GOLDSTEIN: Reckless Liberal spending compromised our ability to fight tariff war

Yahoo

12-04-2025

Liberal government misspending has left us ill-equipped to fight a tariff war with the U.S. – and one of the only alternatives the government has will be to increase taxes to do so.
But don't take my word for it.
Those warnings came from Chrystia Freeland when she was finance minister and from parliamentary budget officer Yves Giroux.
Freeland's warning in her Dec. 16, 2024 resignation letter to then-prime minister Justin Trudeau could not have been more clear.
She said that having been overruled by Trudeau on keeping the federal deficit to $40.1 billion for the 2023-24 fiscal year – it came in at $61.9 billion, 54% above the government's own target – Canada lacked the fiscal fire power to fight U.S. President Donald Trump's 25% tariffs on Canada effectively.
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As Freeland wrote:
'Our country today faces a grave challenge. The incoming administration in the United States is pursuing a policy of aggressive economic nationalism, including a threat of 25% tariffs.
'We need to take that threat extremely seriously. That means keeping our fiscal power dry today, so we have the reserves we may need for a coming tariff war. That means eschewing costly political gimmicks, which we can ill afford and which make Canadians doubt that we recognize the gravity of the moment …
'It is this conviction which has driven my strenuous efforts this fall to manage our spending in ways that will give us the flexibility we will need to meet the serious challenges presented by the United States.'
Trudeau rejected that advice and, in Freeland's words, substituted 'costly political gimmicks,' referring to the government's GST/HST tax break on some goods from Dec. 14, 2024 to Feb. 15, 2025.
This hasn't changed now that Mark Carney is the Liberal leader and prime minister.
The reality is the Liberals have already severely compromised Canada's ability to fight U.S. tariffs through such measures as providing income supports to workers laid off as a result because, in Freeland's own words, (she's now transport minister in Carney's cabinet) it lacks the fiscal reserves to do so.
The implications of this were addressed by the independent, non-partisan parliamentary budget officer in a Jan. 22, 2025 report on the Liberal government's fall economic statement that Freeland resigned over.
Yves Giroux warned a number of factors including 'the larger-than-expected deficit in 2023-24 … would leave little capacity to deal with a decrease in revenue or additional expenses without raising taxes' and that 'given the uncertain and volatile global context, the government's economic scenarios downplay risk.'
Indeed, a decrease in government revenues and additional expenses is exactly what will happen in a lengthy trade war with the U.S., leading to a recession.
Silly slogans like 'elbows up, Canada' ignore the reality that Liberal government misspending has cut off our ability to fight Trump's tariffs at the knees, with one of the only alternatives left to fight it being to raise taxes.
Giroux cited other failings in the Liberals' fall economic statement, raising concerns about the true state of Canada's finances.
He said the demographic and economic assumptions underpinning it were 'not transparent, and likely inconsistent with government policy with regard to immigration levels.'
He warned they were misleading because 'positive impacts of (its) new immigration policies are highlighted … while none of the negative impacts are mentioned.'
Giroux warned expenses for contingent liabilities, largely to resolve payments for Indigenous claims, had increased from $15 billion in 2015, when the Liberals took office, to $76 billion in 2023 and 'are an increasing source of fiscal risk.'
Based on that, Giroux said, 'There is a clear and pressing need for additional transparency in the government process for estimating contingent liabilities.'
He said the Liberal government's 'ability (or willingness) to produce high-quality, timely financial statements continues to deteriorate' and that it had reached 'a new low' by not releasing its public accounts until almost nine months after the end of the fiscal year.
'Even worse,' Giroux wrote, 'the audited financial statements were inexplicably tabled the day after the fall economic statement, rather than prior to, or alongside, the government's economic and fiscal plan …
'As noted ad nauseam by the PBO, the timely publication of the public accounts is crucial for transparency and accountability in government finances.'
As we know, shoddy bookkeeping, manipulation of data and delayed reporting of the government's public accounts contribute to wasteful spending and to political corruption in how taxpayers' money is spent.
Given that the best indicator of future performance is past practice, it's reasonable to conclude a re-elected Liberal government, after a decade in power, will simply continue these reckless financial practices.
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