Let’s pretend that you want to buy a car for $50,000.  You have some savings of $20,000 and thus you will need to finance the other $30,000.  The savings was accumulated from your previous after-tax earnings (let’s assume no one previously gifted you the $20,000 and you did not inherit the funds) since your cumulative household expenses were less than your cumulative earnings which enabled you to save that amount. The interest-bearing financing can be obtained from a bank or other lender, often the vehicle manufacturer’s factory financing arrangements.  You thus go ahead and put your savings down, obtain financing and acquire the car. 

If you understand the above simple example, then you understand the basic accounting equation that was developed over 500 years ago:  assets = liabilities + equity.  In other words, assets are always acquired with “equity” (accumulated net earnings) or liabilities.  In the business context, equity can also include shares or other instruments issued for monies, but individuals and governments do not have an equivalent concept.

In the above example, the asset is the car of $50,000.  It was acquired by equity of $20,000 and new debt of $30,000.  Easy to understand.

With the above in mind, I couldn’t help, again, but take issue with Mr. Carney’s marketing phrase of “Spend Less, Invest More”.  He even put out an elementary level short video to try to explain that simple expenditures (like utilities for your home) have no lingering benefit whereas a house purchase does and is thus an asset.  Brilliance.

Expenditures are part of the computation of equity.  In other words, if your current expenses are less than your current income, then you can accumulate savings / equity.  If your expenses exceed your income, you have a deficit and you need to find a way to pay for those expenses (usually debt or you can use any existing equity / savings).

Got it so far?  Good. You will therefore understand that recharacterizing spending as “expenditures” or “investments” is an old misleading marketing gimmick since it conveniently ignores how such overall spending (whether it is “expenditures” or “investments”) will be paid for.  If you want to recharacterize expenditures to assets, well, sure.  But that ignores the other side of the accounting equation.  How will it be paid for?  In a government context, the answer is easy.  If current taxation revenues don’t keep up with such expenses or “investments”, then debt will increase.

Earlier this year, Mr. Carney stated that if elected he would change the way that government budgeting is reported.  He would separate government spending budgets into operating expenses and capital.  As I wrote at that time, this is a deceptive style of reporting. If a government is paying for operating expenses or “capital”, then it had better have cumulative or current net earnings.  If not, then it will acquire such assets or pay for operating expenditures with debt.

Accordingly, ask yourself if the “spend less; invest more” phrase makes sense.  If it does, then you’ve invented a new accounting equation and you need to write accounting textbooks for a living.  Spending and “investing” in the government context only deals with one side of the accounting equation.  In other words, regardless of whether an amount is an expenditure or an “investment”, it, again, needs to be financed with current net revenues (in other words, current government revenues need to exceed current expenditures) or new debt.  With the Liberal government, there has been 10 years of continuous deficits.  This means to fund “investments”, more liabilities / debt was accumulated.

On April 19, 2025, the Liberals released a “costing plan” should they be elected.  To be clear, this was definitely not a plan.  It was a vague Excel spreadsheet with the strategic depth of a grocery list.  What was clear, however, was that the spending initiatives are massive.  Mr. Carney wants to implement over $130B in new spending, dressed up in the familiar costume of ‘investments’ and ‘capital’. That is a staggering sum bordering on fiscal insanity that will leave our next generations saddled with crippling debt.

And how will all of this new spending be paid for, regardless of whether or not you separate the operational spending from the “investment” spending? Well, new debt and new “revenues”, of course.  Which means new and / or increased taxes.  That simply follows the basic accounting equation.

What could those new taxes be?  Well, hard to say but carbon taxes of all kinds are likely.  Increased personal taxes (despite the small carrot that Mr. Carney has offered during the election to reduce the lower personal tax bracket by 1%).  Wealth taxes?  Home equity tax?  Reduced principal residence exemptions?  Increased capital gains taxes (despite rolling them back as an election promise). Increased corporate taxes?

One thing is for sure:  the Liberals have no interest in tax reform.  They have had 10 years to make positive and very necessary tax changes for Canada with no uptake despite significant calls from the tax, business and economic community.  Mr. Carney hasn’t offered a single substantive word on tax reform except saying that people / corporations need to pay their fair share – a vacuous phrase that means nothing.

The April 28 election is just days away, and Canadians need to decide: do we want a government that respects basic fiscal principles—or one that needs a remedial accounting course? Calling every expense an “investment” doesn’t change the math, just like calling a donut a “carbohydrate-rich wellness circle” doesn’t make it healthy. And as Warren Buffett wisely once said, “Only when the tide goes out do you discover who’s been swimming naked.” And when the tide goes out on these so-called investments, we’ll see exactly how they’re funded—through mounting debt and, inevitably, higher taxes. If we keep buying what the Liberals are selling, the next generation will be left holding the receipt, the tax bill—and a pile of IOUs they never agreed to.