Canada Watch: An Alternative Answer in the Age of Populism

When Carney stood alongside Harper and Chrétien before the cameras—while Trudeau, who had only recently left Ottawa, was conspicuously absent—the visual was unmistakable: Canadian politics is undergoing a profound shift. As leader of a progressive party, Carney has emerged as one of the most conservative prime ministers Canada has seen since the turn of the century on economic issues such as corporate investment, regulation, and private-sector participation in public infrastructure. Remarkably, as a political newcomer, Carney has neither embraced progressive populism to counter conservatism nor uncritically adopted the dog whistles of conservative populism. Instead, he charts a rare course for this populist era: maintaining progressive stances on social issues while tilting toward the centre-right on economics. From within the progressive camp, he confidently champions corporate investment, expanded production, and international trade—not as ends in themselves, but as instruments to uphold the social safety net and public services his government promises. The recently concluded Canadian Investment Summit and the subsequent European tour epitomize this strategy most clearly. Chronic underinvestment, regulatory bloat, sluggish approvals, and politically layered vetoes stalling major projects have long hampered Canada’s ability to unlock its full potential. In a society broadly inclined toward progressivism, pro-business policies are especially vulnerable to moral condemnation. Reducing investment costs and allowing private capital into public infrastructure are easily framed as handouts to capital. This anti-development brand of progressive populism has become a critical obstacle to reform—one that conveniently enables opposition to nearly every concrete measure that generates new wealth, while still demanding greater government redistribution. Carney has directly confronted this high-voltage line. The 2025 budget already improved the tax treatment of corporate investment through an investment allowance; at the September 15 Investment Summit, he announced the Productivity Mega Deduction—expanding the share of qualifying capital assets eligible for immediate expensing from roughly 15% to over 65%, and making the measure permanent. According to Ottawa’s own calculations, the marginal effective tax rate on new corporate investment in Canada will fall from about 13% to 6.4%—less than half the U.S. rate. Businesses purchasing qualifying equipment, software, or constructing related facilities can deduct the full cost in the year the asset enters service—transforming tax benefits into cash flow sooner and lowering the real burden of new investment. Permanence further reduces uncertainty around policy expiration and reversal. Carney is willing to cede fiscal space in time—letting Ottawa forgo revenue now—to accelerate capital’s entry into productive activity; he acknowledges firms’ pursuit of returns and channels that pursuit toward investments Canada urgently needs. Critics may still dismiss this as ‘trickle-down economics’. But a label cannot erase the real-world impact of investment incentives. By accelerating tax deductions, such policies can alter corporate investment decisions and amplify investment scale to stimulate growth. To reduce them to mere ‘handouts to the rich’ is to evade economic reality with political slogans. What Canada desperately needs—right now—is economic growth.

One Month Before the By-Election, Carney Books Tax Cuts as Capital Expenditure

The $16.8 Billion Accounting Method The first fiscal anchor is that day-to-day operating expenditures must be covered by revenues. Table A1.6 calculates this as budgeted revenues plus ‘capital investment income’, minus operating expenditures. ‘Capital investment income’ refers to foregone tax revenue resulting from tax measures designed to encourage capital formation—such as the Productivity Mega Deduction—and amounts to $16.8 billion in fiscal year 2027–28. A footnote beneath the table states this foregone revenue ‘is not recorded in the government’s financial statements and therefore cannot be observed directly.’ The government’s published operating balance for 2027–28 is a surplus of $11.2 billion. Subtract the $16.8 billion, and the result is a $5.6 billion deficit. For 2026–27, the reported $3.5 billion deficit becomes a $13.4 billion deficit. The deduction itself has merit. The budget notes it lowers the marginal effective tax rate on new corporate investment—from 15.4% before the 2025 budget to 6.4%—and expands the share of qualifying assets eligible for immediate expensing from ~15% to over 65%. Reducing the tax burden on investment is something Canada should have done long ago. Conservative finance critic Michael Chong’s critique is precisely that it doesn’t go far enough: he told CBC these reforms amount to ‘tinkering at the margins of a tax system that has strangled investment and income for years.’ Tax cuts are justified—but recording foregone revenue as ‘investment income’ and using it to balance the operating ledger turns the fiscal anchor into a target achievable purely by definitional sleight of hand. Tariffs Are No Longer a Shield The U.S. midterm elections handed both chambers of Congress to the Democrats. Jamie Raskin, senior Democrat on the House Judiciary Committee, told CBC that ‘one reason we took back Congress is to end these tariffs,’ and expressed hope of resolving Canada-related tariff issues within the first 100 days of the new Congress. Mark Carney, speaking on U.S. election day, said Washington had ‘clearly softened’ on several of Canada’s red lines—‘they’re asking for less and offering more’—and added that the two leaders would meet in China later this month. These remarks do not mean tariffs will vanish soon. The new Congress won’t be sworn in until January, and tariffs operate under presidential executive authority; Trump posted a photo after the election wearing a hat emblazoned ‘VETO’. Former U.S. Ambassador to Canada David Cohen cautioned that without White House engagement, there will be no substantive change in trade policy—and that Canada’s aspiration for a tariff-free agreement ‘may simply be impossible.’ Canadian Trade Minister Dominic LeBlanc likewise stressed that negotiations remain with Trump and his cabinet: ‘They are still in office today.’ Should negotiations advance, Ottawa will face another challenge. The budget itself cites private-sector forecasts indicating U.S. tariffs shave just 0.3 percentage points off real GDP growth in both 2026 and 2027. Yet the forecast for full-year 2026 growth stands at only 1.0%; September saw employment fall by 68,000 jobs, and the unemployment rate sits at 6.5%. So far, nearly $44 billion in tariff relief has already been baked into spending plans. Michael Chong’s assessment is blunt: ‘More spending cannot fix a slack economy.’ Tariffs may shield part of the problem—but the underlying weakness remains. That is what this budget must address.

Carney Gives Canada’s Oil Firms a Tax Windfall and Hopes They’ll Spend It

20 hours ago

Canada's government announced tax write-offs for oil and gas producers to encourage capital spending, potentially adding hundreds of millions in cash for firms like Suncor and Imperial Oil. However, executives remain divided on whether funds will drive production growth or share buybacks.

bloomberg

2026-11-09

Carney Gives Canada’s Oil Firms a Tax Windfall and Hopes They’ll Spend It

Carney Gives Canada’s Oil Firms a Tax Windfall and Hopes They’ll Spend It

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