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OPINION: Carney should reject Trudeau policies and be more like Chrétien 

Political brands have almost nothing to do with the actual fiscal policies governments choose to enact and past Liberal governments managed their finances in very different ways

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It’s often easy to assume that governments of a certain political brand will take a specific approach to policy.

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Much has been said about whether Prime Minister Mark Carney’s government’s approach to fiscal policy is what we should expect from a Liberal government. In reality, political brands have almost nothing to do with the actual fiscal policies governments choose to enact and past Liberal governments managed their finances in very different ways.

OPINION: Carney should reject Trudeau policies and be more like Chrétien  Back to video

For example, in our new study, we compare the fiscal and economic records of the Jean Chrétien and Justin Trudeau Liberal governments. The Carney government has promised to dramatically improve Canada’s economy by taking a “very different approach” to fiscal policy. Comparing past governments — to see which fiscal policies correspond with economic success and which don’t  —can help illustrate what the Carney government’s new approach should look like.

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In general, the Chrétien government prioritized smaller and smarter government spending, balanced budgets and debt reduction. From 1993/94 to 2003/04, it reduced spending on programs and services by 3.8%, ran seven surpluses in 10 years and reduced total debt by 12.9% (all numbers are on an inflation-adjusted, per-person basis).

Conversely, from 2015/16 to 2024/25, the Trudeau government increased program spending by 22.9%, ran deficits every year and grew total debt by 34.5% (again, on an inflation-adjusted, per-person basis).

Different fiscal records, different economic records

Clearly, the fiscal records of the Chrétien and Trudeau governments differed dramatically despite sharing the same political brand. One government reined in federal spending to balance the budget and pay down debt. In contrast, the other dramatically increased spending, borrowed money each year, and racked up substantial debt.

Perhaps, not surprisingly, these two wildly different fiscal records corresponded with wildly different economic records.

During the Chrétien era (1993 to 2003), per-person gross domestic product or GDP (a key indicator of living standards) increased by 26.5% compared to 3.4% during the Trudeau era (2015 to 2024). Again, all numbers adjusted for inflation.

Moreover, under Chrétien, private-sector job creation was 27.4% compared to 13.4% under Trudeau. Trudeau did oversee stronger job growth in the government sector, but of course, the private sector pays for those jobs via taxes.

And business investment per worker (inflation-adjusted, excluding residential housing investment) increased 37.0% during the Chrétien era but declined by 5.1% during the Trudeau era. Higher rates of business investment allow workers to be more productive and subsequently earn higher incomes.

Simply put, there’s no set template for how a federal Liberal government will manage its finances. The Chrétien government demonstrated that spending restraint, balanced budgets and debt reduction can help pave the way for economic success, while the Trudeau government showed that high spending, persistent deficits and rising debt can contribute to economic stagnation and stifle Canadian living standards. To fulfil its promise to dramatically improve Canada’s economy, the Carney government should enact policies that work — irrespective of whether they’re perceived to fit a political brand or not.

Grady Munro and Jake Fuss are senior analysts at the Fraser Institute 

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