The federal government delivered a devastating economic statement on Monday that called for more than $20 billion in new spending and explained how last fiscal year's deficit ballooned to $61.9 billion — but it sparked the sudden resignation of Chrystia Freeland as finance minister and questions about her own government's economic policies. was up Which sent Canadian politics into a frenzy.
The day was thrown into disarray when Freeland resigned from Prime Minister Justin Trudeau's cabinet in an attempt to make a statement while reporters and stakeholders went into media lockup to view the document.
Those in the room were supposed to receive the documents under the embargo at 10 a.m. ET, but dozens of copies remained hidden under black tablecloths until 1:45 p.m. ET as officials scrambled to deal with the unprecedented situation.
Government House leader Karina Gould presented the fall economic statement to the House of Commons shortly after 4pm on Monday. ET. During the dinner in Ottawa, Public Safety Minister Dominic LeBlanc was sworn in as the new finance minister.
As well as showing the federal government blew its deficit target by more than $20 billion, the document – overseen by Freeland before his resignation – includes a pledge to address US President-elect Donald Trump's return to the White House.
They include $1.3 billion over six years for a border security package — part of Ottawa's plan to stave off Trump's threat of steep tariffs — though the 270-page document does not explain exactly how that money will be spent. The government is also allocating billions of dollars to boost Canadian businesses amid global uncertainty.
Freeland's resignation letter suggests she disagrees with her boss on how to deal with those challenges.
In a letter addressed to Trudeau posted on social media, Freeland, who has been finance minister since 2020, said the only “honest and practical option” for him was to leave the cabinet after the prime minister approached him on Friday about moving him to another cabinet. the role
He also took a separate shot at his boss's handling of the country's economy, slamming what he called the government's “expensive political gimmicks” and urging the country's prime ministers to work together to counter the Trump tariff threat.
As expected, the update includes the government's promised GST holiday, which took effect on Saturday and is expected to cost $1.6 billion.
The document does not include the government's promise to send a $250 check to working Canadians. The exemptions would have been sent to people earning up to $150,000 in 2023, but the promise has faced opposition from other parties in the House.
Sahir Khan, executive vice-president of the University of Ottawa's Institute of Fiscal Studies and Democracy, said there wasn't much gimmickry in Monday's document, other than the expected tax breaks.
“This is really the first time we've seen them pivot from a consumption-oriented, wealth redistribution budget to an investment focus,” he said.
“It's still taking on debt to do it. We're still raising debt to do it, but there's been a pivot.”
Ottawa defies past losses
In her Spring Budget 2024 speech, Freeland laid out guideposts that would demonstrate the government's continued commitment to fiscal responsibility. The first was a pledge to keep the 2023-24 deficit at or below $40 billion.
The federal government blew that benchmark; Monday's update posted a deficit of nearly $62 billion for the last fiscal year.
The federal government says the 2023-24 spike is due to one-time costs, including $16.4 billion related to Aboriginal claims going through the courts and $4.7 billion related to the Covid-19 pandemic. The deficit is projected to drop to $48.3 billion in the current financial year.
“Definitely a fiscal surprise on the downside. Canada can't deal, but definitely a surprise,” Kahn said.
Another government promise was to maintain the declining debt-to-GDP ratio. According to the Fall Economic Statement, the government has kept within that railing – barely.
The federal debt-to-GDP ratio was 42.1 percent in 2023-24 and the government now expects it to fall to 41.9 percent in fiscal 2024-25.
“But it's still probably higher than some people would like,” Kahn said.
Ambiguous border planning
Today's fiscal update comes as Canada navigates the slippery waters of its most important trade relationship. Trump has threatened to impose 25 percent tariffs on imports from Canada and Mexico, citing concerns about border security, immigration and illegal drugs, particularly fentanyl. Tariffs at that level could cripple the Canadian economy.
The fall economic statement indicates the government is willing to spend more on the Canada Border Services Agency, the RCMP, Public Safety Canada and the Communications Security Establishment, but details on how that money will be spent are light.
The government has suggested purchasing helicopters and drones to strengthen common border monitoring.
Freeland's letter says she is at odds with the prime minister about the best way forward for Canada in the face of Trump's tariff threats.
“We need to take that threat very seriously,” Freeland wrote.
“That means keeping our fiscal powder dry today, so we have the reserves we need for the coming tariff war.”
Trump ally David Asher, a senior fellow at the Republican-friendly Hudson Institute think-tank, said the changes announced in the fall economic statement were a step in the right direction. But he added that they are modest, and that most things are already done by partner countries.
Reacting on Monday, Asher – who led Anti-Fentanyl Task Force Under Trump and advising members of his incoming team — he said he would prefer to see closer cooperation between the U.S. and Canada to crack down on Mexican and Chinese cartels that cross their shared border.
He said the U.S. could arrest more fentanyl traffickers if there was political pressure to conduct joint surveillance operations — something the RCMP chief has suggested — and share more information on financial crimes.
“We will be able to charge these people in the United States with your help. And if we can't, lock them up,” Asher said.
“You don't have RICO (racketeering) laws. We do.”
He said some vague promises in the budget statement would not get Trump's attention. A joint Canada-US fentanyl task force could achieve that, he said, adding, “You really have to pony up.”
The document makes several legal changes related to money laundering that target organized crime in Iran, China and at home.
The Canadian government has been criticized by some Trump allies for repeatedly talking about Sana Quantities seized at border crossings And not about the widespread presence of organized crime.
Promises to encourage businesses to invest billions
Most of the new investments mentioned in the statement are incentives to encourage investment in Canada and address what is described as Canada's productivity problem.
The government has said it will spend $17.4 billion to extend accelerated investment incentives — temporary tax changes that allow companies to quickly write off the value of investments.
Khan called the new spending largely business-oriented and development-oriented.
“For this Liberal government we don't really see that as a focus,” he said.
Conservative leader Pierre Poilivre called on the government to immediately hold a vote of confidence in the economic update. The House of Commons is scheduled to break on Tuesday for the holiday.
“The Prime Minister has lost control, but still he is clinging to power,” he said during the question period.
Speaking later to the CBC power and politics, The NDP House leader, MP Peter Julien, said the party would hold a vote of no confidence in the government if Trudeau remained as leader in the new year. It will hold elections on time.
“There is no doubt about it,” he said.
