Trudeau’s arc: from progressivism to political reckoning
Prime Minister Justin Trudeau, pictured in front of Rideau Cottage, resigned as the Liberal Party leader. A leadership election to replace him will take place on March 9. THE CANADIAN PRESS/Adrian Wyld
In the you-can’t-make-this-stuff-up category, Justin Trudeau’s first-ever statements in Parliament as a rookie lawmaker in 2008 included a stern warning to Prime Minister Stephen Harper about the dangers of running a budget deficit, a plea for more affordable housing, and praise for the separatist Bloc Quebecois for teaming up to topple Harper’s Conservative minority government.
Fast forward to today and Trudeau is a deeply unpopular leader. His government has accumulated more debt than all prime ministers before him combined, housing affordability became a crisis under his watch and this month he suspended Parliament to stave off a bid by opposition parties to bring down his Liberal government.
Irony may be a cheap storytelling device; politicians changing their mind or saying one thing while doing another is hardly shocking.
But I highlight it here to underscore that there is an arc to Trudeau’s economic legacy - marked by high ideals, profound contradictions and evolving priorities, as my friend Robert Asselin wrote this week.
Trudeau’s administration began on solid footing, focused on stimulating demand in an economy still reeling from a commodity slump. There was an emphasis on investment. His cabinet was stacked with strong figures like Ralph Goodale, Scott Brison, Bill Morneau, Chrystia Freeland and Navdeep Bains, who brought a sense of competence to governance. A “do the right thing” ethos permeated those first few years.
But by 2018, the scriptwriters in the Prime Minister’s Office seemed to take over. Moderates began to leave, replaced by less experienced ministers who were more beholden to the prime minister and less willing to push back. During his two minority governments, Trudeau’s expansionist instincts took hold, his aides began bypassing the finance department and critical structural challenges were left unaddressed.
Trudeau promised to bring growth but failed to deliver. Good intentions gave way to hubris, then excess and finally isolation. With this week’s long-delayed resignation, he has left his party adrift and the country more vulnerable just as the world is about to face a major disruption.
Here’s another irony.
Trudeau always seemed aware that leadership rooted in persona rather than substance was unsustainable. I know this because, in 2014, as the opposition Liberal leader, he made that very point during a conversation with me and other Bloomberg editors, emphasizing his moderate credentials.
In that chat, he said he wanted to bridge the growing discord between government and business. His focus, he said, would be on growth, and he promised not to run deficits. He championed the importance of getting Canadian oil to international markets and emphasized his strengths as a convener. “Fives hire threes, nines hire tens,” he told us.
Trudeau insisted he was more about ideas and vision than about personality and style, and for the first couple of years, that seemed true. Whether you agreed or not with the actual merits of his policies, his government appeared to be moving in a measured and pragmatic way.
Early in his mandate, Trudeau staked out a vision of an economy that prioritized braininess over resources—a theme that resonated at a time of weak oil prices. While Stephen Harper’s first major speech abroad touted Canada as an energy superpower, Trudeau set the tone at Davos with his famous line: “Canada was mostly known for its resources. I want you to know Canadians for our resourcefulness.”
He quickly became a global icon of progressivism, a liberal antidote to Trump and Brexit.
On his first visit to New York, Trudeau distanced himself from his father’s economic record and sought to reassure investors that he wouldn’t be a big spender. “The challenge when you shovel money out the door is it doesn’t always get spent on the right things,” he said.
His government’s first non-platform budget in 2017 was minimalist, focused on investment, but by 2018, the tone had changed. That year’s “Equality Budget” prioritized optics over substance, drawing sharp criticism from the business community for failing to address the shifting global tax landscape, particularly U.S. corporate tax cuts by Trump.
Finance Minister Bill Morneau eventually delivered a tax cut later that year, but relations with the business community were fraying. Executives worried the government wasn’t devoting serious attention to fixing Canada’s long-term competitiveness problem. The Prime Minister’s Office, meanwhile, seemed increasingly driven by political calculus.
Pandemic spending amplified this trend. The desire to make constant announcements during Trudeau’s daily press conferences took precedence over producing a coherent economic response. Spending decisions often bypassed Morneau, who resigned amid growing marginalization. His successor, Chrystia Freeland, doubled down on expansive government, framing it as a transformative opportunity.
But as the macroeconomic landscape shifted with rising interest rates the rationale for continued expansionism weakened.
What now remains of Trudeau’s legacy? Many of the entitlement programs introduced since the pandemic may not survive the mounting pressure for increased defense spending and other pressing needs. Even the vaunted daycare program has struggled to deliver meaningful gains in women’s labour force participation despite its high cost.
Trudeau’s government—by losing control of migrant inflows—has done what nobody thought possible a few years ago: undermine public support for immigration. A legacy of sluggish growth, poor investment and economic vulnerability will burden his successor.
And as Trump trolls Canada, it only underscores how exposed we’ve become.
Successes and failures
Trudeau’s Child Benefit Plan, introduced in 2016, stands as arguably his most significant policy achievement. Not only did it provide a much-needed boost to a struggling economy at the time, but its lasting legacy lies in its profound social impact—lifting approximately 400,000 children out of poverty.
Economists welcomed his decision early on to break with conventional wisdom on deficit spending. Yet those proposed small temporary deficits turned into massive permanent ones—so there’s that. The government has also broken past so many of its fiscal anchors, they have lost all credibility.
Trudeau also gets high marks on his handling of renegotiations in 2018 of the new North American free trade agreement.
But his ambition to forge a grand bargain to develop Canada’s resources—the social license argument—fell short of the mark. In trying to please everyone, he has pleased no one.
To be sure, LNG Canada was built under Trudeau’s watch—one of the government’s most underrated economic achievements. But two major pipeline options were taken off the table, and the Liberals were forced to nationalize the only one that remained. As we see now, this has limited our ability to mitigate Trump’s tariff threats.
There’s also widespread concern that the government’s climate policies have seriously undermined the country’s resource sector.
Trudeau’s big economic failure was on the business investment front. As a share of GDP, private sector investment is hovering at the lowest in decades, and our competitiveness has deteriorated sharply as a result.
