Several weeks on from the release of the defence policy update, known as Our North Strong and Free (but generally referred to as the DPU), the entire effort remains a challenging one to assess. In many ways, it was a safe and timid document that does not go far enough to fix the deep problems afflicting the Canadian Armed Forces today. However, the reasons behind its lack of ambition are not immediately clear.

Historically, Canadian defence white papers are supposed to signal a new direction in government policy. That’s largely a function of the relatively long time between each one. The ambition of this DPU is very limited. Had it been part of a regular, incremental update process that was released in 2019 or 2020, then the DPU’s limited efforts would have been acceptable. Yet seven years since the publication of the last white paper, and following a year-long delay from its initial production to its release, it is clear much more radical reforms are required to address some of the profound challenges facing the CAF. 

With Defence Minister Bill Blair’s blunt—but not inaccurate—assessment that the CAF is in a personnel death spiral, one would expect the government to launch a Herculean effort to address this crisis. However, the update makes relatively meek policy adjustments and re-announcements of existing programs which are not commensurate with the scale of the problem at hand. 

This was evident in that much of what was included had already been announced or clearly telegraphed over the past few years. The 2022 NORAD modernization announcement, for instance, had already outlined many of the core areas of focus and investment contained in the DPU. What changed however was that a number of projects had progressed significantly and were being affected by the friction in the machinery of government that the year-long delay created.

The impact of the delay is evident in the case of the Canadian Patrol Submarine Project, which must deliver its first hull into service by the mid-2030s. At that time the Victoria-Class will be reaching the end of their service lives and their replacement would need to precede that event. The current timeline for the project envisions the government running a full competition, then building and accepting into service the sub in a little over a decade. This is highly ambitious for the Canadian procurement system, leaving little margin for error. 

Similarly many NORAD projects have progressed significantly, but also require approval to move ahead. The DPU’s delay has potentially jeopardized these projects.^{1Their timelines were viewed as being so critical that when the update was shelved last year, rumours surfaced that these time-sensitive programs might be announced and advanced individually. This would disconnect them from the DPU’s timeline in order to allow them to progress unimpeded.}

It’s not all bad

There are some tentative positive signs in the DPU. NORAD renewal, where much of the new money is allocated, will be a major step towards building a multi- or pan-domain approach to warfare that is revolutionizing allies’ doctrines and force structures. The key program identified here is Integrated Air and Missile Defence (IAMD). As its name suggests, it seeks to connect a diverse series of sensors and other information inputs, as well as weapons, to create a common operational picture of the battlespace. IAMD as part of the broader NORAD modernization will allow the Royal Canadian Air Force to leverage developments undertaken by the United States Air Force and potentially bring the CAF as a whole up to speed. Similarly (and as noted by Alexander Rudolph), the creation of a cyberwarfare command, as well as a significant funding bump, will potentially elevate this critical area of warfare as the threat environment becomes much more threatening. 

Also importantly, the Griffon tactical helicopter replacement program specifically cites that Canada may eschew acquiring a single replacement helicopter program and rather move towards a family of systems to take on the myriad of roles that the current fleet covers. This mirrors moves made by the U.S. Army, which has recently cancelled its future attack and reconnaissance aircraft program for a Griffon-like reconnaissance helicopter in favour of a mix of systems based on lessons gleaned from the ongoing War in Ukraine. 

The problem with this approach is that the existing procurement system is poorly set up to execute such a complex program. It will therefore be interesting to see how it will unfold. While the DPU hints that the government is considering deeper reforms to how procurements are run, its track record in this area does not inspire confidence.

Why now?

So why release the long-delayed DPU now? A major factor is that it is likely to blunt foreign criticism of Canada’s lacking defence spending, partly in anticipation of the upcoming NATO summit in July. Perhaps the most consistent message officials stressed during its release was that committing to growing the defence budget to 1.76 percent of GDP was a major step forward to reaching its NATO commitment of 2 percent. They also noted that the government would actually reach the 20 percent threshold devoted to procurement. Messaging of this consistency, both within the document (where the NATO commitment was cited four times) and official statements illustrate its importance.

Yet it is not just NATO criticism that likely informed the paper’s construction. The extended discussion on the Arctic at the start of the update, as well as the immediate boost to NORAD modernization spending, suggests that the U.S. may actually be the primary audience for the white paper. This shouldn’t be surprising given how critical the bilateral relationship is for Canada’s overall prosperity. These fears are almost certainly heightened by the spectre of a second presidential term for Donald Trump. Thus the language and focus are likely to blunt criticisms emanating from the U.S., where the fairly ingrained perspective on both sides of the aisle is that Canada is freeloading on America’s defence spending. Placating Congress in particular is critical as it also plays an important role in setting policy and appropriating funding for NORAD/NORTHCOM, which is essential for its successful implementation. 

Will the DPU actually be implemented?

Despite all these efforts, however, if clear messaging of Canada’s focus on defence was ostensibly the focus of the DPU, the government fell far short. One of the more curious aspects of the DPU surrounds its accounting. As noted above, the paper routinely discusses how defence spending will approach NATO’s two percent requirement but not reach it. Yet if all of the new and previously announced programs are executed as envisioned, the government would almost certainly reach the threshold, if not exceed it. 

For example, the procurement cost of several platforms, including the new submarine program, was not included. Even more critically, in order to operate all of these new capabilities and roles identified in this update and the 2017 white paper, the CAF will require a major expansion of its currently depleted ranks, potentially adding more than 14,000 additional personnel. Accounting for all of the loose ends, it is almost certain that the DPU will get beyond the 2 percent threshold. This was clear last spring when I wrote a column highlighting the DPU’s likely price tag, the broad contours of which remain the same.

The reasoning behind the omission is hard to discern. A potentially generous interpretation is that these programs’ cost estimates are immature and not ready to be published in the DPU or commented by government. However, it has already been reported that the Navy has pitched the program with a $60 billion dollar price tag, so there are at least some estimates as to parts of the program’s cost. A much more uncharitable take is that the government was attempting to have its cake and eat it too by showing major progress to its allies while not revealing the truth costs of the modernization to its electoral base. It is evident that segments of the Liberal Party’s electoral base would be deeply uncomfortable with a major defence spending boost.

If the latter motivation is true, it does not bode well for the actual implementation of this update. The success or failure of a defence white paper is the political support it enjoys from the government of the day, and little inside this document suggests a sustained, long-term commitment to defence. If the government is truly worried enough about its electoral prospects to obfuscate key aspects of the DPU, that does not inspire confidence it will see through even the limited efforts contained within it. 

Already this is evident in the DPU’s production. The document itself was prepared last spring but was shelved due to a lack of support within the cabinet. Only when the government’s political position became untenable a year later was the draft dusted off and then hurriedly released, with less than three weeks’ notice to the bureaucracy to prepare for the event. 

That in a nutshell sums up the entire review effort. While the DPU has positive elements that if implemented wholesale could make a significant difference for the military, all of the indicators surrounding it inspire deep skepticism. From its production to the presentation of the details contained within, the government often seemed more interested in how it was perceived by the various constituencies it sought to impress. While the DPU will achieve some limited successes, it is unlikely to stem the much more widespread and systemic problems that the CAF and Canada face. 

In The Weekly Wrap Sean Speer, our editor-at-large, analyses for Hub subscribers the big stories shaping politics, policy, and the economy in the week that was.

What’s behind the capital gains tax increase?

Although the prime minister had already announced most of its signature measures over the previous week or so, this week’s budget still contained one notable surprise: an increase to the capital gains tax rate for capital gains above $250,000 for individuals and at any level for corporations and trusts. 

We had anticipated the budget would set out tax increases for corporations and high-income earners—in fact, the March 9 edition of the Weekly Wrap warned that the budget might “appeal to class warfare”—but we didn’t expect changes to the capital gains tax regime. The disincentives for entrepreneurship and investment seemed too high in the face of a stagnant economy, low business investment, and declining productivity. 

The budget proposal, which is projected to raise nearly $20 billion in new revenues over the next five years, has generated significant criticism from entrepreneurs and investors who rightly warn that it will discourage business start-ups and capital investment. Calgary-based investor Derrick Hunter has written about these risks for The Hub. 

At a time when the Canadian economy is in high demand of capital to expand the housing supply, increase business starts, and boost productivity, this is a counter-productive policy. There’s a considerable body of research that shows that capital taxes are among the most economically damaging forms of taxation. The economic costs of extracting this capital from investors and handing it over to the federal government are therefore likely to be significant. Especially since it wasn’t offset by accompanying tax reductions as Hub contributor Trevor Tombe set out in his post-budget analysis. 

It prompts the question: why is the Trudeau government doing this? 

We know for instance from former Finance Minister Bill Morneau that it’s been something the government had considered and rejected in the past. It strikes me that there are three explanations for adopting it now. 

• Politics: The government hopes to bait Pierre Poilievre and the Conservatives and/or parts of the business community into a fight in which the prime minister can reposition himself as on the side of middle-class Canadians. His gratuitous use of the “ultra-wealthy” in recent days to describe those affected by the policy change is a sign that the government is in search of a wedge issue. 

• Fiscal anchor: Between the 2023 budget and Fall Economic Statement, the government committed to lowering the debt-to-GDP ratio on a year-over-year basis, and without the new revenues from the tax change (particularly the windfall in the current fiscal year) it’s quite likely it would have once again broken free from its anchor. This would have not only set up the government for political criticism, but it may also have increased the likelihood that it faces a credit downgrade for its lack of fiscal credibility.  

• Ideology: The most underrated explanation is that the Liberal Party itself has evolved from a centrist party with corporate sensibilities to a much more progressive party that’s skeptical of capital and more predisposed to income redistribution and an activist state. This point cannot be overstated: it’s notable for instance that the budget change reverses a cut to the capital gains tax rate enacted by the Chrétien government in 2000. 

Whatever the ultimate balance of factors behind the government’s decision, the economic effects are still the same: hiking taxes on capital is bound to worsen Canada’s investment climate and ultimately its economy as a whole. 

Generational fairness requires prioritizing growth

The Trudeau government has sought to define this week’s budget in terms of “generational fairness.” It spoke for instance of the need to “restore a fair chance for Millenials and Gen Z.” Finance Minister Chrystia Freeland’s budget speech even claimed that we find ourselves at a “pivotal moment” for these cohorts. 

This political positioning is understandable yet insufficient. There’s plenty of evidence that younger Canadians are feeling anxious and agitated about their circumstances. They cannot afford homes. They’re delaying marriage and family formation. And, as we outlined this week in The Hub’s first bi-weekly DeepDive, they’re increasingly unhappy. 

The numbers are striking. Younger Canadians used to report higher levels of happiness than older Canadians. Not anymore. Canadians under age 30 are now on average less happy. Canada’s overall level of satisfaction ranked number 15 in this year’s World Happiness Report. But if you limit it to younger Canadians, we actually fall to number 58 along with countries like Paraguay, Malaysia, and China. 

There’s a tendency to observe these dynamics through the lens of politics. A key reason that the budget is so focused on this cohort is because it has abandoned the Liberal Party en masse. The Conservative Party of Canada is the only centre-right party in the Anglo-American world that currently has a political advantage among younger voters. These developments challenge long-standing political axioms about the interaction between demographics and political preferences.

But the biggest issue here isn’t politics. There’s something far more concerning about the demographic, socio-economic and even psychological effects of large numbers of young Canadians experiencing  “failure to launch” syndrome. It can have long-run costs and consequences for individuals and society as a whole.  

It’s not a coincidence for instance that the fertility rate is at an all-time low at the same time that Canadians under age 30 are reporting rising levels of unhappiness. Causality is doubtless working in both directions.  

An unmarried, childless future in an ugly and overpriced, small downtown apartment is a rather grim proposition. Nothing in the totality of human experience tells us that these are the conditions for human flourishing or a successful society. 

Some of the budget measures may help on the margins. But one does get the sense that there’s something bigger going on here and technocratic solutions are a necessary yet insufficient response. Howard Anglin’s article for The Hub this weekend about building aesthetics, textured neighbourhoods, and what Tim Carney calls “family-friendly” communities starts to get closer to some of the underlying factors behind this generational malaise. One could also point to the void of spiritual questions—though that’s beyond the scope of public policy and certainly this essay. 

I would however make the case for a lack of growth and progress as a key (and perhaps the key) explanatory factor. Here I may respectfully part company with Anglin. I don’t think that people are telling us that things are moving too fast. I think in a lot of ways they’re telling us that they’re moving too slow. I subscribe to the Douthian argument that economic and technological stagnation (outside of narrow cones of progress), cultural conformity and replication, and the absence of a common project have contributed to a self-reinforcing mix of stagnancy, sterility, and drift. 

Douthat’s solution to what he calls “decadence” is a combination of divine intervention and renewed technological progress (“So down on our knees—and start working on that wrap drive.”). 

Maybe he’s right. But either way, these are the precise questions that we ought to be asking before we consign a generation or two of young Canadians to an uninspiring and unfulfilling future. 

This might finally be the Maple Leafs’ year

Today marks something far more important than politics or public policy: it’s the start of the NHL playoffs and the Toronto Maple Leafs’ elusive search for their first Stanley Cup since 1967.

George Will likes to say that he writes about politics to support his baseball habit. I can relate. The only job that I can envision leaving The Hub for is really any role with the Maple Leafs, from team president to the guy who fills the water bottles.

I’ve loved hockey ever since I can remember. I played a lot as a young person—though not particularly well. I recently wrote about my playing days, including the occasional fight, for Cardus’ Comment Magazine. You can find my essay here.

Will also often says that at an age too young to make life-shaping decisions, he had to choose between becoming a Chicago Cubs fan or a St. Louis Cardinals fan. Most of his friends became Cardinals fans and grew up cheerful and liberal. He chose the Cubs and grew up a gloomy conservative.

Again, I can relate. Being a Leafs fan is good training for a conservative. It’s a steadfast lesson in low expectations and the inherent fallibility of man.

But I’m a North American conservative so I’m susceptible, however wrongheaded, to a unique continental optimism. I can’t help but succumb against my better judgment to a quixotic hopefulness.

No matter how hard one tries, the Leafs invariably tempt you into believing that this year is different. Last year’s first-round win against the Tampa Bay Lightning set off those feelings for me. The swift second-round defeat to the Florida Panthers caused a precipitous fall back to reality.

This season I’ve once again watched most of the games. I began the year determined to protect myself from inevitable disappointment. But somewhere along the way, perhaps due to Auston Matthews’ 69 goals or the group-think of my hockey chat groups (yes, there are two), I’ve come, at an almost sub-conscious level, to believe that this might be the year.

If so, I’ll need to bring my boys to Toronto for the parade because even though they’re only one and three years old, there’s a good chance that it won’t happen again in their lifetimes.

I suppose this is a long way of saying that if I’m a bit distracted in the coming days (and hopefully weeks) it’s because I’m focused on my real passion: hockey. Hopefully, politics and policy will cooperate and take a break for a while.

Until then, Maple Leafs forever!