Three economic questions this campaign has yet to address

This piece was published in the Globe and Mail.

The 2025 federal election campaign is two-thirds done. The new government will need to reverse Canada’s decade-long economic decline, respond to U.S. President Donald Trump’s economic aggression and contain growth of federal debt. How will the leading contenders to form a government address these challenges? Canadians deserve answers before they vote.

Canada’s poor economic performance over the past decade was largely due to inadequate rewards for work and investment. What have the leading parties said about that? The Liberals propose cutting the lowest personal income tax rate to 14 per cent from 15 per cent. The Conservatives propose to cut it to 12.5 per cent. Tax relief of $5-billion to $14-billion a year sounds good, but the 15-per-cent rate is not our problem. For taxpayers with incomes above $57,375, lowering that rate does nothing to reward an extra hour of work, or an upgrade in skills. Canada could get much more bang per buck of tax relief.

The Conservatives propose higher contributions to tax-free savings accounts (TFSAs) and deferral of capital-gains taxation for investors in Canadian assets. Those ideas at least address low saving and investment levels, but the requirement to invest in Canadian assets raises a big flag. Canada has history with foreign investment limits, and dropped them because they were ineffective and unfair. We need to know whether these proposals would be different.

Neither the Liberals nor the Conservatives have said anything about improving Canada’s uncompetitive corporate income taxes. In its 2025 Shadow Budget and An Economic Strategy for the Next Government, the C.D. Howe Institute described how a lower corporate income tax rate, sharper incentives for companies to grow and better targeting of the billions of dollars of current tax and spending supports for business could spur productivity. Canadians need to hear about that.

Excessive low-skilled immigration exacerbated low growth in per-person GDP in recent years. The C.D. Howe Institute showed how better selection and recognition of foreign credentials could improve the contribution newcomers make to prosperity. Mr. Trump’s attacks on science and academia have increased the potential gains from smarter immigration. What are the parties offering there?

Mr. Trump’s economic aggression has been front-of-mind throughout the campaign. Both main parties have backed concepts with broad-based support, such as reducing interprovincial trade barriers, diversifying international trade, reducing and improving regulations, better trade-related infrastructure and accelerating approval processes for major projects. But generalities don’t cut it. None of these things is easy, and some would mean sharp reversals of years of policies that prioritized environmental and other goals over development of natural resources. If the parties cannot say how they would tackle the hard stuff, improved resilience is nothing more than a slogan.

Years of out-of-control spending and borrowing have left Canada fiscally vulnerable and saddled young Canadians with an unfair burden. The Liberals have talked about splitting the budget into “operating,” which they would balance, and “capital,” which they would not. But the federal government, like all Canadian governments, records the depreciation of capital in its operating budget – it is unclear how this different accounting would work, and very unlikely that it would constrain borrowing.

Liberal Leader Mark Carney has also referred to ensuring an overall federal deficit of less than 1 per cent of GDP. That is not ambitious: The status quo fiscal outlook in the C.D. Howe Institute’s Shadow Budget depicts a deficit below 1 per cent of GDP by 2027-28. And it is not enough: It would leave the federal net-debt-to-GDP ratio around 40 per cent, much higher than Canada’s pre-pandemic rate. The Conservatives have promised to balance the actual budget “as soon as possible.” That sounds better, but without a time frame, it falls short of a serious commitment.

Neither party has shown Canadians numbers. The Liberals and Conservatives say they are working with the Parliamentary Budget Officer on costing, but until we see numbers, Canadians should be skeptical. Mr. Trump’s attacks seem to have made Canadians more enthusiastic about defence spending, but raising our efforts even to NATO’s 2-per-cent-of-GDP target implies outlays about $17-billion higher in five years. The Liberals have ruled out reducing major transfers to individuals and provinces. The size of the Conservative tax-relief promises magnifies the challenge of balancing the budget. But no fiscal promise financed by borrowing is reliable in the long run. Can Canadians believe what they are hearing?

Neither of the leading contenders to form the next government has told Canadians enough about how they will strengthen the Canadian economy, make Canada more resilient in the face of Mr. Trump’s aggression, and ensure a sustainable, generationally fair federal budget. With only two weeks left in the election campaign, these questions need answers.

Don Drummond is a Stauffer-Dunning Fellow at Queen’s University and a Fellow-In-Residence at the C.D. Howe Institute, where William B.P. Robson is president and CEO.