Vassy Kapelos tells Evan Bray it’s ‘anybody’s guess’ if Carney’s first budget will pass

Mark Carney’s Liberal government is set to table its first budget on Tuesday afternoon, in what many political watchers see as the first real test for the new prime minister and his cabinet.

The Liberals are making some changes to how budgets are delivered, tabling the document in the fall rather than the spring, and separating the operating and capital spending portions of the budget. While Carney has promised to “balance” the operational side of the budget within three years, many economists are expecting a big deficit, along with a hike in spending.

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• Liberals set to deliver highly anticipated federal budget today
• Government needs opposition support on budget vote to avoid a winter election
• Sask. Premier Scott Moe expects ‘significant’ deficit in federal budget

Carney’s predecessor, Justin Trudeau, never tabled a balanced budget despite promises to do so.

The Liberals will need to secure the support of at least one other party in order to pass the budget and avoid a winter election, though that support is unlikely to come from the Conservative Party. Leader Pierre Poilievre has said Carney will need to keep the deficit below $42 billion in order to win support from his party, along with cuts to income tax and the elimination of Canada’s industrial carbon tax.

Vassy Kapelos, chief parliamentary correspondent for CTV and host of the The Vassy Kapelos Show – heard on Saturdays from 1-3 p.m. on 650 CKOM and 980 CJME – joined the Evan Bray Show on Tuesday to discuss the upcoming budget. Kapelos said there isn’t a lot of demand for a fall election at the moment, but “stranger things have happened.”

Listen to the full interview here, or read the transcript below:

This transcript has been edited for length and clarity.

EVAN BRAY: Is it just me, or does it feel like there’s a lot of eyes on this budget, more so than in recent history?

Kapelos: I think you’re totally right, and for a couple of reasons. First, it’s been a really long time since we’ve actually seen a budget. So this is the first real kind of guiding plan for a government that we’ve had in a really long time, so I think just by virtue of that, we’re all paying attention, but we’re also paying attention because this is the first proof point for Mark Carney’s government. He has said he’s going to do big things, and he’s really being fixated on the economy. I think that’s a huge part of why he won the election, offering himself as the person best suited to guide the economy through the trade war with the United States, and just in general, and so this is a proof point of that. I think Canadians are really anxious to see exactly what plans he has in store to match or not match the rhetoric that he has certainly employed.

There’s going to be a few storylines that will come out of this budget. One of them, given the fact that we know the deficit is likely to exceed some of the projections, is this budget going to be touted as “this is the cost of sovereignty in 2025”?

Kapelos: It’s so funny that you say that, because I was speaking to two people who were working on the budget a few weeks ago who said, “Expect to hear the term ‘the price of sovereignty.’” That is what they’re going to say to justify the spending side of the ledger. And I’ll be watching really closely, because there have been other instances where you saw big numbers on that side of things – the spending side of things – over the last 10 years. And sometimes there were very justifiable reasons for it, like in COVID, and other times less so. So it’s up to people like me and others scrutinizing to really drill down into this. Just because they say, “This is an investment and it’s going to create a return on investment,” will it actually? How much of this is income redistribution, or is it really geared at spurring investment in a different way? So I’m very closely looking at that, but that level of spending is going to be interesting as well, right? “The price of sovereignty don’t come cheap” is what I’m guessing is going to be what’s telegraphed through this budget, but the deficit, if it exceeds let’s say $70-$80 billion and we’re heading into $90 billion territory, that becomes very consequential.

I saw the recent poll that showed the majority of Canadians are really wanting to see a budget that digs into, in a substantial way, the cost of living. Is it possible? We know that this budget will work towards strengthening the economy. We have already heard lots of foreshadowing of that the strengthening of the economy, but does that lead to a lower cost of living? And and if so, how quick is that turnaround?

Kapelos: Nothing is going to be quick, would be my first guess. I think one of the issues that has impacted the inability of our wages to keep up with inflation is the issue of productivity, so my guess is there will be measures in this budget aimed at increasing productivity, but translating that to you and I at home I think is a harder job. We always often hear how Mark Carney is like a technocrat. Often he comes across that way, so I’m very curious to see the way in which they attempt to thread the needle in that vein. And conversely, you’re going to see the Conservatives go very hard on the size of the deficit and link it very directly to cost of living, essentially arguing that instead of lowering your cost of living, the government by increasing the debt load and increasing the size of the deficit is doing the opposite. And there’s some economic argument behind that, but it’s it’s not the whole picture. So each side will really have an interesting kind of communications job around centralizing this budget on what matters to you and I and people listening, which is how expensive our life feels. And I think, in particular, the government will have a big challenge there.

You just brought up debt and deficit. Let’s talk fiscal discipline for a second. I saw the C.D. Howe Institute recently gave this government a D on fiscal responsibility. Are Canadian citizens more likely, this time around, to give the government a pass when it comes to that deficit number because of the complicated things that are happening on the geopolitical scale?

Kapelos: I’m not sure yet. I think that there is an appetite for the government to show restraint, but at the same time the government is going to try to sell that message that we just talked about, the idea that it’s going to cost to pay for our sovereignty and to reform our economy. So where do Canadians fall in that mix? I’m not 100 per cent sure. Traditionally, particularly over the last 10 years, voters didn’t necessarily punish the government – in this case, the Trudeau government – for running deficits. I’m not sure whether it’s still going to be that way, particularly if the size of the deficit does increase substantially at the same time, I’m very curious to see what Mark Carney means when he characterized the budget as one of austerity. What kind of fiscal discipline (will) they show in the area that they have said they’re going to cut, which is on spending on the operations of government? Are we talking a substantial cut in the public service? Last week, the finance minister said that the last time the public service had been sustainable was prior to the pandemic, which is like 80,000 fewer people. Are they going to literally eliminate 80,000 jobs? That would be a shocking development, I think, and one that we have not really been accustomed to, particularly over the last 10 or 12 years. So how that shakes out is a real point of scrutiny for me. What does austerity actually mean? And what does it mean for programs and all that kind of stuff?

Every year when the budget comes up, there’s a week or two that precedes the budget that is about tone setting, and we’ve seen some of that. In fact, we saw Mark Carney on a national address in front of some university students in the in the last couple of weeks. Can you talk about what you’re seeing from your seat right outside those buildings in Ottawa? What type of tone is government trying to set heading into budget?

Kapelos: They’re not trying to lower expectations, which is traditionally not the most political thing to do. Normally, politicians keep expectations low so that they have a chance to outperform them. And I think it’s fair to say, rightly or wrongly, the prime minister has set the expectations for this budget and other things under his tenure very high, and I am very curious to see what that means. So will the content of the budget match the tone that you reference, which is, this is basically “the budget of a generation,” “the budget of a lifetime.” That is the landing point that they arrived at. When it comes to messaging around this budget, they keep using the term “generational investment,” so it’s a lot less about austerity than it was two months ago, or responsibility or restraint, and it’s a lot more about, “budget of a lifetime.” I don’t actually know what that means. I’m being totally frank with you. I hear them say it. I hear the finance minister repeat it about 700 times a day, and I’m not really sure exactly what it means, because it really heightens the expectations around the budget, like “We’re going to solve this trade war, reform our economy and make your life better with this one document.” I’ve never seen a budget that actually accomplishes that. I think they really have their challenge cut out for them.

I’m wondering if you have any thoughts on anything that might be noticeably absent from today’s budget? Is there anything that you’re thinking they are going to specifically, maybe strategically, not focus on?

Kapelos: I’m very curious to see what happens with certain programs that were set to expand, so things in Indigenous services, pharma care, even in dental care to a certain degree. The one hint that the prime minister has dropped – and this is really like searching for clams or something, because I’m listening to every word, trying to parse it out – the one hint that he’s dropped about what restraint might look like, the day after he delivered that speech, he basically said there might be programs that we wanted to expand or wanted to accelerate that we just won’t be able to at the speed with which we thought. So I’m curious to see, does that mean no more pharma care deals, or no more expansion of pharma care? Does it mean icing the expansion of dental care that was planned? So I’m very curious to see if that’s there. And then the other thing is, what do they do to try and win the support of the opposition parties? I think they’ve decided the NDP are their likeliest supporters, so what do they back off of when it comes to, for example, cuts in order to satisfy the NDP and pass this budget and avoid an election?

That’s perfect lead into my last question. What are you hearing in terms of this budget actually passing?

Kapelos: Ten days ago I would have said “No way – it’s going to pass.” Right now, I’m like, “It’s anybody’s guess.” It is a weird time right now in Ottawa, where every person you call a decision-making authority – and the opposition parties – basically can’t tell you exactly what they’re going to do after this budget is introduced. And I think that provides the opportunity for, in a minority situation, basically the idea that anything can happen. I don’t think anybody really thinks they’re ready to go to an election or wants to go to an election. No Canadian wants them to go to an election right now, but stranger things have happened, and this could be a strange thing.

–with files from The Canadian Press