Michael Chong: Carney’s budget is a borrowing binge dressed up as balance...

The Conservative finance critic says Ottawa is burning through the fiscal room it would need in the next crisis, while moving spending off the books to hide how much it’s borrowing.

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Seeking clarity on a budget when the government offers obfuscation…

Speaking with Michael Chong is always fascinating. He’s one of the smartest people you will meet in Parliament, he’s thorough in his work, he’s a Conservative without being hyper-partisan and is widely respected by colleagues on all sides.

So it was a pleasure to chat with him recently about the 2026 federal budget, the Masters of our destiny budget!

In our chat, Chong says Mark Carney is “most definitely not a fiscal conservative.” He points out that deficits in Carney’s first budget were double those in Justin Trudeau’s last, and that this budget adds about $700 billion to the national debt. Within four years, interest payments will take 14 cents of every tax dollar, about $85.5 billion a year, which is more than Ottawa spends on health care.

He also describes some of the ways the Carney government is trying to hide borrowing and how they are moving spending off book to claim lower deficits.

For those who prefer to read, here is a transcript of our conversation.

Michael Chong on the Carney budget: ‘Mr. Carney is most definitely not a fiscal conservative’

This interview has been edited for length and clarity.

Brian Lilley: “Masters of our own destiny.” That’s Mark Carney’s buzzphrase for the budget, but is he living up to it? I’m Brian Lilley, political columnist for the Toronto Sun. In my view, Carney isn’t living up to “masters of our own destiny” any more than he’s living up to his promise to think big, act bigger and move at speeds not seen in generations. It’s great marketing, but it doesn’t really mean a lot.

The budget released last week carries $594 billion in total spending once you account for $58.7 billion this year just in public debt charges — a number set to climb past $80 billion within five years. Is this a conservative budget, as some people are saying? I wouldn’t say so, and I’m betting Conservative finance critic Michael Chong wouldn’t either. Michael Chong, thanks for your time today.

Michael Chong: Thank you for having me.

Lilley: Let’s start with the fiscal framework. You can say spending isn’t going up by that much, but public debt charges will hit $80 billion within a few years. We’ll be spending more on public debt charges than Ottawa gives the provinces in health transfers. That doesn’t sound like a fiscally conservative — or a fiscally sane — budget.

Chong: Mr. Carney is most definitely not a fiscal conservative. In fact, the deficits in his first budget were double those in Mr. Trudeau’s last budget. The irony is that Mr. Trudeau was more fiscally conservative than Mr. Carney has been.

This budget undertakes a massive borrowing binge over the next several years, increasing the national debt by some $700 billion, at double the pace of the deficit. The result, as you’ve pointed out, is that in four short years, interest payments are going to chew up 14 cents of every tax dollar. That’s the equivalent of $85.5 billion in interest charges every year — more than we spend on public health care. It’s a real concern, because if that track continues, it puts a whole bunch of social programs, and the fiscal viability of the government, at risk.

Lilley: I was covering the Ontario budget recently, and I’m hard on pretty much every government. I think they all spend too much and should be careful with our tax dollars. But Ontario is at 6.7 cents on the dollar for its public debt charges, which is still too high. It puts it in perspective that in Ottawa it’s 11 cents now, going up to almost 14, as you said, within a couple of years. That slowly squeezes out the government’s ability to spend on things that actually deliver services to Canadians, does it not?

Chong: It absolutely does. Former Bank of Canada governor David Dodge has what’s been called the Dodge rule: interest charges on the public debt should never go above 10 cents per tax dollar, and federal debt-to-GDP should not approach 50%. By that rule, we’ve blown through the first metric.

The reason these measurements are so important is that the federal government needs the capacity to respond to an emergency. We’ve had two crises in the last 20 years: the 2008 global financial crisis and the 2020 pandemic. In both cases, federal debt-to-GDP was in the low 30s. In the global financial crisis, the federal government had to borrow 5% of GDP to protect people’s jobs and livelihoods. In the 2020 pandemic, it borrowed 15% of GDP to protect the health and safety of Canadians.

We are currently at 40% debt-to-GDP. If we face another crisis in the coming years — and we have to prepare for that — the federal government needs the fiscal firepower to borrow perhaps 10% to 15% of GDP to respond. It’s running out of the capacity to do that because of this massive increase in debt and interest costs.

Lilley: The finance minister and the prime minister say we’ve got the strongest balance sheet in the G7, that we have fiscal room. They make all of these claims that would seem not to be true based on what you’ve just described. Or have we just moved the metrics and gotten rid of all the fiscal anchors we used to be concerned about?

Chong: First off, there are no credible fiscal anchors in the budget. Experts like former deputy minister of finance Kevin Lynch, who was also clerk of the Privy Council, economist Christopher Ragan and former finance official Don Drummond have all said the government needs to establish credible fiscal anchors that reduce the federal debt and get the budget back toward balance. That’s not in the Carney government’s budget, and so in the long run, they are putting the country at risk.

The prime minister released his national security statement about a week ago. In it, he said Canada needs to prepare for all contingencies, including worst-case scenarios and war, and that economic security has to be at the heart of that preparation. Well, the No. 1 thing the government can do to prepare for worst-case scenarios is to ensure it has the fiscal capacity to respond, like we had in 2008 and in 2020 — a fiscal capacity they’re quickly using up with their binge of borrowing to fund things like Cohere and Telesat.

Lilley: One of the things I know bothers you about the way this government treats tax dollars is that it makes these grand announcements — like the $1.6-billion Cohere announcement — that were never in the budget. So much of what they’ve announced was never in the budget, nowhere in the fiscal framework. It eventually shows up, but they’ve already committed the spending, haven’t they?

Chong: Yes. The Carney government and the prime minister have shown a distinct lack of respect for Parliament’s power over the purse and over taxation. They’ve shown a flippant disregard for the importance of democratic accountability when it comes to spending public money and raising public funds.

All governments tend to make announcements outside of Parliament and outside of the budget, but not to the extent and scale this government has. Over the last six months, by my count, they announced more than $100 billion in initiatives outside the budget and outside the fiscal framework. Then yesterday, we finally got an accounting for many of these announcements, and it is a lot of financial obfuscation. It’s hard to figure out exactly where the money is going because they’re using different types of accounting methods. It’s not transparent, and it certainly doesn’t respect the importance of Canadians deciding how their money is spent through their elected representatives in the House of Commons.

Lilley: There are good things in the budget, like the rule that if you bring in regulations that cost a dollar, you have to find ways to get rid of regulations that amount to two dollars in cost. I think that’s a good thing. The capital gains tax deduction doesn’t cover enough businesses, but it’s a good idea — maybe expand it beyond just tech companies.

But overall, we keep hearing that the economy is under threat because of tariffs and trade uncertainty. In my view, we need to be unleashing our economy and making fundamental changes on things like corporate and personal income taxes, so that we stem the brain drain. What would you have wanted to see to unleash our economy and let it grow the way it should? We’re not having good growth. We’re having stagnant growth and rising unemployment. Something needs to be done to counter the impact trade uncertainty and tariffs are having.

Chong: That’s a great question, Brian. In short, we would have done two things. First, we would not have spent even more money, borrowing even more money, to try to address the fundamental problems in the Canadian economy: sluggish sub-1% growth, sluggish job creation and the problems with affordability. Instead, we would have focused on major supply-side reforms to increase investment, incomes and paycheques.

Some of those supply-side reforms are ones many people have advocated for: an overhaul of our taxation system; a complete overhaul of competition policy, so consumers in Canada have much more choice and lower prices; and an overhaul of our regulatory system, which we have yet to see in a meaningful way at so many different levels.

For example, where is the elimination of interprovincial trade barriers? A year ago, the government announced it was going to eliminate interprovincial trade barriers, and here we are with very few of them eliminated. Where is the elimination of the myriad regulations for small and medium-sized businesses that are strangling business formation and capital formation? We need the major supply-side reforms that experts, including business groups, have been calling for for years. We didn’t see them in this budget, even though the prime minister promised them in his election platform.

Lilley: I’ll leave you with this. Your party leader, Pierre Poilievre, recently did a quite clever video at a pub in Ottawa, using two different credit cards — one for investment and one for spending — to show how the prime minister is trying to say the budget is balanced. Give it to us in simple terms: what is Mark Carney doing to claim the budget is balanced when it’s really a long way off from ever being balanced?

Chong: He’s doing two things. First, he’s reclassifying a lot of spending as investment. For example, the government is classifying its film tax credit not as a tax expenditure, which is how normal public accounting works, but as a capital investment. That makes no sense. It’s a tax expenditure and should be categorized as such in the government’s budget.

The second thing, which is an even bigger problem, is that they’re moving a lot of spending off budget. It’s not even showing up in the budget. They’re setting up all these Crown corporations and entities at arm’s length from the government, and they’re borrowing tens of billions of dollars a year to capitalize them, moving that spending onto the balance sheet. That’s not showing up in the budget.

As a result, the federal deficit is becoming an increasingly irrelevant number, because it doesn’t reflect the government’s borrowing. In years past, the deficit roughly equalled what the government had to borrow that year. That’s no longer the case. What the government is borrowing this year is double what the deficit would suggest, because it’s pushing all of these expenses off the budget and onto the balance sheet. That is a major problem. It’s an affront to Parliament, and it’s an affront to democratic accountability over the nation’s finances.

Lilley: It sounds like something that will eventually catch up to us when the bond rating agencies and others start adding all of this up.

Chong: That’s right.

Lilley: Michael Chong, thank you very much for your time.

Chong: Thank you.