A Real Platform Should Not Claim to ‘Fix the Budget’ while Ignoring its Biggest Hole
Both parties leading in the polls want to restore balanced budgets. Conservative Leader Pierre Poilievre aims to eliminate the federal deficit over his first term (4-5 years). Liberal Leader Mark Carney promises to restore balance to the operating budget within three years.
You will know if either of them are serious if – and only if – they don’t pretend the federal budget can be balanced simply by cutting things that some love to hate. Bringing back budget balance requires taking a hard look at the largest line items, and carefully considering.
What You Need to Know to Avoid Being Duped
Canada's finances are top of mind for many Canadians this election, but we should beware political leaders who try to dupe voters into believing that there are easy deficit solutions.
The federal deficit is projected at $42.2 billion in 2025 according to the 2024 Fall Economic Statement. This is a pretty big hole to fill. Politicians who suggest that they can cut their way out must offer clear plans to trim enough to meet the mark.
Unfortunately, it's simply not possible to restore balance to Canada's budget by ONLY cutting things that people love to hate. The budget line-items regularly targeted by political leaders simply don’t cost enough.
Let’s look at some of the cuts people regularly propose to Dr. Paul Kershaw in his columns in the Globe and Mail. This list includes eliminating disgraceful scandals like ArriveCan, abolishing the CBC, getting rid of Environment and Climate Change Canada, scrapping EV battery subsidies, and cancelling all Foreign Aid. To estimate how much these proposals could save, Gen Squeeze consulted with Finance Canada.
When we add the proceeds of all of these potential cuts together, we might save enough to fill just 39% of the budget shortfall.
That's leaves $26 billion. Where can we find it?
Both Poilievre and Carney worry about the 40% increase in the size of the federal civil service under former Prime Minister Justin Trudeau, and propose to find greater ‘efficiency’.
For the moment, let’s set aside that some of this increase may have been necessary to support the 86% increase in Old Age Security (OAS) spending, or the 76% increase in medical care. Or new national strategies for housing and child care. Or a pandemic response requiring historic levels of procurement for medical supplies, loans and subsidies to businesses and households. Instead, let’s presume that half of the growth in the bureaucracy totally wastes taxpayer money, and send pink slips to 20% of the civil service.
Even this sweeping measure would save only about $25 billion annually – which is close, but not quite enough, to fill Canada's current revenue hole.
What this means is that neither Mr. Carney nor Mr. Poilievre can cut enough to ‘fix’ the budget without looking to other, larger ticket items. So don’t let them dupe you into thinking we can skate by with no hard trade-offs.
Now, the above tally of cuts only considers our current budget shortfall. The $42 billion deficit in 2025 doesn't account for spending growth already planned for programs on which Canadians rely. So when political leaders tell voters about their economic plans, remember that we also need to find enough cash to cover the rapid spending increases required to protect healthy retirements for boomers.
These expenditures are increasing far faster than most other budget line items put together.
In 2014, the OAS budget was $44 billion. The most recent fiscal update pegs the cost in 2025 at $86 billion. You might notice that this $42 billion annual increase is almost exactly the deficit projected for 2025.
This election, Conservative and Liberal platforms must grapple with the fact that OAS has been, and will continue to be, the biggest hole in the federal budget.
No other program has grown so rapidly. And no other program will increase more in the years ahead. OAS will reach a staggering $104 billion by 2029 – another 18 billion in annual spending for which cuts must compensate in order for Ottawa to balance the budget.
There’s no escaping that OAS is the primary reason why Canada has little dry “fiscal powder” with which to fight the coming tariff war, as Chrystia Freeland lamented in her resignation letter. Or that OAS is the primary source of the inflationary deficit spending against which Mr. Poilievre routinely rails.
What’s worse, we have depleted our fiscal reserves for a program that we don’t even know is working. The Auditor-General recently reported that Ottawa bureaucrats have no idea if OAS is meeting its objectives, because they haven’t updated their thinking about the program in almost 75 years!
Decades ago, governments knew that a dramatic increase in public spending would accompany boomers’ retirements. But administrations of all party stripes did little to prepare for this looming risk – preferring the political convenience of kicking the can down the road. Now we are down that road, and we have a BIG fiscal problem – no matter which party wins government.
If party leaders don’t offer ideas about how to rein in OAS spending as part of their promise to restore balanced budgets, our Dupe-O-Meter will be sounding the alarm.
Happily, we have a straightforward and responsible plan all parties can follow.
The key is to ask financially secure retirees with six figure incomes to accept slightly less OAS, so that the savings can be repurposed to eliminate seniors’ poverty, help Gen Z, Millennials and their kids, and reduce the deficit – all without asking for more from taxpayers. That’s our win-win-win plan for all ages.
Retirees themselves are stepping up to support this plan. They are personally prepared to take a bit less from OAS. If you’d like to join them, let us know.
Dupe-O-Meter Party Assessments
As of April 23, the party platforms make clear that none of the major national political parties—Conservatives, Liberals, or NDP—have presented a realistic plan to balance the federal budget in the next mandate.
No party has addressed the elephant in the room: the rapid and continuing growth of Old Age Security (OAS), which is expanding faster than any other part of the federal budget.
NDP leader Jagmeet Singh critiques Liberal leader Carney’s proposal to balance the operating budget within three years. While some plans to balance the budget deserve consideration, Mr. Singh’s blanket critique suggests that politics should deliver a “free lunch” to current voters. But there is no such thing, and that cost will ultimately be borne by younger and future generations.
Since winning the Liberal leadership, balancing the books has not been a major focus of Mr. Carney’s campaign. His platform plans to burst through the fiscal guard rails set in previous years under the Trudeau government. The Liberal leader promises to balance what he calls the “operating budget,” but excludes OAS and other large spending items that are not capital investments. Deficit-financing large infrastructure projects can make sense to shore up our defence, build homes, fight climate change. But that shouldn’t preclude revisiting whether operational spending is efficient, including the delivery of $18,000 in annual OAS subsidies to retired couples with $180,000 in income. Accordingly, we judge Mr. Carney’s fiscal commitment to eliminate operating deficits reflects “silent neglect” more than a substantive plan.
Meanwhile, “Fix the budget” has often been a favorite phrase of Conservative leader Pierre Poilievre. Yet, until he directly engages with the role that OAS plays in driving the deficit, we believe his promise falls squarely into the "slogan central" category, rather than offering the real deal. His costed platform reveals as much. It plans a deficit in 2028 that is around three-quarters of the size of the Liberal deficit, after we consistently account for revenue increases between the parties' fiscal plans.
