{"id":37749,"date":"2025-07-04T09:49:16","date_gmt":"2025-07-04T09:49:16","guid":{"rendered":"https:\/\/www.europesays.com\/us\/37749\/"},"modified":"2025-07-04T09:49:16","modified_gmt":"2025-07-04T09:49:16","slug":"to-up-defence-spending-canada-must-cut-deeper-tax-harder-and-borrow-more-all-at-once","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/37749\/","title":{"rendered":"To up defence spending, Canada must cut deeper, tax harder and borrow more \u2013 all at once"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

Prime Minister Mark Carney makes a defence and security speech standing alongside Chief of the Defence Staff Jennie Carignan, left, and National Defence Minister David McGuinty at Toronto’s Fort York Armoury in June.Arlyn McAdorey\/Reuters<\/p>\n

Todd Hirsch is a Calgary-based economist, author and public speaker. He is also the director of the Energy Transition Centre.<\/p>\n

No sooner had Canada committed to immediately meeting NATO\u2019s long-standing target of spending 2 per cent<\/a> of GDP on defence \u2013 an increase of $9.3-billion annually \u2013 than the goalposts shifted. Dramatically.<\/p>\n

At last week\u2019s NATO meetings, a new benchmark emerged<\/a>: 5 per cent of GDP. While 1.5 per cent of that could include spending on cybersecurity, infrastructure and defence-related technology, the overall target is a staggering $50-billion increase.<\/p>\n

How can the government meet the new spending obligations? The reality is that there is no single way to do this. It cannot solely be a tax increase, a spending reduction or more borrowing. No one path can sustain the magnitude of the additional $50-billion alone without breaking the system.<\/p>\n

If Canada is to meet its increased NATO obligation, it must be a combination of all three. And it\u2019s time to be more creative than perhaps we\u2019ve been in the past \u2013 even if it breaks a few taboos of public finance.<\/p>\n

Here\u2019s a practical three-pronged approach.<\/p>\n

1. Spending reductions: The \u201cShared Sacrifice Plan\u201d<\/p>\n

Roughly 80 per cent of Ottawa\u2019s annual budget is spoken for \u2013 locked into transfers to individuals (such as Old Age Security and Employment Insurance), payments to provinces (for health care and education) and interest on the debt. Only about 20 per cent is what might be called \u201cdiscretionary\u201d or operating spending.<\/p>\n

That operating budget is about $90-billion. Sure, there\u2019s always room to trim, but claiming that more than half of the operating budget is \u201cwaste\u201d is unrealistic.<\/p>\n

New NATO target will require Canada to spend $150-billion annually on defence, Carney says<\/a><\/p>\n

It\u2019s time to implement what could be called the \u201cShared Sacrifice Plan\u201d of a 1-per-cent cut across every federal program \u2013 no exceptions. That would include OAS, EI the Canada health and education transfers to the provinces, equalization payment, the CBC, Parks Canada, and even federal prisons and the judiciary. (The only portion that cannot be reduced is, of course, debt servicing.)<\/p>\n

Talk about breaking taboos! Every department will argue that they need more funding, not less. But surely a 1-per-cent cut could be absorbed without too much pain. (And in fact, the whole exercise would still result in some increased funding, just 1 per cent less than what the increase would have been in absence of the plan.)<\/p>\n

Spread evenly, such a measure avoids political favouritism and could save about $5-billion. It\u2019s not enough, but it\u2019s a start.<\/p>\n

2. Increased revenue: Close the tax gap<\/p>\n

No one wants to hear about higher taxes. But there\u2019s another option: collect more of what is already owed.<\/p>\n

According to a 2021 Canada Revenue Agency report, an estimated $18-billion to $23-billion in taxes goes uncollected each year. That\u2019s 7 per cent to 9 per cent of total federal tax revenue. (And that was based on 2014\u20132018 data; the gap is likely larger now.)<\/p>\n

Andrew Coyne: Can we find the extra $50-billion we promised NATO? Yes, we can<\/a><\/p>\n

This \u201ctax gap\u201d stems from a mix of tax evasion (illegal), honest filing mistakes (also illegal, though not always unethical) and unpaid taxes due to bankruptcies. None of it is easily fixed.<\/p>\n

Still, modern tools \u2013 artificial intelligence, better technology, stronger enforcement \u2013 could help. If the federal government could shrink the gap by even half, it could generate an extra $10-billion to $12-billion annually. Now we\u2019re starting to see the needle move.<\/p>\n

3. Debt \u2013 with a purpose<\/p>\n

The final prong of the plan is borrowing more money. That sounds ominous, especially given the size of our existing federal debt. But there may be a smarter way to do it.<\/p>\n

During the Second World War, Canada issued Victory Bonds: government-backed investments with a defined purpose, timeframe and return. Why not revive this concept?<\/p>\n

Imagine a new series of \u201cCanadian Sovereignty Bonds,\u201d or even something cheekier such as \u201cElbows Up Bonds.\u201d The idea is to invite Canadians to lend to their own government for a clearly defined mission: defending our sovereignty and meeting our global commitments.<\/p>\n

Yes, it\u2019s still debt. But it\u2019s transparent, purposeful debt. And it might even stir a sense of pride or duty in Canadians who want to be part of a larger national effort.<\/p>\n

There is no simple, painless solution to meeting NATO\u2019s new 5-per-cent target. Spending cuts will be unpopular, even if minimal. Squeezing more tax revenue is still leaving Canadians with less money, even if it is legitimately owed. And borrowing more is still debt accumulation, no matter what you call the program.<\/p>\n

Combining all three is the trick. With a little imagination and a lot of political courage, could get us to our new NATO commitment eventually.<\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: Prime Minister Mark Carney makes a defence and security speech standing alongside Chief…\n","protected":false},"author":3,"featured_media":37750,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[2147,9157,50],"class_list":{"0":"post-37749","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-news","8":"tag-canada","9":"tag-dei","10":"tag-news"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/114794342841517192","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/37749","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=37749"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/37749\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/37750"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=37749"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=37749"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=37749"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}