Trud’oh: A Messy Firing

I t is not often that Canada’s politics are more eventful than America’s, but Prime Minister Justin Trudeau’s botched firing of Chrystia Freeland, his finance minister and deputy prime minister, produced such an occasion.

First, a recap of the events. On Friday, December 13, Trudeau told Freeland in a Zoom call that, once she delivered the government’s fall economic statement (essentially a mini budget) on Monday, she would be replaced as finance minister. Shortly before she was set to deliver the statement on Monday morning, Freeland published a scathing resignation letter in which she accused Trudeau of charting a fiscal direction with “costly political gimmicks, which we can ill afford” and suggested that Canadians knew Trudeau was focused on himself instead of working for them.

Freeland’s resignation sparked a day of chaos. With no finance minister to deliver the government’s economic statement, its delivery was delayed. In absence of a finance minister, the responsibility is supposed to fall to the industry minister, but he reportedly refused to read the statement. In the afternoon, Trudeau loyalist Dominic LeBlanc, the public safety minister, was sworn in as finance minister, but he did not deliver the economic statement either. Instead, it was presented in the most unusual fashion: “The Government House Leader placed the budget document on the Table and ran away. Literally ran away,” according to Conservative member of Parliament Don Stewart.

In the evening, the Liberals held a caucus meeting. About 15 MPs spoke; reportedly, most called for Trudeau to step down. Liberal MP Wayne Long suggested that about one-third of Liberal MPs (or about 50 of them), including several cabinet ministers, want Trudeau to resign, another third are on the fence, and the final third are Trudeau loyalists. So far, 13 Liberal MPs have publicly stated they want Trudeau to resign, but there is no indication he intends to do so.

As for the economic update, it showed the federal government barreling through its $40 billion deficit “guardrail” with a $61.9 billion deficit in 2023–24. For 2024–25, the deficit projection was increased from $39.8 billion to $48.3 billion, although even this is likely an underestimate given the Trudeau government’s tendency to revise spending projections upward in each update.

The deficit would have been even higher had Trudeau had his way with more of his “costly political gimmicks,” to echo Freeland’s resignation letter. Not included in the economic update was Trudeau’s announced $4.7 billion tax expenditure in the form of $250 checks to every Canadian whose income was under $150,000 in the previous year — a blatant vote-buying scheme ahead of an election year.

Despite her denouncing Trudeau’s latest gimmick, Freeland is not and never was a beacon of fiscal responsibility. In 2020, she took the reins from former federal finance minister Bill Morneau — who also, after leaving government, criticized Trudeau for overspending and favoring “scoring political points” over serious policy — and ramped spending up further, essentially abusing the pandemic spending explosion to establish a permanently higher level of government spending.

When the Liberals took office in 2015, they had inherited an essentially balanced budget, with federal program spending under 14 percent of GDP and federal net debt of just over $700 billion. By 2019–20, the Liberals had raised program spending above 15 per cent of GDP and ran a $39 billion deficit — before the pandemic. What does the latest economic update show? In addition to continued annual deficits in excess of $40 billion, federal program spending is projected to cross 16 percent of GDP this fiscal year. Federal net debt will top $1.4 trillion, approximately doubling in nominal terms during the Liberals’ decade in office.

To go with ever-increasing spending and borrowing, the federal tax burden has increased considerably. Under Freeland’s watch, the Trudeau government has proposed or implemented punitive special taxation on financial institutions, a share buyback tax, and a capital gains tax hike. That’s in addition to the Trudeau government’s increasing payroll taxes and the carbon tax every year since 2019 — real increases, far above simple inflation indexing.

What have been the results of the Liberals’ taxing, spending, and borrowing policies? From the time Trudeau took office through to the third quarter of 2024, Canada’s cumulative growth in real GDP per capita has been a mere 1.7 percent compared with the United States’ 18.6 percent over the same nine-year period. This coincided with an 8.2 percent decrease in business investment in Canada while business investment in the U.S. (again, in real per capita terms) increased 34.5 percent. Canada’s public sector employment has increased 25.2 percent, inflated by 43.1 percent growth in federal public administration, while private sector employment and self-employment has grown only 12.5 percent. Canada’s real GDP per capita has now fallen for six consecutive quarters and is expected to fall again in the final quarter of 2024.

Such horrendous economic numbers may not bother Trudeau — at a spending announcement last month, he flippantly remarked that, while he’s focused on Canadians, he would “let bankers worry about the economy” — but they have in large part driven the Liberals’ dismal poll numbers, which has caused much of the Liberal Party’s internal strife. The Conservatives have led in the polls since summer 2023, now by at least 20 percentage points, and Liberals have lost seats in several recent federal by-elections triggered by resignations of MPs.

Notably, the Conservatives shocked the Liberals by winning the Toronto–St. Paul’s by-election this June. Considered one of the safest Liberal seats in the country, the Liberals had held it since 1993 — they won it with 49 percent of the vote (to the Conservatives’ 25 percent) in the 2021 federal election. Toronto–St. Paul’s is next door to Freeland’s own electoral district. Her former chief of staff ran under the Liberal banner but lost narrowly to the Conservatives. Then, in September, the Liberals lost a Quebec seat they had carried by more than 20 percentage points in 2021. Finally, on December 16, the Liberals lost a historically closely contested British Columbia seat to the Conservatives by a 66–16 margin.

What is next for Canada, Trudeau, and the Liberal Party? Despite calls for his resignation from within his own party, Trudeau seems determined not to go anywhere and to double down on his reckless economic approach. Thus, the deterioration in public finances and economic outcomes will continue until the next election, which will take place next year — when the current pattern of the Liberals’ getting trounced at the ballot box will hopefully continue as well.