Hot off the press, pollster Philippe Fournier and Canada 338’s latest numbers are a wakeup call for the governing Liberals. The question is whether they will hear it.
Apart from one outlier, (Leger), the rest of the polling pack in Canada is no longer predicting the massive majority for Mark Carney’s government that seemed a sure thing only a month or two ago. Instead of the dizzying heights of 50% plus, the consensus is now on Liberal support at 40-45% and the trend is downward. This may not seem like much of a decline, but in our First Past the Post electoral system it makes a BIG difference. The Liberals would still win if an election were held tomorrow, but their potentially huge margin of victory in Parliament is now reduced to a far more modest five to seven seats in most projections, not much more than they have now. And despite the unappealing prospects of Pierre Poilievre and Avi Lewis as leaders, both the Conservatives and the NDP are starting to do slightly better. In fact, the NDP is back to its more normal 12-14%, up from the disastrous 6% of the 2015 election — enough to cause its typical trouble for the Liberals with progressive voters. Even the Bloc is doing slightly better. If the Conservatives ever decide that Poilievre’s popularity freefall must be recognized and he must be replaced, all bets are off.
What to make of this softening in Liberal support? While hardly dramatic, it is indicative of some underlying government weaknesses that remain unaddressed and in some cases apparently unrecognized, the same things identified in two earlier blogs (“Selling ‘Canada Strong: Are We All in This Together?” [01/1/26] and “Carney Ignores Progressives at his Peril” [23/05/26].) Simply put, the prime minister and his cabinet are singing from a different songbook than most Canadians. To their credit, and unlike most politicians, this group of Liberal anti-politicians is willing to tackle long term issues. However there is a significant disconnect between what they envisage as a realistic timeframe for their ambitious plans, and what the average Canadian expects. The former are talking about a decade of major effort, and the latter are thinking in terms of a year or two at most. The result has been a growing concern among many voters, after a year in power, that things under the Liberals do not seem to be getting any better.
There is no question that this government has outlined a comprehensive, well thought out agenda that addresses important structural problems in the Canadian economy. There is no doubt that it has outlined the various elements of this agenda quite clearly, from high speed trains to pipelines. What it has not done is explain how long it will take to achieve the implementation of this agenda, or what the short and medium-term costs to individuals and government programs and services will be.
And this is the crux of the matter. The government’s television ads stressing the massive infrastructure and investment projects the Liberals are undertaking are momentarily impressive, but for most people there is no concrete evidence that these projects are even underway, never mind that they will have a positive impact on ordinary Canadians in the near future. This is for the obvious reason that they will not. Benefits, when they finally materialize, will be indirect, in the form of a strengthened economy, not in the form of tangible rewards for the average individual. It is asking a great deal of most citizens to expect them to patiently wait a decade for improvements in their personal situation, even if they recognize that the measures being undertaken are worthwhile and even necessary.
There is ample evidence that many Canadians – and especially young Canadians — are increasingly unhappy with their personal situation. Ranked 15th in the world in 2024, Canada as a whole fell to 18th place in the World Happiness Report of countries in 2025. Even more significant is the decline in happiness of young Canadians. Those under 30 were once the happiest cohort in the country, but in 2024 this group placed last in Canada and ranked 58th in the world. Only because those Canadians over 60 were in 8th place internationally among their cohorts did Canada manage to hang on to its 18th place country ranking, as prominent UBC economist John Helliwell has noted.[i] His pessimistic analysis is reinforced by an in depth C.D. Howe study entitled “The Kids Are Not All Right and Neither is Anyone Else,” which points to such cost-of-living issues as youth unemployment, food insecurity, housing unaffordability and age-based government program inequities as notable sources of discontent.[ii] Hardly surprising, then, that this same youth cohort is now attracted to the federal Conservatives.[iii]
In the past few weeks there has been some indication that the Liberals are beginning to understand this problem. As a result the April budget update and many ministerial statements stressed that the government is “fast-tracking” housing starts and “protecting” basic social programs such as healthcare and the national childcare program, (although in reality, as numerous commentators have noted, the funding for almost all of these programs is being reduced.) But there have been few specifics to which individual citizens can relate.
Similarly, the prime minister this week announced a new “national food security strategy.” Apparently he was under the impression that this initiative would attract attention and positive support from those Canadians who are feeling the pinch at the grocery store. His government’s solution? Another technically solid, evidence-based ten-year plan whose bureaucratic features perfectly demonstrate the disconnect between this government’s approach and the concerns of many ordinary citizens (see details below [iv]).
To be clear, all of these measures are appropriate, desirable and technically sound, and they will no doubt be effective when they are implemented. But they will not reduce the cost of food in the grocery store for the foreseeable future. And a significant proportion of Canadians will be increasingly unhappy with a government that they perceive is not delivering on what they expected, even if their expectations are unrealistic. But how can they be realistic when no one has explained to them how this big picture agenda will work?
The food security example highlights the stark reality of the disconnect. To fix this the government must do better at communicating the realities of its long-term economic agenda and respond more directly to immediate citizen concerns. Otherwise it may find it does not have the time it needs to implement this agenda. Put another way, while the Carney government is to be commended for tackling long-term issues, it cannot escape the realities of retail politics and short election cycles.
What to do? The answer, in part, is to launch a major communications effort, led by the prime minister himself and supported by relevant ministers. The objective is to convince Canadians that Carney’s government is aware of, and responsive to, their immediate concerns and is on the right track to fix long-term systemic problems in the economy.
There are three parts to this communications strategy, the first of which is quite straightforward. The government must not only address short-term affordability issues, it must be seen to be doing this. Happily, a government ad released in the past week appears to recognize this pressing need. As the ad makes clear, the government actually has introduced some immediate short-term relief measures, but many if not most Canadians have been unaware of these initiatives. Nor have the measures been presented by the government as a coherent package until now. As the ad highlights, these measures include: a Canada Groceries and Essentials tax benefit, including a one-time top up of $500 to the pre-existing GST rebate and a permanent 25% increase to this tax credit for five years; making permanent the National School Food Program introduced by the Trudeau government; temporarily removing the federal excise tax on gasoline and diesel fuel at the pump; reducing the lowest income tax rate from 15 to 14%; and eliminating the GST on homes under $1 million and reducing it on those at $1 to $1.5 million. Clearly these are measures to which the ordinary Canadian can relate.
While critics will argue these measures are insufficient, and that more needs to be done, particularly with respect to the national child care program and pharmacare, they at least go some way towards providing the government with political cover while it works on its long term plan. Hopefully the ad will play continuously during the FIFA competition and Blue Jays games. Meanwhile the prime minister and his cabinet, and all Liberal MPs, need to highlight these measures at every possible opportunity over parliament’s upcoming summer recess.
The second pillar of this communications strategy is equally clear. The prime minister must provide Canadians with a realistic timeframe for the implementation of the government’s big picture economic agenda. He and relevant ministers should also commit to providing regular annual updates on progress. Given that opposition parties and oversight watchdogs like the PBO will be doing this in any event, this proactive approach will allow the government to get its message out ahead of its critics, framing the discussion in the best possible light, and should, once again, help to retain voter trust.
The third and most important pillar of the communications strategy is also the most difficult. It requires the prime minister to address the elephant in the room – government finances – in a frank talk with Canadians. If a sizeable proportion of Canadians is already unhappy with the way the country is going, it is clearly not advisable to wait until they see the negative consequences of government cutbacks on a range of well-known programs and services before attempting to do this. It is up to Carney to lay out the fiscal problem, and the possible options to address it, and sooner rather than later. Ideally this would take the form of a televised address to the nation just before the return of parliament in September, in advance of consultations for the November budget.
No doubt the Liberals would like to avoid this pillar. The irony, of course, is that Mark Carney is by far the best person to tackle this issue. This is precisely the area of expertise on which his personal credibility and his current popularity rest. What is required is that he expend some of his considerable political capital while he still has it.
To begin with Carney needs to outline the scope of the problem, which has increased exponentially since he became prime minister in early 2025. True, the country’s economy was already in long-term decline due to poor productivity. And true, the tariff crisis brought on by the Trump administration has made this worse in the past year and required the government to shore up a number of sectors of the economy to prevent significant losses. In addition, Carney has added a massive expenditure component for his long-term infrastructure and economic development agenda. However this, at least, was not only expected but was built in to the Liberal platform, although it certainly added to the expenditure side of the ledger.
Instead, the major culprit in the government’s current fiscal dilemma is defence spending, and this is where the greatest political challenge lies for the Liberals. After all, this was never part of their Canada Strong election platform of April 2025, which only committed them to “build up our military capabilities and in doing so, enable us to meet our 2 per cent [of GDP] NATO target by the end of the decade.” Put another way by Queen’s University professor Eugene Lang, ‘Canadians did not vote for such high defence spending.”[v] With the Carney government’s unexpected June 2025 commitment to increase defence spending from barely 1% of GDP to 2% in less than a year, the disparity between the government’s total revenue and expenditures has dramatically increased and has already resulted in cutbacks elsewhere, as evidenced by the government’s current Expenditure Review of all other federal programs. If the government keeps to its additional commitment for defence spending to reach 3.5% by 2030 and 5% of GDP by 2035, as mandated by NATO, the deficit/debt will balloon out of control unless even more drastic action is taken.
Polls have shown that Canadians have reluctantly accepted the need to increase Canada’s commitment to national security, and perhaps to NATO, after a lengthy period of reduced defence spending.[vi] This is significant in and of itself since defence spending has never been a priority of Canadian voters. But that support comes with the clear caveat that expenditures should benefit Canadian companies and should also distance us further from our former American ally. (This is already proving to be a technical problem, as the issues arising from the government’s recent purchase of a Swedish guidance system have shown.)[vii] More importantly, both polls and academic research have concluded that the roughly 60% public support for the government’s 2% plan declines significantly with respect to a further increase to 3.5%, let alone 5%.[viii] Carleton University Professor Eric Van Rythoven concludes support for any increased defence spending is in fact “fragile” and states “I cannot see a future where Canadians will tolerate that kind of spending on defence at the expense of other priorities.” Indeed, one Angus Reid poll shows more than 50% strongly oppose this further increase, expressing concern about the fate of other government programs. And this is before the vast majority of Canadians understand just how much this enormous increase in defence spending will impact the federal budget’s bottom line and the delivery of other programs and services.
It is important to note that Defence has long been separated out from government spending for all other federal departments. Defence actually appears as a separate line item in federal budgets, precisely because it is so much more costly than all but one other specific program of the federal government, (the OAS/GIS), even when it has been funded at levels that represent 1% of GDP or less. It is equally important to note that roughly 60% of all federal revenue automatically goes to Transfers to Individuals (OAS and GIS, the Canada Child Benefit, Employment Insurance, etc) and Transfers to Provinces (Canada Health Transfer, Social Transfer, Equalization, etc). As a result, even the combination of defence expenditures and expenditures on all other federal government operations together represent only 29% of federal revenue, with the remaining 10% of federal revenue going to service the public debt.
With the Carney government’s most recent increase in Defence spending to $62.7 billion, in order to reach NATO’s 2% of GDP goal, the total funds now allocated for Defence far exceed the total amount spent on the Canada Health Transfer (at $54.7 billion), and almost equal the total amount spent on federal operations by all other departments and agencies, (at $71 billion). (Indeed, the only single expenditure greater than Defence is the OAS/GIS for seniors at $85.5 billion.) With this 2% goal achieved, the current annual deficit – the gap between federal revenue and expenditures – is projected to be some $78 billion,[ix] up substantially from the $61 billion deficit of the last Trudeau government in 2024. If the Carney government proceeds with its plan to increase defence spending to 5% of GDP this deficit is projected to reach $130 billion if no other changes are made.[x]
This is the situation the prime minister must address with Canadians, first by noting that there are only a few realistic options to reduce this gap. One can either increase revenue or decrease expenses. The favourite and “painless” option of many previous politicians – simply assuming government revenue will increase through economic growth, which in turn will produce more tax revenue and therefore solves the deficit problem without the need to make any other changes – is simply not feasible in the current economic climate. Instead, the only viable option for raising government revenue is to increase taxes, a move considered suicidal by most Canadian politicians for several decades, primarily due to entrenched neoconservative discourse.
Alternatively, the focus can be on ways to decrease expenditures, which is the route the Carney government has so far chosen. However, as noted above, unless it is willing to reduce its expenditures on transfers to individuals or provinces, another move long considered politically suicidal, the federal government only has discretion over roughly 29% of its revenue, of which 7% is allocated for Defence. This means that any more cuts must come from barely 22% of its revenue, which provides the funding for more than forty government departments and agencies and hundreds if not thousands of specific programs delivering services to Canadians. There will be nothing painless about these program cuts, as media coverage is already beginning to highlight in terms of the current Expenditure Review.
The stated objective of the Expenditure Review is to save some $32 billion over three fiscal years, to minimize the gap cause by the government’s mad dash to 2% in less than a year. Even if these cuts were to be extended and expanded for the next seven years, the amount recouped would be nowhere near what is required to fund further increases in defence expenditures to reach even 3.5% of GDP by 2035. Economists estimate that will require some $160 billion more of government revenue. Simply put, even more drastic cuts in non defence-related programs will not help much in reducing the gap and minimizing the shortfall. With many social, cultural and environmental programs on the chopping block, the political pushback will only intensify.
What can the government do to alleviate this pain? One obvious answer is to bite the bullet and increase revenue through previously unpopular measures. Experts on both the right and left of the political spectrum have offered up no end of options to address this problem, some of which are politically unsaleable and unacceptable in the context of a liberal Canadian political culture. But a consensus is gradually emerging among experts that some modest mix of two or three different measures might provide sufficient relief to allow the government to stay the course without incurring huge political blowback, assuming the government, and the prime minister, can convince Canadians that this additional expenditure on defence is necessary. And even if Mark Carney cannot achieve that objective and is obliged to cut back on his NATO commitment, he will still need to bring Canadians onside with the massive costs of his “transformational” investment in infrastructure and economic development, costs which in and of themselves have increased the deficit and will require political buy in.
In increasing order of political challenge, these three proposed measures to increases the government’s revenue stream would be:
- Reducing the eligibility of wealthy seniors to the OAS/GIS, located in the Transfer to Individuals basket.
As noted above, the cost of the specific OAS/GIC program is actually the largest single budgetary measure, at $85.5 billion. The OAS program has become increasingly controversial since, although it includes a claw back provision for wealthy seniors, it is still available to those individuals with an income of $100,000 and two-senior families with a combined income near $180,000, while the GIS offers only a small top up to low income seniors. In addition to a fairness issue the controversy is often seen as generational, since the program’s cost is often contrasted with the $54 billion allocated for the national childcare program. The solution, proposed by experts such as UBC professor Paul Kershaw, the founder of Generational Squeeze, and Claude Lavoie, former Director General of Economic Policy at the federal Department of Finance, is to sharply reduce the eligible income level for the claw back, a measure which would produce savings (and hence additional government revenue) of roughly $17 billion annually.[xi] Even if some $2 billion is allocated to the GIS, additional revenue of $15 billion per year or $45 billion over three years would be available. Polls have shown that 70% of Canadians feel this type of change is reasonable and desirable.[xii]
- An increase of 2% to the GST
When prime minister Brian Mulroney first introduced the GST in 1991 it was hugely unpopular and arguably contributed to the defeat of his government in 1993. However it remained in place throughout the Chretien decade and eventually became an accepted minor irritant for most Canadians if it was noticed at all. The Harper government’s 2% reduction of the federal portion of the GST from 7% to 5% in 2008, while no doubt viewed favourably by his party’s base in tax-free Alberta, was not a widely popular or recognized move, nor was it recommended by tax experts, many of whom described it as the worst possible option for decreasing the tax burden on Canadians. It did, however, cost the federal treasury roughly $15 billion annually in lost revenue.[xiii] And while the consumption tax is undeniably less progressive than income tax, increasing the existing GST rebate for low income families is the commonly proposed remedial measure, and one the Carney government could easily implement.
- Introducing Some Form of Wealth Tax
Clearly this is the most controversial of the options, but potentially one which could be politically popular. The concept is gaining considerable support among noted economists (such as Thomas Piketty, Emanuel Saez and Gabriel Zucman) in western democracies where the so-called wealth gap, between billionaires and the rest of the population, is increasing exponentially, and where, in many cases, the wealthiest individuals pay little or no income tax because of the nature of their wealth. [xiv]
Previous efforts to enhance the progressivity of the personal income tax system have traditionally focused on increasing the rate of top income brackets, (eg. Justin Trudeau’s increase of the top federal bracket from 29% to 33%), and have generally been politically popular, but they have run into hard realities. As countless studies in Canada and elsewhere have demonstrated, an economic concept known as Elasticity has derailed many a government’s plan for dramatically increased revenue. Because those in such top tier income levels have more flexibility, they often re-arrange their income in such a way that they not only avoid increased payments but actually end up paying less. Most experts, including Canada’s Parliamentary Budget Officer, have concluded this Elasticity effect ultimately results in considerably less revenue for the government than if it had not introduced the increase.[xv] And in the current economic climate, with the Carney government desperately attempting to attract Canadian business dollars and foreign investment, an increase in the corporate tax rate is clearly not a realistic possibility either.
Enter the new/old concept of a wealth tax. In the past a number of European democracies had a form of wealth tax which was subsequently withdrawn, primarily because of the concern with the flight of capital, the same concern expressed with the concept of increases in personal taxation rates. But the advent of the era of billionaires and Elon Musk has led to renewed interest in the concept. Currently Norway, Switzerland and Spain have a wealth tax, while Belgium, the Netherlands, France and Italy have some form of non-income taxation of wealth such as real estate or stocks. Many experts have suggested the crucial aspect when considering such a measure is to set the bar at a rate that renders the flight risk low while the revenue stream is nevertheless greatly increased, a balancing act that will vary with the political culture of the country. This bodes well for Canadian consideration of the measure given the relatively high compliance rates with current measures. As for revenue, one model, proposed by Professor Neil Brooks, a well-known tax lawyer with Osgoode Hall Law School, would impact only 0.1% of taxpayers. Brooks has projected that a 1% levy on individuals with net assets between $25 million and $50 million, and 2% on those with higher net assets, would result in roughly $40 billion in additional federal revenue annually.
Whether the Carney government proceeds with its additional Defence spending commitments or not, many experts argue the above measures are long overdue and/or appropriate for current economic realities. Certainly the measures outlined will also significantly defray the cost of the Liberals’ long-term infrastructure agenda, which is already an important factor in the expenditure/revenue gap, however the government chooses to calculate it. [xvi]
Hopefully a sufficient number of politically astute advisers remain in key positions in the new technocratic and business-oriented Liberal government to recognize the importance of pursuing the communications strategy, and of the prime minister himself providing Canadians with the information necessary for them to understand the significance of the long-term agenda that requires these initiatives. Otherwise the Liberals may well find themselves out of office before they can achieve many of their longer-term objectives.
[i] https://cdhowe.org/publication/graph-of-the-week-canadas-happiness-decline-hits-young-people-the-hardest/
[ii] https://cdhowe.org/publication/the-kids-are-not-all-right-and-neither-is-anybody-else/
[iii] https://macleans.ca/longforms/the-rise-of-conservative-youth/
[iv] It includes: –1 billion for infrastructure — including food terminals and hubs — to help independent grocers compete with large retailers by making it easier for them to buy from farmers and food processors. — initiatives to help small- and medium-sized processors modernize and increase productivity so they can compete in the global marketplace while attracting investment from major manufacturers. and — $750 million for greenhouses and hydroponics to expand year-round Canadian production of fruits and vegetables, including in rural and northern communities and-speeding up approvals for seeds, feed, fertilizers and veterinary products, and to reduce backlogs that slow down the system.[iv]
[v] https://www.theglobeandmail.com/business/commentary/article-canadians-did-not-vote-for-such-high-defence-spending-how-to-get-them/
[vi] See for example https://ottawacitizen.com/public-service/defence-watch/canadians-defence-dollars-spent-canadian-owned-firms; https://www.policymagazine.ca/poll-shows-canadians-support-higher-defence-spending-but-not-to-buy-american/ and https://nanos.co/wp-content/uploads/2025/07/2025-2859-CTV-June-Populated-Report-Defence.pdf
[vii] https://www.cbc.ca/player/play/video/9.7239057
[viii] https://capitalcurrent.ca/budget-prioritizes-defence-but-canadians-may-not-support-huge-long-term-investment-experts-say/
[ix] https://drained.ca/spending
[x] https://drained.ca/spending
[xi] https://www.theglobeandmail.com/business/commentary/article-youth-young-future-canada-success/
and https://www.theglobeandmail.com/business/commentary/article-youth-young-future-canada-success/
[xii] https://nationalpost.com/news/canada/canadians-including-retirees-support-trimming-oas-for-well-off-seniors-poll
[xiii] https://www.ipolitics.ca/2015/02/23/mr-harpers-taxing-troubles/
[xiv] For more detail see https://www.policyalternatives.ca/news-research/the-case-for-a-wealth-tax-is-stronger-than-ever-in-canada/ and
[xv] https://www.pbo-dpb.ca/en/publications/RP-2425-019-S–costing-personal-income-tax-changes-role-elasticity-taxable-income–role-elasticite-revenu-imposable-dans-evaluation-couts-modifications-impot
[xvi] Note the government introduced a new calculation of deficit and debt in its November 2025 budget to minimize this concern, as outlined by the PBO
