plan for Canada

Liberal leader Mark Carney unveiled his costed election platform on April 18 with billions of dollars in additional spending beyond what his predecessor, Justin Trudeau, had planned. On the weekend, he defended it by explaining to reporters that he knows it will work because “I’m an economist.”

So he is. But he’s also a politician.

I, on the other hand, am an economist unburdened by political ambitions and because of that I have reasons to believe it won’t work.

Carney claims that a Liberal government will balance the budget within three years. The plan shows a “Platform Deficit to GDP Ratio (operating)” of 0.01 percent in fiscal year 2028-29, the fourth and last year of the proposed platform.

The key word here is “operating.” The plan draws a distinction between the operating balance and “investments.” It is only by making this distinction that we get to a balanced budget. Creative accounting.

When it comes to investments, the plan proposes some $130 billion in additional spending, above and beyond what had already been proposed by the Trudeau government (the “baseline” scenario in the plan).

By adding in the projected deficits in the baseline scenario and the projected platform operating balance, we arrive at approximately $250 billion of new debt, and a higher deficit to Gross Domestic Product (GDP) ratio (1.35 percent in 2028-29) than in the baseline scenario (0.82 percent). Canada’s GDP was $2.14 trillion in 2024, so this represents an incremental debt of about 12 percent of 2024 GDP.

When asked if he was worried about the budget still being $60 billion in the red in 2028-29, Carney replied (translating from the French):

“We use the word spending, but in fact this is not spending. Most of these amounts listed in our platform are actually investments. ... We are not adding expenditures except to drive growth in private investment. And I know, I’m an economist, and with an investment of $500 billion the economic growth rate will rise.”

Add creative linguistics, combined with an appeal to authority, to Carney’s already creative accounting and you can see where this is going.

The ability of a new government to hit the projected deficit and debt ratios at the end of four years depends on realistic assumptions concerning interest rates, GDP growth, and spending. And those all depend on whether additional government spending translates into the claimed amount of higher private investment.

However, it is difficult or impossible to infer from the platform what assumptions it uses for GDP growth or interest rates. These have to be inferred from the numbers in the tables, and the information provided is insufficient.

Concerning GDP, the projected 0.01 percent operating surplus in 2028-29 has just one significant digit, so it could be as little as 0.0051 percent or as much as 0.0149 percent. The absolute dollar amount of the projected surplus is $222.4 million, so projected GDP could be as little as $1.4 trillion or as much as $4.3 trillion.

Lots of wiggle room.

Concerning interest rates, one set of numbers in the platform is potentially telling. The line “Incremental Debt Charges” presumably means interest payments on any additional debt. For 2025-26, this is given as $300 million. In that fiscal year, the platform projects an incremental deficit of a little over $15 billion ($35 billion in new investments less $20 billion in new revenues, the latter from tariff revenue on goods imported from the US). The implied interest rate on the new debt would therefore be 1.97 percent.

This is, to put it charitably, quite low. In April, Treasury Bill yields were 2.64 percent. It is possible that higher deficit to GDP and debt to GDP ratios than the ones used in Carney’s baseline scenario could lead to a deterioration in the perceived creditworthiness of the government, which in turn would lead to higher borrowing costs and higher debt charges.

Mark Carney is the new head of the party, but the Carney cabinet and most of the behind-the-scenes advisors are the same as under Justin Trudeau. It may even be the case that the platform (except for minor tweaks) was written before Carney became leader. And the Trudeau government had a pattern (since 2015) of underestimating its spending and its deficits. Matthew Lau of the Fraser Institute noted in 2024:

“If the Trudeau government is notable for planning astonishingly high levels of spending, it’s equally notable for overspending beyond its original plans. At all times - when they first took office in 2015, in the pre-pandemic years, and now - the Liberals have consistently raised their spending targets, then spent more than targeted.”

You can read Lau’s chronicling of systematic overspending here.

Furthermore, what are we to make of the investments that are supposed to achieve the higher rates of economic growth which in turn are predicted to keep the deficit to GDP ratio at 1.35 percent in 2028-29 and limit the increase in the debt to GDP ratio to 12 percent at the most? The Liberal platform is opaque on the exact nature of these investments. However, we can glean some information from the costing document.

Carney has said, “Perhaps pipelines but not necessarily pipelines.” He has also clearly said that his government will not repeal Bill C-69, the so-called “No more pipelines Act.” This is a strong hint that “perhaps” actually means “no way.” From these statements and his consistent stance on achieving net zero carbon emissions by 2050, we can infer that the new investment spending will not be designed to favour private investment in the resource sector, where Canada has a comparative and even an absolute advantage compared to its competitors.

New measures include $4.5 million for “Canada Pride,” $150 million more for the CBC, $250 million for “Protect more nature,” $500 million to “Proactively rehabilitate sensitive ecosystems,” etc. Some of this spending must include previously-budgeted spending from the baseline scenario. Otherwise it adds up to much more than the $130 billion in total additional spending. For some categories, “Previously announced funding” is subtracted off, but not for all of these categories.

Private investment in Canada has stagnated since 2015. Canada now has less capital per worker than it did ten years ago. This means that the investments of the Trudeau government clearly did not have the multiplier effects that Carney claims for his new investment spending ($130 billion in public investment spending catalyzing $500 billion in private investment). Colour this economist skeptical that these multiplier effects are suddenly possible in the current context.

It is probably fortunate for Carney that this costed platform was not released before the leaders’ debates on April 16 and 17. It would have provided much fodder for his opponents on the debate stage. It is true that the Conservatives have not yet released a costed platform. We should soon be able to compare the two platforms and judge their relative degree of realism versus creativity.

(Steve Ambler is professor emeritus of economics in the École des sciences de la gestion, Université du Québec à Montréal)