The Notebook with Theo Argitis: The Trudeau Consensus lives on

Welcome to The Notebook, where each week I’ll share notes on some of the most important economic issues impacting Canada right now. In this edition, I focus on how, though he’s no longer prime minister, Justin Trudeau’s economic legacy lives on in both the Liberal and the Conservative party platforms. 

There’s an old Woody Allen bit about two women at a restaurant.

One complains the food is terrible. The other replies, “Yeah, I know. And such small portions.”

That’s essentially how Canada’s 2025 election campaign feels.

Mark Carney’s Liberals are eager to show they’re breaking from Justin Trudeau’s nine-year record—Carney’s platform highlights how his $130 billion plan charts a new course with a greater emphasis on investment. Yet in the same breath, the Liberals are ramping up spending nonetheless and warning that Pierre Poilievre’s Conservatives would gut cherished programs implemented by Trudeau

The Conservatives, meanwhile, talk a big game about sweeping change. But their plan nibbles at the edges—cutting consultants, not core programs—and leaves much of Trudeau’s fiscal blueprint intact. In fact, by conventional budget analysis (which they avoid in their platform), they could run even larger deficits than the current Trudeau trajectory.

What’s clear is that, come April 29, Canada’s fiscal DNA will still bear Trudeau’s imprint. No matter who wins, the former prime minister’s shadow looms large.

Trudeau’s legacy

Trudeau’s legacy is a sharply expanded federal role on both the spending and revenue side.

While COVID-19 blew open the fiscal taps, the real structural shift came after the crisis. Program expenditures post-pandemic settled just under 16 percent of GDP—about two percentage points more than under Stephen Harper. A two-point increase equals roughly $60 billion in additional annual spending.

Revenues rose in tandem. By the end of Trudeau’s term, federal receipts were about 16.5 percent of GDP—also up about two percentage points from the Harper years.

Together, a new fiscal baseline was created with a larger, more active federal government—expanded spending, debt tolerance, social and green investments as priorities—that appears to have become the political default: the Trudeau Consensus.

Both major platforms released this week reflect that reality. Each party has pledged tax cuts that would reduce Ottawa’s revenue take—including eliminating the consumer carbon tax and reversing the capital gains hike. But both would keep revenues well above Harper, and even levels under Trudeau’s first finance minister, Bill Morneau.

To be sure, Poilievre’s Conservative platform is more ambitious in challenging Trudeau’s legacy. It promises a “common-sense” revolution with reduced bureaucracy and more private-sector-driven growth, along with lower taxes. But dig deeper, and it’s less revolutionary than advertised.

The plan would lower revenues to an average of 15.6 percent of GDP over the next four years. The Liberals would bring it to 15.8 percent. Lower than the current trajectory but still more than a full point above where things stood under Harper. And that’s before factoring in tariff revenue, estimated at $20 billion this year.

The Conservatives project a decline in program spending as a share of the economy, but only if their proposed savings materialize. Poilievre’s plan includes 13 measures to cut about $58 billion over four years, almost half of which will come through trimming consultants. Even then, total spending would remain above levels seen under Morneau.

Their deficit math is also tenuous. The Conservatives could easily produce higher deficits than Trudeau’s final fiscal update in December. Their platform counts on growth dividends from policy changes—a controversial and murky approach to costing.

Carney’s Liberals, meanwhile, are fully committed to ramping up spending. Their $130 billion in new measures over four years would keep spending to levels not seen since the mid-1990s debt crisis. Carney’s deficits would run nearly $90 billion higher than Trudeau’s projections.

Endurance

So why does Trudeau’s fiscal legacy endure?

Partly, it’s campaign caution. No party wants to propose deep cuts during an election and face backlash. And after a decade of structural expansion, altering the fiscal baseline takes time—or a major shock, just like the pandemic provided the impulse for expansion of the state.

There’s also a macroeconomic argument: with U.S. tariffs looming and a slowing economy, neither party wants to add more headwinds through austerity.

But there’s more to it.

The Trudeau Consensus may have become self-sustaining—a product of deeper political dynamics. Through three mandates, the Liberals built a progressive coalition that thrives on an expansive state. And as this election has shown, that coalition is alive and quite formidable.

Expectations for robust social transfers, subsidized childcare, climate-focused investments, and other government initiatives have been locked in. Retrenchment is now politically toxic.

Carney has not only inherited this coalition but has reframed it as a tool for forward-looking investments required to compete globally in the face of Trump-era protectionism and belligerence. He has swapped Trudeau’s moralistic rhetoric for technocratic pragmatism, but the underlying premise remains: the state must do more.

The Conservatives understand this too. Reversing public expectations too quickly would be politically perilous. That’s why Poilievre’s “revolution” sidesteps major entitlements and other major Trudeau initiatives—for example, his promise this week to keep tens of billions in Liberal subsidies for electric vehicle and battery plants. It’s a tough paradigm to crack.

Once the state expands, scaling back becomes politically fraught due to entrenched constituencies. It’s the opposite of “starving the beast”—the conservative idea that you can force a smaller state by slashing revenue. Expanded programs create stakeholders that feed political momentum, not resistance.

What the 2025 election reveals is that the Trudeau Consensus is still rolling, at least until a new catalyst comes around that would force this progressive coalition into trade-offs. Perhaps, something like a debt crisis.