This latest budget risks triggering a new round of inflation through excessive borrowing and a weak follow-through on policies supposedly intended to foster growth..Thus, economist Dr. Tim Sargent, Director of Domestic Policy at the Macdonald-Laurier Institute, with extensive government experience at the deputy minister level.Appearing on Hannaford tonight, Sargent says the Carney government deserves credit for at least recognizing Canada’s core economic problems, short-term trade disruptions caused by U.S. protectionism, and a long-term productivity crisis rooted in poor private-sector investment..“For the first time in years,” he said, “the government is actually focusing on the right problems.”He also credited the budget for acknowledging some of the policy sources of those problems.“Government has gotten too big, immigration is too high, taxes are too high, and there’s too much regulation,” he said. “This budget recognizes some of that.” He noted modest moves to reduce immigration, trim the public service, and cut certain taxes, calling them signs that Ottawa may at least understand what’s wrong..But Sargent’s faint praise ended there.“The real question,” he said, “is whether the government has the willpower and the right ideas to fix those problems. And that’s where the budget really comes up short.”He described its measures as “half steps” — small cuts to a bloated civil service, tax relief but only limited tax relief and then vague promises about emissions caps and electric-vehicle mandates.Sargent was particularly critical of the government’s plan to raise the industrial carbon tax from $80 to $170 per tonne within five years, even as it claims to promote investment. The budget itself, he noted, praises Canada’s oil and gas companies for already achieving world-leading emissions reductions, “so you could say, why not wait for everyone else to catch up?”Instead, he said, the government is doubling down on costly policies that will drive investment away.“If they’re serious about this, it’s just going to make further oil and gas investment uneconomic,” he warned. “Investors have lots of places to put their money, and they’re no longer pretending to care about ESG rhetoric.”.Asked whether the budget represents a shift toward more centralized economic control, Sargent agreed.“They see the problem and think they can be the solution,” he said. “But governments don’t have the information or the market discipline that private investors have. They can afford to indulge themselves — and they often invest in things that don’t make economic sense.”He pointed to billions in new spending on housing and hospitals as examples of Ottawa intruding into provincial areas of responsibility, while more urgent projects where Ottawa has jurisdiction — like pipelines — go untouched.“If you wanted to build an economy,” Sargent said, “the last people you’d want doing it would be the government.”.The most serious danger, in Sargent’s view, lies in the government’s plan to borrow heavily for years to come, with no forecast for a balanced budget. Current borrowing projections include a $78-billion deficit this year, followed by $65 billion next year and $63 billion the year after, and planned deficits of more than $50 billion annually thereafter..Carney has defended this as necessary to finance investment, but Sargent rejected that distinction.“Every government that’s tried to separate ‘investment’ from ‘current’ spending runs into trouble,” he said. “Markets look at how much you’re borrowing, period.”The cost of servicing that debt — what he called “the nation’s credit card” — is expected to climb from roughly $45 billion to $70 billion within five years. (See third line from top in the table above.).“That’s money that can’t be used elsewhere in the economy,” he said. “It’s government taking money away from Canadians, and that pushes up prices.”He warned that government borrowing competes with private borrowers, driving up interest rates across the board. “That’s your signal,” he said. “If you’re carrying a lot of debt, pay it down. Borrow less, save more — because governments are doing the opposite.”Sargent also doubted the federal government’s capacity to deliver on its promises.“It’s not enough to have a few smart people at the top,” he said. “The government machine itself is creaky. It can’t even get passports out on time.”Rebuilding the civil service, he added, would take “years of swapping out senior managers, improving performance, and getting rid of poor performers.”Despite his scepticism, Sargent emphasized that he applauds the budget’s ambition and its tentative shift away from Trudeau-era policies. “It’s not a fail,” he said, “but it’s not the A that the country needs at this moment.”His final verdict: a solid C —for at least recognizing Canada’s problems. The extreme unlikelihood that it will fix them precludes a higher grade.And for ordinary Canadians? His advice is simple: “Reduce your debt and brace for another round of inflation — because it’s on its way.”Hannaford airs at 7:00pm this evening.
