this post was submitted on 02 Jun 2026
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Navigating uncertainty and rejecting cuts
Canada’s economic and fiscal picture is uncertain and facing unprecedented volatility as a consequence of Donald Trump’s trade war. We enter this period with an already high and rising unemployment rate and with our economy not yet fully recovered from the COVID-19 crisis and the resulting supply chain shock.
Nobody knows exactly what the next four years will bring. The Parliamentary Budget Office’s 2025 Election Proposal Costing Baseline provides for heightened economic uncertainty in the coming years, but it doesn’t account for a full-blown trade war. Forecasts from the Bank of Canada (BoC) and various private sector forecasters are even more gloomy in anticipating a slowdown.
New Democrats are rejecting calls for cuts to the public sector and to social programs – cuts which would be made to reach a budgetary balance in the short-term, despite the costs and the consequences for people. Instead, we are proposing increased investments in both infrastructure and in people.
In the context of significant uncertainty, and in an abundance of caution, our fiscal plan will set aside an additional amount each year as a contingency fund. This will help hedge against risks, including further external shocks or events that could reduce government revenue and increase expenditures more than anticipated.
Additionally, our costing includes two scenarios for the country’s economic trajectory based on the latest analysis from the BoC. As such, it also includes an upper and lower estimate for the deficit and debt. The initial baseline for the deficit used in this analysis comes from the PBO’s updated projection from March 24 while the initial economic baseline comes from the PBO’s March Economic & Fiscal Outlook. These baselines are then adjusted for the two scenarios analyzed in the BoC’s Monetary Policy Report that accompanied its April 17 decision to hold the policy rate at 2.75%.
The Bank’s two scenarios both result in lower economic output over the mid-term than in the PBO baseline. All else being unchanged, lower output produces a larger deficit. To calculate the effect on the deficit, the PBO’s fiscal sensitivity values were used.
The NDP’s fiscal target over a four-year mandate is a falling debt-GDP ratio by the fourth year at the latest. After accounting for the impact of revenue and expense measures on the economy via the fiscal multiplier, this is achieved even under the more dire scenario considered by the BoC.
Even using conservative estimates for the fiscal multiplier, the NDP’s fiscal plans have a significant, positive effect on economic output. Revenue measures are focused on the wealthiest households and most profitable corporations while spending measures are aimed at housing, low-and-middle income households, and infrastructure.