Liberal Leader Mark Carney, then-newly elected, speaks to then-prime minister Justin Trudeau in Ottawa in March, 2025.Sean Kilpatrick/The Canadian Press
Former prime minister Stephen Harper’s endorsement of his successor as Conservative Party Leader, Pierre Poilievre, in last year’s federal election came as a surprise to no one.
Still, that Mr. Poilievre’s rival in the race had previously been named to head the Bank of Canada by Mr. Harper himself suggested that the former prime minister recognized Mark Carney’s leadership qualities well before the country did. The Bank of Canada gig helped make Mr. Carney a global star when the 2008 financial crisis propelled him onto the world stage and, eventually, to the top job at the Bank of England.
The fact that Mr. Poilievre’s résumé did not match up did not stop Mr. Harper from declaring, at a Conservative rally last April: “I am the only person who can say that both of the men running to be prime minister once worked for me. And in that regard, my choice without hesitation, without equivocation, without a shadow of a doubt, is Pierre Poilievre.”
Mr. Carney could not hold Mr. Harper’s endorsement of his Conservative successor against him, and, at an event in Ottawa this week, the two men appeared to have formed a mutual admiration society. At a ceremony to mark the unveiling of Mr. Harper’s official portrait, Mr. Carney described the former Tory PM as a “conviction politician” who could also be pragmatic.
“He came to Ottawa as a balanced-budget conservative …Yet when the financial crisis struck, he did not let ideology prevent him from doing what was necessary,” Mr. Carney said, referring to the deficits Mr. Harper’s government ran during that period. “Mr. Harper understood that you build up strength in good times to have the capacity to act in bad times.”
Well, sort of. Mr. Harper did not warm to the idea of stimulus spending in 2009 without considerable arm-twisting by his then-finance minister Jim Flaherty and the threat of a Liberal-led coalition replacing his minority government. Facing a non-confidence vote, Mr. Harper successfully sought to prorogue Parliament to buy time to cobble together a budget that thrust Ottawa back into the red after a decade of surpluses.
Harper warns of Trump threat, calls for reciprocal tariffs in gala speech
In that respect, Mr. Carney’s comments might also be seen as a dig, if not a rationalization of his own big-spending budget plans. This Prime Minister has largely embraced the fiscal policies not of Mr. Harper, who had nearly returned the budget to balance by the time he lost power in 2015, but those of his immediate predecessor, Justin Trudeau. Mr. Trudeau’s government ran record deficits during the pandemic, nearly doubling the federal debt, and it failed to adopt a credible debt-reduction strategy once the crisis had passed.
Mr. Carney’s government has not only demonstrated similar nonchalance with respect to the country’s rising debt burden, but it has abandoned the only serious fiscal anchor – that of a declining net debt-to-gross-domestic-product ratio – that the Trudeau government had committed to respecting, however dubiously.
The November budget replaced that fiscal anchor with a pledge to put the deficit-to-GDP ratio on a downward slope. Yet even meeting this low bar is in doubt as the Carney government continues to announce billions of dollars in new spending commitments – including a boost to the GST rebate and the reintroduction of electric-vehicle incentives – while promising to make “generational investments” in defence and infrastructure. So much for “build[ing] up strength in good times to have the capacity to act in bad times.”
Granted, these might not be considered “good times” by all, as the country faces a potentially painful economic restructuring induced by U.S. President Donald Trump’s trade war. But they are not historically bad times either.
Mr. Harper inherited a rosy budget thanks to his Liberal predecessor’s successful efforts to slay the deficit. The federal net-debt-to-GDP ratio plunged from nearly 67 per cent in 1995 to about 34 per cent when Mr. Harper was elected in 2006. It had fallen even further – to 28 per cent – by the time the financial crisis hit. Ottawa had room to spend when it needed it.
The November budget projected a net-debt-to-GDP ratio of 42.4 per cent this year, and rising above 43 per cent after that. But with no debt-to-GDP fiscal anchor, such projections are even less dependable than those of the Trudeau government.
If a recession, pandemic or something worse hits, the federal debt ratio could surpass 50 per cent. Provincial governments would also go further into the red, driving the combined federal-provincial debt burden well above the nearly 75-per-cent level it stood at in 2024-25.
The trajectory of federal spending that Mr. Carney inherited and continues to pursue puts Canada on a risky path in a world of higher interest rates and overindebtedness. Without a course correction, one wonders what his successor might say at the unveiling of his portrait.