This article originally appeared in National Newswatch.
By Ken Coates, February 5, 2025
The process started years ago, in an all-party and all-government frenzy of public spending. It expanded rapidly during the COVID-19 pandemic, with governments rushing money out the door in what we now know was an ill-co-ordinated and largely unplanned effort to anticipate the economic dislocation of that disruptive and uncertain time.
Blindness to large numbers has become commonplace in many aspects of Canadian life. When a handful of Taylor Swift concerts adds hundreds of millions of dollars to metropolitan economies, when baseball star Juan Soto signed a $765-million, 15-year contract with the New York Mets, and when Toronto Blue Jays fans have earnest discussions about how many hundreds of millions to commit to pending free agent Vladimir Guerrero Jr., it is clear Canada has entered an age of very large numbers.
Billion-dollar promises and agreements have been thrown around with reckless abandon. In recent years, the federal government added expensive programs for child-care, dental care, pharmacare, housing, transit projects, and other major initiatives.
The government of Canada blew past a forecast $40-billion deficit and adjusted its estimate upwards by another $20 billion in its fall 2024 financial statement.
The public, already tired of the continued travails of the Liberal government, have not been swayed by grandiose programs funded on borrowed money.
Much the same is happening on the Indigenous file in Canada. From a proposed $48-billion child and family welfare commitment to First Nations controlled programming, a $10-billion settlement for a legal challenge on Robinson Huron treaty annuities, and including numerous “cows and plows” settlements with western Canadian First Nations related to 19th-century treaties, the government of Canada is finally addressing decades-old legal obligations.
What stands out about these government expenditures is the near absence of public pushback against the expenditures. While it is hoped that the funds will make amends for government lawlessness towards First Nations in the past, it is not at all clear that Canadians have high expectations about the financial allocations.
Inflation accounts for the numbing of the Canadian public on financial matters. When the cost of the necessities of life — food, housing, fuel and the like — increase steadily, government spending has expanded dramatically to keep up.
As a result of inflation and higher spending, soaring government deficits have become commonplace once more, at a scale unmatched in Canadian history.
Fortunately, the federal government’s proposal to distribute $250 cheques to millions of Canadians, funded on borrowed money was shelved. Canadians generally yawned at this latest multibillion-dollar attempt to curry favour (although few would have turned back the cheques).
Still, that hasn’t stopped the Ontario government from sending out its own $200 rebate cheques, at a cost to the provincial treasury of $3 billion.
Much the same happened in the U.S., where the Democratic 2024 presidential campaign, founded on its $890-billion Inflation Reduction Act, a scaled-down version of the more than trillion-dollar Build Back Better Act that failed to pass Congress because of its ambitious spending plan. Mass spending, however, failed to revive the Democrats’ political fortunes in the November 2024 election.
Instead of spending increases, the Trump campaign promised a range of tax breaks and expected to raise trillions from imposing tariffs. Slashing revenue will come with a price: a budget-focused think tank predicted last fall that the U.S. deficit would still rise $7.5 trillion under the plan.
However, the new Department of Government Efficiency, under billionaires Elon Musk and Vivek Ramaswamy, aims to slash trillions in spending.
The current potent combination of declining real personal incomes for the vast majority of Canadians and the explosion in government spending and the salaries offered to the very rich has sweeping political implications.
The U.S. federal election demonstrated a similar clash between the financial challenges of average Americans and the expansive spending habits of the Biden administration. Governments on the centre-left have operated for several decades on this idea that large-scale interventionist programs, even if financed on borrowed money, would capture the public’s imagination.
The political realities of the world of very large numbers may be changing. Families struggling to cope with rising costs, uncertain about whether personal incomes will keep pace with inflation, and unwilling to pass personal debt on to their children, expect more of public officials.
Formerly crowd-pleasing grand policy gestures may have met their best-before date, with the interventionist measures of the past giving way to greater fiscal prudence and more respect for long-term stability in national public accounts.
Ken Coates is a distinguished fellow and the director of Indigenous affairs at the Macdonald-Laurier Institute.
