Younger Canadians will pay for Carney’s massive spending and borrowing

Jake Fuss is director of fiscal studies at the Fraser Institute.

On Thursday, Prime Minister Mark Carney’s government will table its second federal budget since taking office in March 2025, and based on its record so far, we can expect more new spending and large deficits. Ottawa’s fiscal situation may rank low on the list of priorities for most young people in Canada. But make no mistake – more than any other group of Canadians, they’ll pay the price for this approach.

On the campaign trail, Mr. Carney promised a “very different approach” to federal finances relative to former prime minister Justin Trudeau. That was welcome news, as the Trudeau government unwisely borrowed hundreds of billions of dollars to fuel its spending addiction. Federal spending on a per-person basis and debt reached historically high levels (after adjusting for inflation), and Ottawa hasn’t balanced a budget in nearly 20 years.

Enter Mr. Carney, who said he would be “spending less” yet quickly broke that promise and actually increased spending significantly. His government posted a $66.9-billion deficit for 2025-26, a projected deficit of $65.3-billion in 2026-27 and deficits of at least $53-billion for the subsequent four years. These cumulative deficits – from 2025-26 to 2029-30 – are double the size of what Trudeau planned before leaving office.

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Of course, to cover the deficit, Ottawa must borrow money. Total federal debt will eclipse a projected $2.9-trillion by 2029-30 – that’s almost $300-billion more in debt accumulation than Trudeau planned – and debt interest costs will hit a projected $75.7-billion, which is more than the combined total that Ottawa plans to spend on employment insurance and the Canada Child Benefit that year.

The burden will land disproportionately on younger Canadians who will likely pay higher taxes, enjoy fewer services or some combination of both for decades to come. As baby boomers sail off into the sunset, the government will stick millennials, Gen Z and other younger generations with the bill.

Ottawa’s red ink also has immediate consequences for Canadians today. When the government runs deficits, it competes with individuals, families and businesses for the money available to borrow. In response, lenders increase interest rates and it becomes more expensive for Canadians to pay a mortgage, buy a new car, pay for home renovations and so on. Today’s higher interest rates exist in part because of the relentless and historic level of spending and borrowing by the federal government (and many provincial governments).

Which takes us back to the upcoming budget. In light of the dismal state of federal finances, what should Canadians expect?

More red ink, and some creative accounting. Specifically, to create the impression of fiscal prudence, last year the Carney government separated “operating spending” – referring to day-to-day spending on programs such as Old Age Security and EI – from “capital spending,” defined as “anything that builds an asset.” Then last month, it said it would balance the “operating budget” by 2028-29.

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But “operating spending” and “capital spending” both have an impact on the bottom line. Separating these two categories only obscures the true state of federal finances. The Parliamentary Budget Officer (PBO) – the independent federal fiscal watchdog – has criticized how the government classifies “capital spending,” illustrating that the government has an incentive to conveniently shift items from “operating” to “capital” spending to purportedly balance the operating budget. (A separate PBO report last month said the Carney government is not even on track to balance the operating budget by 2028-29, regardless of any accounting sleight of hand.)

In reality, absent any substantial spending reductions or huge jumps in revenue, the overall budget deficit will remain massive and well beyond the Trudeau government’s already large projections.

The Carney government has talked about fixing federal finances without actually fixing them. Instead, it seems likely that Mr. Carney will not only continue the Trudeau approach but may accelerate it even further. That’s bad news for all Canadians, particularly younger Canadians who will inherit the bill.