Guns and butter: The true cost of Canada’s military spending is yet to be tallied

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Canada will never be a military powerhouse. But it is making up for lost time during the post-Cold War years, when spending on fighting machines sank to risible levels. As various MPs have stated, Canada had planes that wouldn’t go up and submarines that wouldn’t go down, and still does for the most part. Today, only one of Canada’s four rust-bucket submarines is in service and its CF-18 fighter jets are twice the age of some of its pilots.

Canada’s fighting stance will soon change. Ottawa has ordered fleets of the latest-generation fighter and surveillance aircraft and naval and Arctic patrol vessels whose collective costs over their lifespans will come to hundreds of billions of dollars. Spending on defence has finally reached the NATO standard of 2 per cent of GDP and is set to reach 5 per cent in the next decade.

The latest deal came this week, when Prime Minister Mark Carney confirmed that Canada had selected Germany’s TKMS to build a dozen stealthy attack submarines for the Royal Canadian Navy. Including the cost of maintenance, upgrades and weapons, the outlay for these boats could reach $100-billion. Canada has also ordered 88 Lockheed Martin F-35 stealth jets, though it has fully paid for only 16 of them. The government is also considering Sweden’s Saab Gripen fighter jet, which would be built in Canada.

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There has been little debate in Parliament or in society more generally about the upside and the downside of this lavish rearmament campaign.

Is all this hardware to defend Canada against Russia, or President Donald Trump’s United States – he has said he wants to make Canada the “51st state” – or another country? Does Russia, which has failed to defeat the much smaller Ukraine after more than four years of war, really pose a serious threat to Canada or Europe? Does Canada expect to join foreign wars at the beck and call of the U.S. (Mr. Carney in June called the unprovoked U.S.-Israeli war on Iran “worth it” if it meant Iran would not have a nuclear weapon).

Or is Ottawa loading up on American weapons for fear that Mr. Trump will boost tariffs against Canada or stymie another cross-border bridge if it remains a defence-spending laggard?

Another debate that has largely gone AWOL is the economic and fiscal consequences of the spending splurge. Not all government spending is created equal, and military spending, if done in part to boost economic growth and create domestic jobs, may come up short in those areas. Spending on infrastructure, education, health, and research and development generally provide more bang for your buck over the medium- to long-term.

Defence spending in most countries is focused on a narrow set of domestic companies and suppliers – or not focused on them at all. Take Canada. It has not built military ships, aircraft or artillery pieces in great numbers since the Second World War, when it had the world’s third- or fourth-largest navy. After the war, it let it defence industries languish and, incredibly, scrapped a world-leading supersonic interceptor fighter, the Avro Arrow, after only five were built; Canada last made fighter jets in the early 1970s, under U.S. licence.

These industries cannot be rebuilt quickly – or at all. The F-35s are made in the U.S.; the TKMS submarines primarily in Germany. Yes, building these war machines will, over time, create thousands of spin-off jobs in Canada in maintenance, materials supply and other areas. But far more jobs will be created overseas. Buying aircraft, ships, submarines and the weapons to make them lethal means sending billions of dollars of taxpayer money out of the country.

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Canada has little choice. About half of the total arms revenue flows to U.S. military suppliers; much of the rest goes to European and Chinese suppliers. Building the Gripen in Canada, which Saab has proposed, would go some way to reduce the cascade of non-domestic military spending.

Then there is the fiscal side. An April report by the International Monetary Fund said that, while defence buildups can boost economic growth in the short term, they can also increase inflation, budget deficits and public debt.

On average, fiscal deficits generally worsen by about 2.6 percentage points of GDP, and public debt rises by 7 percentage points, within three years of the start of the spending spree in any given country, the IMF said. Canada has to be careful because its fiscal headroom has narrowed in recent years. In 2025, total debt as a share of GDP was 113 per cent, almost double that of Germany’s.

High defence spending can also raise social issues. The IMF said that “when higher defence outlays are financed primarily through spending reprioritization, the guns-versus-butter trade-off emerges, and spending on social protection, health and education is substantially reduced.” In other words, the fattening of one budget requires the thinning of another.

Canada is suddenly spending on military goodies as if it’s on war footing, a stance encouraged by NATO and Mr. Trump. True, Canadian pilots should not be flying 45-year-old fighter jets. But does the country really need all this killing machinery? Are drones better – they are certainly far cheaper – than F-35s or Gripens? How will all this spending be financed? Which budgets and programs will suffer to satisfy the appetites of the generals and the admirals? None of these questions have been properly addressed in Parliament.