While times of crisis are something to endure and not celebrate, they do provide an opportunity for us to be reminded of what’s really important. The chaos of Trump and the economic pain he has inflicted thus far on Canada has been manageable, but the toll from the uncertainty grows each day. The threat of the tariff hurricane still looms and if our current trade deal is scrapped next year - look out. It is for this reason governments have to look at their upcoming budgets and make some tough choices.
Governments like everyone else have to manage money coming in and going out. Just like many of us, they pay interest on the debt owed. When governments spend beyond their means they add to the debt and more of the money coming in from taxes is eaten up just servicing that debt. Last year the feds spent more debt payments than they did on healthcare transfers to all the provinces! To fix this fiscal mess, governments could simply raise taxes, but asking people to pay more when they are facing their own economic hardship is a non-starter for many voters. Hence the need for all governments to do a full accounting of their spending.
Our Prime Minister, Mark Carney has taken the lead by signalling that the upcoming budget will be one of austerity. He has already pushed the Finance Minister Champagne to cut operational spending by 7.5 per cent for the 2026-27 fiscal year, 10 per cent the following year and 15 per cent in 2028-29. Fiscal realities are finally setting in and the federal government will have to be ambitious in their cuts to offset the dramatic increase in defense spending. All this is also in response to making sure our fiscal house is in order to provide economic support to industries in peril due to Trump tariffs. Nothing focuses the mind like a crisis and nothing gets your spending priorities in order than an unexpected big bill or layoff.
If the tariffs cause a significant rise in unemployment, tax revenues will decrease causing even greater stress on the country's finances. It is easy to see now why Carney has reversed course so quickly from his predecessor and is looking to green light resource development in order to fill government coffers with resource royalties. The provinces are getting on board as well with this push to make Canada an energy super power. Decades of inaction has created a backlog of infrastructure projects so any transformation will take years to bear fruit. While the upper levels of government can run deficits waiting for projects to come online - municipalities like my beloved Guelph don't have that flexibility. They must balance their budgets and will be under increased financial pressure with decreased support from Ottawa and Toronto.
How cities choose to navigate through this turbulent storm will be of significant consequence to the quality of life their citizens enjoy.
More to come…
