The Munk Debates Podcast - Munk Dialogue with Andrew Coyne: Is Mark Carney governing like a Conservative?

Episode Date: September 28, 2026

What can we expect from a make-or-break federal budget delivered in the middle of a trade war? Rudyard and Andrew look at the growing appetite in the business community for broad tax reform—and ask whether now is the moment for Canada to make itself as competitive as possible for investment. If the government wants to deliver meaningful tax cuts, they argue, it will need to tackle spending, including business subsidies, so that companies make investment decisions based on economics rather than government incentives. And with Carney’s government far ahead in the polls and a “wolf” named Trump at the door, is there any better time for the government to spend its political capital on bold economic reform?Given the government’s retreat from climate commitments, rollback of the capital-gains tax increase, support for pipeline building and moves on immigration reform—is this really a Liberal government? Andrew argues that it is much easier for a Liberal government to do conservative things than for a Conservative government to do conservative things. With Carney enjoying extraordinary freedom of movement, almost akin to a wartime situation, he is taking full advantage of it. But where does that leave the Conservatives?Become a Munk Donor ($50 annually) to get 72-hour advanced access to the full length editions of Friday Focus and Munk Dialogues. Go to www.munkdebates.com to sign up. Hosted on Acast. See acast.com/privacy for more information.

If ever there were a moment where we needed something like that, this seems like the good time to do it, where they are way ahead in the polls, where they have a genuine wolf at the door in the form of Donald Trump and everything he represents. If ever there were a time to spend some political capital on something like this, it seems to me now is the time. Roger Griffiths here, the chair of the Monk Debates

with our latest Monk Dialogue with Globe and Mail journalist Andrew Coyne. Andrew. Good see you. Likewise. We had a great response to our last video with you. Over 80,000 views on Canadian politics. Who to thunk it. Let's continue on that theme, Andrew, because we've, you know, had this parliamentary session kind of kick off with a couple consequential weeks. Parliament's now on break, reconvenes October 5th, and then we barrel towards a pretty consequential federal budget. So I want to start with you there. What are you anticipating in this budget? We've seen some major announcements on this kind of super deduction on capital investments.

We've got some musing about privatizing airports. What else do you think might feature in, again, a kind of make or break federal budget for Mark Carney in the middle of the trade war? The short answer is I don't know. I'd be surprised if it was quite as make or break as we in the media like that. to make it into, but we certainly saw with the accelerated depreciation, the 100% deduction in one year, that they're now prepared to be a little bit more radical than they were before.

That's the biggest tax change we've seen in years, if not decades. It's not, I think, enough in terms of the moment that we're in, but if it's a signal of where they're headed, there certainly is an appetite in the policy community, in the business community for broader tax reform, This would certainly be the moment to do it when you still got lots of time left on your mandate. And when we're still in the throes of this trade war, as you mentioned, where we've got to make the country as competitive as we possibly can for capital. There's all sorts of reasons, all sorts of excuses business could give to say, why do I want to locate in Canada, but I'm going to have to face these tariffs in the United States, when you don't have a great reputation in terms of getting stuff built here, when your tax code isn't all that competitive.

So they're trying with between that and speeding up the, the approvals, they're trying to send the signal that we do want capital. We're desperate for capital. We're very eager to get capital investment here. But as I say, I think this is the moment to broaden it out further. So that's on the sort of competitive productivity side of things. What we're unlikely to see is any serious assault on the deficit. They seem quite content with this business of separating out the operating expenses from the capital expenses, which is not entirely invalid.

It's just, it's not the whole story. Whether it's capital or whether it's operating, you still have to borrow for it. You still have to pay interest on it. It'd be one thing if all of the capital expenses were really for things that will actually speed up economic growth and therefore return more revenues to the government and then make the government better able to pay off its debts and we'll just pay the interest on it. But only some fraction of what is going to be called capital spending would actually do that. So it's, I don't want to say it's entirely leisure demand, but it's not entirely valid either.

And they seem to be, that's the story they now seem to be sticking on. You know that this government, if we include, if we bracket the Harper, the Trudeau government and the and the Carney government is, one long liberal government. They've been shifting the goalposts continuously in terms of what is their target, what is their anchor, what is their guardrail against fiscal profligacy. And so this is just the latest in the long series. It's not nothing, but we're a long way from a balanced budget. What do you think, Andrew, about the fact that we're seeing across advanced economies through the summer and now intensifying in September rising borrowing costs, most notably in the United States, but Canada has not been immune to this either.

To what extent does that start to put some pressure on this government? As my understanding, according to their last year's budget, as early as 2030, borrowing costs could be the third largest federal expenditure in the budget. In other words, all that debt is accruing interest, bond yields are surging, and interest costs are rising with them. Does that start to put some more pressure on right-sizing government, which is the euphemism? Other people would call it cutting. Is that part of the agenda, Andrew? Could we expect something along those lines in the budget?

Well, absolutely. It certainly should be. Look, there are a number of different reasons, different pressure points on interest rates. One, particularly in the states, is a great unease about the general conduct of fiscal and monetary policy in the United States, running deficits of whatever it is, five or six percent of GDP in peace time, supposedly peacetime, with all kinds of challenges coming up in terms of the age and population, the paying for Social Security, which the United States is not nearly, not nearly as far. funded as it is in Canada, so that pretends possible either increases in borrowing or increases in taxes down the road. So there's, and all this business of politicizing the Fed and the worry that that can lead to the Fed having to monetize things and therefore you get into inflation like we had in the 70s and

80s. So there's a lot of concerns around that. The same time, you've got a lot of the sort of real component of interest rates, so not just the inflation premium, but the real component of it is also under pressure. you've got so much borrowing going on. Not just public sector borrowing, but massive amounts of borrowing to fund the AI boom. The scale of the borrowing these companies are doing is just off the charts.

So there's all kinds of reasons why interest rates around the world are rising generally, and they're rising particularly for countries like the United States. Canada is not doing as poorly as the United States in that score, but we shouldn't kid ourselves. We've got huge borrowing demands facing us, whether from the military buildup that we're now engaged in, which is generation, you know, we're going back to a world in which 20, 25% of federal spending is on defense from whatever it was, four or five percent not so long ago.

So funding that, funding the aging population for our country, which is where the real challenge isn't so much the pension side of things, it's the health care side of things, and the provinces are under enormous pressure. And any time you're looking at our long-term, fiscal picture, you can't just look at the federal government, you have to look at provinces, and you can't just look at net debt to GDP because the net figure, netting out the amount that we have in the CPP and the QPP is a bit of a fiction. It's not an asset you can sell off

to lower your debts. So, you know, unfortunately, we tend to measure things relative to the absolute five-alarm crisis that we were in in the 90s. And all too often we'll say to ourselves, well, it's not as bad as then, so therefore it's not a problem at all. So interest costs as a percent of revenues has gone from, I think it was six or seven percent at its bottom. I think it's now over 11 or 12 percent. Okay, that's not as bad as the 36 cents it was at in the mid-90s, but it's headed in that direction. We're not careful. So we have to get ourselves into the mindset of saying act now before the crisis is actually.

actually at our door. Get started on it now so that we never have to face that kind of crisis. Yeah. And maybe, again, find ways to right-size government to cut where we've seen, you know, head counts up, what is it now, Andrew, almost 40% over the last decade. What's absolutely needed. What's absolutely needed. First of all, we're talking about a, some people are talking about a major round of tax reform. We'll see whether or not that comes. As part of that tax reform, it seems to me, we could also layer in suspending reform. If we really want to get really serious tax cuts and to be able to pay for us, part of that is a base broadening exercise where you get rid of a lot of these exemptions and preferences,

deductions that don't make any economic sense and you use the revenues from that to cut tax rates. But the other could be, it should be, cutting spending, particularly business subsidies, for example, and don't kid yourself, there are tens of billions of dollars if we're serious about it. that would not only fund the tax cuts, but would be good to do even in themselves so that we stop, you know, distorting investment decisions, whether on the tax side or on the subsidy side. So we get people making investment decisions

because they make economic sense, not because they're getting some kind of prize from the government for doing that. So, you know, a big bang exercise, if ever there were a moment where we needed something like that, this seems like the good time to do it, where they are way ahead in the polls, where they have a genuine wolf at the door in the form of Donald Trump and everything he represents. If ever there were a time to spend some political capital on something like this, it seems to me now is the time.

Yeah. Let's talk a little bit about the man in the picture we're just showing there, Mark Carney. Andrew, if you put together a lot of his policies over the last, what are we at now, 18 months or so of this government minority? first majority now. And you think of what they've done on the carbon tax, it's abolition, the rollback on some of the capital gains tax increases, adjustments that the Trudeau government had made efforts to reduce the rate of immigration based on popular demand, criminal justice reform, now substantial efforts to build pipelines in can. Canada to encourage energy and resource extraction.

I could go on. The list is long in terms of policies that one might arguably would have attributed to a peer-Polyev government if he had won the election in spring of 2025. So what do we have here, Andrew, today, 18 months into this as we move towards this budget? Is it right to call this a liberal government? Is it something else? Is it some new genus, some new species of political animal that we're seeing in Ottawa today? Well, these things are all relative.

You might call this a 1950s liberal government. And it has a lot of the attributes of that. So prior to the big expansion of the welfare state, prior to the accession of Pierre Trudeau, et cetera, et cetera, the liberals were very much a business-oriented party, a relatively free market-oriented party and relatively fiscally conservatives. So to some extent, it's simply a return to, you know, an earlier era. It's certainly more conservative, I don't think anybody would disagree, more conservative than the government that preceded, the Justin Trudeau. But that's not saying much, of course.

And so merely unwinding some of the Trudeau government's furthest extremities wouldn't necessarily qualify you as conservative. But a lot of what they've done, even in the short time they've been in power, if the Harper government had done half of it, we'd be counting it as a successful conservative government. The Harper government, in fact, did very little. Talked a good game.

He gave off a staunchly conservative vibe, which friend and foe oftentimes take as the sufficient. But when you actually looked at their policy achievements, They're pretty meager. To be fair, it's a lot easier for a liberal government to do really conservative things and for a conservative government to do. Right. This is a well-noted tendency in Canadians, and I think it's rooted in a certain common sense. Nixon goes to China.

And people are prepared to let you do something as long as you're not, they don't think you're going to go too far with it. Right. So with the liberals, people can say to themselves, okay, they're cutting spending, but they're only doing it because they have to. And they won't go too far because they don't really like doing this or they don't like cutting taxes or what happened. And there's a certain amount of truth in that. And you can run that in reverse. When people want a left-wing thing done, arguably they might turn to a conservative government to do it because they won't think the conservatives will take it too far. So there's a certain built-in advantage.

There's a built-in advantage, of course, also as certainly Jean-Cretchen, discovered when he was cutting the deficit, that, you know, I always say the biggest advantage the liberals have in power is they don't face. the liberals in opposition. So rather than having every liberal MP in opposition bench just screaming at him for every cut that he made, Kretchena had the reform party saying, go farther, go faster. And certainly when Carney makes these conservative policy adjustments, he either has the conservative saying, well, okay, you're stealing our policies, but, you know, we can't really object to it. Or they're chined themselves up and knots trying to think how they can oppose it without absolutely, you know, force. taking everything they've ever stood for. So it's not a happy time to be a conservative at all

when your opponents are that flexible. If you're a progressive liberal, you're very unhappy right now. And you're looking at the undoing of a lot of environmental legislation that liberals believe in very deeply. But what liberals also believe in is staying in power and doing what the leadership tells them to do. And so when when you have somebody in, in Carney's position where the combination of his own persona and expertise and curriculum vitai and the moment that we're in and what the public is looking for in that moment, it all adds up to giving him enormous freedom of movement. Basically, this is arguably a kind of wartime situation, obviously not really wartime,

but it has certain resemblances to that. And the move of the public across much of the political spectrum is, you know, do what you got to do. You know, I think a lot of the ground have been prepared, again, by conservatives on the need, for example, to streamline the permitting procedure, on the need to get our tax rates down. So they're taking advantage of that as well. But they've also got this moment where nobody's as popular as the prime minister among the party leaders. everybody's afraid of Donald Trump and what that represents. Add it all up, it's just a very open opportunity for somebody who is of this mindset to do these rather conservative things.

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