GABRIEL GIGUÈRE
OTTAWA – As Ottawa holds consultations for its next federal budget, the MEI is urging the government to chart a different course by cutting spending, reviewing costly new programs, and reducing the regulatory burden that has weighed down the economy.
“Canada’s economy is stagnant, and its fiscal outlook is grim,” says Gabriel Giguère, senior public policy analyst at the MEI. “These are not just numbers on a page; this is debt taken out in our names, adding pressure on families already reeling from recent inflation.”
The previous government left office with a federal debt of $1.4 trillion after having failed to balance the budget in its nine years in power. The C. D. Howe Institute projects that Prime Minister Mark Carney’s first budget could feature a $92-billion deficit for 2025–2026.
While Carney’s government has pledged to reduce program spending by 15 per cent in the 2028-2029 fiscal year, (following cuts of 7.5 per cent and 10 per cent in the previous two years) through shrinking departments and cutting waste, the MEI notes this isn’t expected to a reduce total spending at this time. A thorough review of both the bureaucracy and federal programs is needed to restore sound public finances.
A more ambitious reduction of the federal bureaucracy by 17.4 per cent, mirroring the Chrétien model from the 1990s, could eliminate 64,000 jobs and save $10 billion annually.
Rolling back recent programs could also yield substantial savings. The federal dental program is projected to cost $13 billion over five years, while its pharmacare program will cost $13.4 billion by 2027-28. IT is worth noting also that health care is primarily a provincial responsibility.
“Government excesses combined with overregulation work in concert to strangle the economy,” says Mr. Giguère. “This is costing us jobs, investment, and government revenue.”
Between 2006 and 2021, federal regulations increased by 37 per cent, reaching 320,000 in total. Statistics Canada estimates that this reduced real GDP growth by 1.7 percentage points, employment growth by 1.3 percentage points, and labour productivity growth by 0.4 percentage points.
Had Ottawa maintained 2006 regulation levels, Canada would have seen about 10 per cent more business start-ups in 2021.
Targeted regulations of key Canadian sectors should also be reviewed, according to the think tank.
Ottawa’s oil and gas emissions cap, scheduled to take effect next year, aims to reduce emissions from this sector to 35 per cent below 2019 levels. Reports from Deloitte and the Parliamentary Budget Officer (PBO) confirm that the cap would effectively act as a production cap.
Deloitte estimates that by 2040, this regulation would lower Canada’s GDP by one per cent, representing a $34.5-billion loss in constant 2017 dollars. The report also found the cap would cost 112,900 Canadian jobs by 2040.
The PBO further projects that to meet Ottawa’s emissions goal, oil and gas production would need to be 4.9 per cent lower than current forecasts over 2030-2032.
Canada boasts the world’s fourth largest natural gas reserves and is the third-largest exporter. Oil and gas accounts for more than seven per cent of national GDP.
“Our advice is for Ottawa is to get out of the way,” says Mr. Giguère. “Our stagnating standard of living proves that government expansion across all areas does not produce economic prosperity, and doubling down on this approach will only make matters worse.”
The MEI’s pre-budget submission is available here: https://www.iedm.org/wp-content/uploads/2025/08/brief_federal_budget_2025.pdf
The MEI is an independent public policy think tank with offices in Montreal, Ottawa, and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.
