A budget for tanks, banks, and oil barons

Despite promising a “generational” and “transformational” budget, Prime Minister Mark Carney is doubling down on resource extraction, militarism, and corporate handouts—appeasing Donald Trump and Canada’s corporate class, but doing little for working people.

Martin Lukacs and Desmond Cole break down the Liberal government’s Stephen Harper-esque spending cuts to the public service and their failure to address the crises of affordability and climate breakdown.

The Breach Show is our podcast featuring sharp analysis on politics and social movements in Canada. Subscribe to the podcast on Apple, Spotify, Iheartradio, Youtube Music or your favourite service.

---

Desmond Cole: The federal Liberal government has just delivered its first budget under the leadership of Prime Minister Mark Carney.

The Liberals are calling this a generational budget, and while it might be good for some segments of the corporate economy, there isn’t a lot to celebrate for low income and working people. So what’s in this budget and what could it mean politically for this session of Parliament?

Joining us to speak about all of that is Martin Lukacs, the managing editor of The Breach. Hi, Martin.

Martin Lukacs: Hey, Desmond. How are you doing?

I’m good. So I want to hear about your experience, because you actually went to Ottawa to cover the budget and you did what’s called the “lock up,” a very serious sounding thing that journalists get to do on budget day before all the documents are released publicly, where we get to sit in a closed room, they take your phone away and you get to kind of peruse this giant document.

Actually, they used to confiscate your phones, which I was honestly looking forward to. It turns out now that journalists are allowed to keep their devices, but they have to promise pinky swear that and sign an agreement that they won’t share details of the budget.

Basically journalists go into this budget lockup at 9:00 a.m. and then it’s embargoed—not made available to the public—until 4:00 p.m. when the finance minister delivers it in Parliament.

So we get an eight hour head start on the public.

It was my first time going. It’s an interesting experience. It all had a kind of symbolic start.

I was waiting with a group of journalists near Parliament Hill for shuttle buses to take us to the Diefenbaker, which is about a 15 minute drive away. There must have been about 30 of us.

And one shuttle bus shows up with room for ten. So it was like: the Carney cuts—are they already taking a toll?

Besides that, you’re basically in this room with about a hundred other journalists. Civil servants from the various departments are circling, trying to provide answers to questions the journalists might have, but are often just spinning what’s in the budget.

We get this 400 page booklet. The budget is very glossy, more in some ways more a PR statement than a clear economic blueprint. We’re allowed to be accompanied by progressive economists. In the case of The Breach, we brought along a progressive economist from IRIS, which is the progressive think-tank here in Quebec, to guide us numerically challenged journalists in reading some of the aspects of the budget.

As you mentioned, “generational” was one of the big words. “Bold.” “Transformational. “Catalyzing”—they love that word.

That’s one of Carney’s favorites for sure.

The claim of the budget is that it is a major response to the economic threats coming from the U.S., as well as some of the affordability challenges that we’re facing in Canada. To my mind, it fell far short of all those things.

While Mark Carney was elected as the savior to defend the interests of Canada, this budget shows very much that instead, he’s governing to service the needs of the corporate class there.

It is a budget of corporate handouts and of massive military spending rather than anything to really address unaffordability in this country. It’s the latest sign—beyond the moves that Carney has been making the last six months—that what he’s really about is redistributing wealth and resources to the already wealthy and the elite. Far from something new, it’s really a version of the same old politics we’ve been getting from Conservatives and Liberals the last few years.

In many ways it is a budget that Stephen Harper would have been pleased with and in terms of the cuts that it makes, it matches what Pierre Poilievre had laid out in his own platform. It is not something I think that will meet the measure of the moment for Canadians.

The big feature I think of this budget is tens of billions of dollars of new investments in the military, as you mentioned, over the next several years.

The drawback in the public service: about 16,000 public service jobs this year alone, and up to 40,000 in the next few years in order to pay for the new spending in defense. 16,000 cuts were already locked in because of measures that have been passed by former Prime Minister Trudeau and then there’s another 30,000 coming in the next three to four years from Carney.

The night before the budget lock up, I was speaking to some people I know within a public service union in Ottawa and they described an event that happened the week before that really summed up this budget and the way that Carney is governing.

This labor union represents people at the Public Health Agency of Canada, which is one of the departments that has already been facing major layoffs. The way that layoffs work is it’s a kind of a Hunger Games-style competition where co-workers basically have to complete a series of tests to compete for the remaining jobs that are available. This past week, employees at Public Health Agents of Canada had basically been subjected to this process.

One morning they showed up to their building and in the lobby, they discovered a jobs fair in full swing, except it was hosted by the Department of National Defense, which I think gives a very good sign of what the priorities of this government are.

They are right-sizing the public service, which is a right wing euphemism for making the government far-less capable of handling the increasingly complex needs of an ageing population as we have in Canada.

In many ways, bulking up this military state is part of a short sighted strategy to make defense spending and weapons spending core to our economic growth rather than, for instance, the care economy or public services and universal social programs that Canadians desperately need in this moment.

There’s also, I think, a doubling down on resource extraction, which is far from a transformational thing. It’s very much the 19th century economy that Canada stuck with.

In this budget, there’s a complete abandonment of a response to the climate crisis and an emphasis on the worst aspects of the kind of “rip-it-and-ship-it” orientation of Canada’s economy with water guzzling and emissions spewing AI thrown into the mix to appease the growing power of Big Tech.

Then it’s all wrapped into this nostalgia inducing romanticized notion of settler colonial triumphs on the frontier: “We’re building big manly things.”

I think that there were some pretty clear winners in this budget, and then there’s everyone else who either maybe is seeing things that they care about stay the same on a flat line in this budget or even be cut and reduced back.

Let’s start with who obviously won in this budget. Who got what they were asking for from the feds, in your opinion?

I think the big winners were the fossil fuel lobby, the weapons manufacturers, and to a large degree, the corporate elite—broadly speaking—in this country, though they didn’t get everything that they’d hoped for and been clamoring for.

The departments, for instance, that were protected from fifteen per cent cuts were the Department of National Defense, the RCMP, who are getting an injection of one thousand new cops, and the Canadian Border Security Agency (CBSA), who are also getting 1000 new border officials. Every other ministry is having to find fifteen per cent cuts, which will include certainly the 40,000 public civil servants, but also mean program delivery cuts.

The budget is not very clear about all the impacts that that will have, for obvious reasons, being more of a PR document.

I think the biggest winners are fossil fuel corporations who are basically being freed from any kind of regulatory obligations. There had been a lot of hoopla about a cap on emissions from the oil and gas sector. This budget makes clear that the Carney government will be abandoning that.

They are also rolling back one of the victories of the environmental movement in the last few years, which was a federal greenwashing legislation that would prevent fossil fuel corporations from publishing ads full of disinformation and misinformation about their practices. It’s hard to see how that has any impact whatsoever on government spending, so that seems just like a little goodie that’s being thrown to the fossil fuel industry.

There’s also new subsidies to liquefied natural gas, which is despite the government’s best efforts to make it seem like it’s clean energy is not. 

Throughout all of the different program cuts across the departments, there’s also a $3 billion in cuts to existing climate programs, whether that’s public transit or money for tree planting, home energy efficiency. In many ways, the fossil fuel industry will be very happy with it, with what they got. 

The weapons industry is probably the faction of the corporate elite who are going to be happiest about this. There’s $80 billion in spending, which includes the $10 billion that Carney already announced this summer. That’s a 40 per cent increase of the defense budget and that will mean a bonanza of spending on armored vehicles, attack submarines, weapon systems—on top of what Carney has already committed to warships and jets.

Not to mention the Golden Dome, which as we’ve reported at The Breach, Carney has made it clear that he would likely have Canada participate and pay for that, which would weaponize space and is an absolutely outrageous boondoggle being pushed by President Trump.

I think the weapons industry is going to be very happy with this. If there’s anything generational in this budget, it is what the government is doing when it comes to military spending in this country. It really seems like they are putting Canada on war footing, including by encouraging companies small and large to engage in what is known as “dual use,” which basically means developing products that can serve both military and non-military uses.

It really raises the question that when you are putting an economy on war footing, war economies need wars. That’s certainly how Canada’s generals—who are probably going to be very happy with this budget—think. They’re very tied to the Pentagon.

They see our enemies the way the U.S. sees their enemies, namely China. This budget is also about consolidating Canada’s role in a U.S. driven new Cold War against China. That will mean a new arms race. I don’t think that’s the priorities that Canadians have in mind when they think about their urgent day-to-day needs.

There’s been a lot of talk from Carney about how their military spending will break Canada away from its dependence on the U.S.. Carney himself has acknowledged that 75 per cent of our current military spending goes to the US military industrial complex. 40 per cent of Canadian weapon companies are themselves just U.S. branch companies.

There’s a lot of talking out of both sides of their mouth because at the end of the day, if they want to build with this speed and this amount of money, it is inevitable that Canada will still be sending so much of that money to U.S. companies to build the weapons that they say they now want.

More weapons, fewer public services: Carney’s military spending bonanza

We talked about Canada’s possible participation in the Golden Dome, weaponization of space projects with Steve Staples on a previous podcast, and you mentioned the one thousand Canada Border Services Agency personnel who will be hired.

A lot of this actually sounds like it’s leaning into a kind of appeasement of Donald Trump, a kind of look that shows “actually we’re just as aligned, if not way more aligned than we’ve been in the past.”

Carney’s been criticized for backing down on elbows up. Is this the end of that talking point?

I think there’s two things at play. One is definitely that there’s a continuation of the appeasement of Trump that we’ve seen, and I also think that there is a shift in thinking among a kind of transnational political and economic elite towards putting defense spending at the center of their strategies for economic growth. This used to be called military Keynesianism.

We’re seeing in many ways Canada follow what has been happening in the U.K. and Germany, which are devoting a huge amount of their public spending to building out their militaries, and the question has to be asked: against what enemies?

I think a lot of people are afraid of Donald Trump’s saber rattling and then the economic tariffs that he’s imposed on the country, his threats about potentially annexing us. I do think that if that were to ever come to pass, there’s no military response to that. There’s no way that we can fend off the power of the U.S. military, nor really are these proposals a serious plan to prepare for that.

I think rhetorically Carney’s playing into that and I do think that that kind of military Keynesianism, this effort to claim to be developing our productivity and having trickle down effects for Canadians is utter folly.

For one thing, every dollar of spending in the military and on weapons creates far fewer jobs than if they were to spend that money in healthcare, in environmental spending and education.

If we’re at all concerned about the climate crisis as well, the militaries are the biggest institutional emitters of carbon emissions. If the militaries of the world were a country, they would have the fourth largest carbon footprint.

But I think in moments of honesty in the budget and in some of the announcements coming from the Carney government, they acknowledge that at the end of the day, they’re still going to have to rely on the U.S. military industrial complex to build these kinds of weapon systems.

It is very hard to develop that kind of advanced manufacturing processes that are needed to do that kind of building. So a little bit of talking out of both sides of their mouth.

We have seen that the Canadian military is still continuing to sign deals with the U.S., whether they build rocket systems, whether to lay the groundwork for the Golden Dome. I think it’s past the point now where Canada can actually revisit the F-35 jet, which is a huge $30-40 billion deal that would be built by Lockheed Martin, which of course is one of the most notorious U.S. weapons manufacturers. I think they’re pulling a fast one on Canadians.

You mentioned that the corporate elite are also big winners in this budget. Let’s break that down and talk a little bit more specifically about what they got in this week’s budget presentation that would make them so happy.

There’s been a kind of mixed reception from the corporate class in their, in the business press—which is their safe space where they discuss what they really feel.

They got a package of tax breaks that the Carney government is describing as a “super productivity deduction,” which I think is the kind of Canadian, less bombastic name for Trump’s
“big beautiful bill,” which is very weird actually seeing written in print in the document.

The finance minister was boasting that with some of these deductions, Canada now has a lower effective corporate tax rate than even the U.S., and this is being done to spur new investment into Canada because we have to be competitive, right? It’s being framed as that and with the hope of inviting— or “catalyzing” I guess would be the word—a trillion dollars of private capital into investing in Canada. I very much doubt that that promise can be fulfilled.

Some other goodies that they got: the Carney government is getting rid of the luxury yacht tax that was brought in by the Trudeau government.

God, I’ve been worrying.

So, Desmond, if you’re looking to buy yourself a fancy boat, now would be the time to do it. I hope you didn’t do it last week because then you’d still be paying that tax.

The finance minister said that he’s a pragmatic man and it costs more to administer it than they were getting, which I find hard to believe because they were pulling in a modest $30 million.

I think the kind of corporate giveaways that the corporate class got in the last six months was far more than they got in this budget.

As we know the government got rid of as one of their first acts, the capital gains inclusion tax hike rate, which represents billions and billions of dollars. The digital services tax was one that Elon Musk and Zuckerberg were very worried about. That also represents several billion dollars in lost revenue for the government.

One of the other big ones that the corporate class broadly is happy about is the so-called middle class tax cut, which actually isn’t a middle class tax cut at all.

The benefits of that tax cut are mostly going to upper class people, because lower income people don’t often pay taxes, so that the amounts that they’re getting from that are ten, twenty dollars at most, but it is costing the government $30 billion to pay for that. 

I think overall the corporate class is probably quite happy.

Big tech in particular have admitted to the press that they have never been consulted as much as they have in the last few months, and that is a growing powerful faction of the corporate elite in this country. I think they’re also going to be very pleased with the AI strategy, which hasn’t fully been rolled out yet.

On the whole, this is very much a kind of budget of an investment banker who knows who his core constituency is.

Now let’s talk about everyone else who has interests in this budget, which is pretty much everyone in this country in some manner or another, and the fact that there wasn’t a ton to be really excited about. 

If you’re a working person in this country, if you’re on a low-income, if you’re perhaps on government assistance, if you’re unhoused or really struggling to pay your rent, working several jobs at a time—I mean, I know it’s a 400 page budget. I know it’s going to take a long time to go through everything, but it certainly didn’t feel to me, Martin, like the people that I’ve just mentioned were front and center in the government’s mind.

It’s almost a kind of spurring economic growth from the top through all of this military spending and business incentives that will then, as they say, trickle down to the rest of us.

Tiny little droplets, right?

I think if you’re a renter, if you’re working class, if you’re an immigrant, this budget does not only not have anything for you, but is likely to make your life worse.

We’ve already talked about the public service cuts, which it’s worth reminding people that the Liberal government didn’t run on that in their election. Carney talked about capping government spending, but these are actual deep cuts of the sort that the Conservatives themselves wanted in their own platform.

There’s nothing really in terms of increased supports for unemployed workers through better employment insurance that would make it more accessible and more generous to people out of jobs. They could have beefed up some of the low income transfers. They didn’t do that. They certainly could have raised taxes on the wealthy to provide new and improved public services.

We didn’t get any of that.

One of the things we did get is a doubling down on the scapegoating of migrants, international students, refugees when it comes to the housing and affordability crisis, and this budget really represents a retreat from the humanitarian obligations that Canada has to refugees.

There is a slashing of 10,000 of the amount of refugee spots that Canada makes available. They have cut the international student numbers in half, and they’re even introducing new measures that will deny refugees basic healthcare and force them to pay for it. In many ways, they are reinforcing a two-tiered system in this country that traps migrant workers in conditions that make them incredibly precarious, disposable and exploitable.

The Migrant Rights Network, in anticipation of this budget, earlier this week sent out a release noting how exceptional this budget was in the way that it talks about immigration.

“For the first time ever, the annual immigration levels announcement will be included in the budget. This is not normal. The government is deliberately linking immigration to spending decisions so that they can blame migrants for the affordability crisis instead of corporate greed that’s actually driving it.”

So everybody knows, this huge show by the Carney Liberals and by the finance minister, Francois Philip Champagne, to say like we’re cutting permanent residency levels in half, we’re cutting this number of asylum seekers, we’re cutting or changing the federal interim health program. That’s not really generally something you hear. It is a serious cause for concern the way that the narrative is shifting.

Completely. I guess it’s worth mentioning a few of the cuts that were blocked thanks to organizing over the course of the summer.

Indigenous Services and Crown Indigenous Affairs, which were supposed to be slated for fifteen per cent cuts were protected. They, like the RCMP and Department of Defense are just having to find two per cent in cuts.

The Climate Youth Core—which was a really important proposal coming from the Climate Emergency Unit to spend billions of dollars on putting young people to work in this country, cleaning up the mess created by the oil industry, finding meaningful work in helping Transition Canada off of fossil fuels—it didn’t get the what they were looking for and what the Liberals had kind of led them to believe they might get, but they did get $40 million. It’s essentially a pilot project. It’s something still that I think can be shown to be vitally important and hopefully with the right kind of organizing in the future, it will get the kind of money it deserves.

The Department of WAGE, Women and Gender Equity was also slated for major cuts. Over the late summer, a massive mobilization from feminist and LGBTQI organizations pushed back on that, and while the entirety of the anticipated funding was not protected, a large chunk of it was. I think that’s an important victory as well to shout out.

I would add a little piece on disability benefits in Canada. In this budget, things kind of held steady. I was following some of the commentary from the Disability Justice Network of Ontario as they were watching the budget roll out.

The Canada Disability Benefit is not going to increase in this budget, but it’s also not being cut. Make of that what you will, but the government is also going to move through this budget to exempt the Canada Disability Benefit under the Income Tax Act in the future. So I feel like you could see that as holding the line in some sense, Martin, but the case is also that everyone’s been talking about affordability. We talk about affordability for people who can’t buy a $1.5 million home. We’re not considering that if you’re disabled in this country, your life has also gotten more expensive, and so holding the line in many senses is actually a decrease as well.

So finally, let’s think about what I think a lot of people understand when they think about a budget in a minority Parliament situation, is what’s the politics of all this and how does it affect Parliament now?

Because the Liberals, of course, have a minority under Mark Carney, but they’re only a few seats shy of a majority government, which would protect them in the future. They got a little closer to that number as the budget was being announced because an MP from Nova Scotia, Chris d’Entremont, decided that he was going to resign from the Conservative Party while the budget was being read and crossed the floor to the Liberals.

We saw him in a press conference yesterday being welcomed by Mark Carney and standing next to him during an announcement. He walked into this big room with all of the Liberal MPs and everyone was hugging him and shaking his hand. This now puts the Liberals in a position where they’re only two seats short of a majority and they are a little bit closer to getting the votes that they need to pass this budget.

Of course, the reason that that matters is if you don’t pass the budget in Parliament, that is a confidence motion. You have lost the confidence of the House and we automatically go to another election, which is what everyone’s been talking about. Will there be an election this fall? Will there be an election near Christmas time?

It can be a bit of a mug’s game to try to predict how these things will play out. It does seem like the Liberal government, since the crossing of the floor of d’Entremont, has gotten a lot more confident, and it sounds like they are trying to pick off a few other Conservatives.

The Conservatives, meanwhile, are doing their deficit hawkery stuff and it doesn’t seem like they’re going to support this budget. 

I think the NDP is also in a really tough spot where obviously, you know, the seven MPs that remain are, you know, steadfastly opposed to this kind of austerity budget. But I think it’s very hard for the NDP to run the kind of campaign that they would like to.

As far as I know, they wouldn’t be able to get a loan that parties usually take out to be able to run full-fledged campaigns because they’re not an official party and they’re already in the hole so much in terms of their debt. Even though they are polling at twice the level that they were from the spring election, they’re in a tricky spot. While it might be conceivable that they could pick up a few seats, they could even lose the ones they currently have. I don’t envy the seven MPs. What does your crystal ball hold?

Let me reach into my breach crystal ball here and see what’s going on. No? I’m just hearing what everybody else is hearing. I’m just trying to follow along and I think something that is interesting to note is that not every New Democrat member of Parliament has to vote for or against this budget.

There is a little bit of wiggle room, especially with d’Entremont crossing the floor now, that some of them might just abstain from voting on the budget at all. They will neither support or reject it, which would help the Liberals, anybody from any other party, including the Conservatives, not feeling up to voting for or against. It’s one less thing that they have to worry about.

We haven’t mentioned the block of Quebecois or the Greens. Elizabeth May came out immediately and said that the Green Party will not be voting for this budget because of the disastrous impacts that they believe it will have on the climate. The Bloq Quebecois are being a little bit cagey at this moment about whether or not they will be able to support it. I don’t really know what’s going to happen.

We can all make our predictions, but I do think that our focus should be on the things that we can control, and I do think we should not let this budget pass without being stridently critical of it.

The way that the media has kind of sanitized just how much it puts Canada on a war footing and how much it starts that kind of austerity cuts that the corporate class has been clamoring for.

It really feels a bit like when you turn the heat up on frogs in a pot of boiling water.

I don’t think this is the end of the austerity we’re going to see from this government. If we think back to the mid 90s, the Liberals took two years before they passed their truly generational neoliberal cutbacks to universal social programs and healthcare and education in this country.

I do worry that if we don’t start to mount a vigorous response from social movements in civil society, that the Carney government is going to take that as a sign that they can keep going.

I think that part of their being comfortable with increasing the deficit in this country is that if they let it continue for another year or two in terms of growing, that gives them a great pretext a year or two years down the line for for truly making deep and savage cuts to the programs that Canadians deeply rely on.

If we don’t start to mobilize, we don’t start to organize, we’re due for those kinds of cutbacks down the line.