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.
Carney’s conundrum: choosing between what’s best for the economy and what’s best for his political interests
The day before the Trump administration’s 35 percent tariffs on Canada took effect, Statistics Canada confirmed that Canada’s economy contracted again in May—the second consecutive monthly decline. While the modest contraction was expected, it’s a reminder that the economy is fragile and that the policy and political implications are considerable.
Even if we avoid a formal recession this year, it’s a safe bet that the economic projections underlying last fall’s economic statement—the one that cost Chrystia Freeland her job and ultimately precipitated Mark Carney’s political rise—have deteriorated.
Lower growth means lower revenues and, with countercyclical spending pressures, a larger fiscal hole. When the government tables its anticipated fall budget, Canadians should brace for weaker economic projections, higher deficits, and mounting pressure to secure a trade deal with the United States.
As Trump’s tariffs take effect, this economic backdrop creates a strategic dilemma for the Carney government. Accepting a suboptimal deal with Trump could provide the economic certainty that markets and investors are seeking, even if the terms are worse than CUSMA. Prolonging negotiations in search of a better deal, by contrast, risks letting the economy slide closer to recession. Carney must choose between what may be best for the economy and what’s best for his own political interests, and there may ultimately be a gap between the two.
Trump, for his part, has the upper hand. His domestic economy is relatively strong, and his tariff agenda is getting surprising endorsements, including this week from JPMorgan’s Jamie Dimon after the unexpected agreement with the European Union.
Zooming out, though, May’s GDP numbers reinforce a long-standing point that we’ve made at The Hub: Canada’s biggest challenge isn’t the Trump trade talks or any other short-term issue, for that matter. It’s secular stagnation. We’ve been trapped in what I’ve called the “2-percent trap”—barely 2 percent average annual growth since 2000, and just 1.75 percent since 2015. There are various consequences to such a period of sustained stagnation. It can contribute to large-scale deficit spending, it can distort our politics by increasing the intensity of distributional battles, and it can even eventually warp our expectations. That many are already celebrating that we may avoid a recession is, itself, a sobering reflection of how far our economic expectations have fallen into the 2-percent trap. If you have ideas to break us out of economic stagnation, this is the last weekend to submit them for the Hunter Prize for Public Policy. Learn more here. Ontario’s bike lanes brouhaha reveals the absurdity of Canada’s judiciary This week’s Ontario court decision declaring the Ford government’s removal of certain bike lanes unconstitutional under Section 7 of the Charter is the absurd yet natural consequence of a decades-long rewriting of Canada’s constitutional order by activist judges. What began in 1982 as a procedural safeguard—the right not to be deprived of life, liberty, or security of the person without fair legal processes—has now morphed into an unconstrained tool for judicial policymaking. Section 7’s text appears modest. It promises that the government can’t interfere with our core liberties “except in accordance with the principles of fundamental justice.” This was initially conceived of as the protections of procedural due process, like the basic protections against arbitrary imprisonment or unfair trials. Yet the Supreme Court’s 1985 B.C. Motor Vehicle Reference set in motion a legal revolution. It declared that “fundamental justice” wasn’t just about fair procedures. It could also include substantive due process, whereby judges were free to assess the content and wisdom of the laws themselves. This subtle doctrinal shift transformed Section 7 into a rights-creation engine. It has since generated judicially discovered rights to abortion (R. v. Morgentaler), prostitution (Canada v. Bedford), assisted death (R. v. Carter), and now possibly bike lanes. Of these, the assisted death case is probably the most egregious case of judicial rights-making. The Supreme Court went from determining there was no such right in the 1993 Rodriguez v. British Columbia decision to unanimously endorsing it in the 2015 R. v. Carter decision. How the Charter suddenly added a right to physician-assisted death in just over 20 years without an amendment demonstrated that it’s politics all the way down when it comes to the interplay between Section 7 and the ambitions of activist judges. Yet if Carter is the most audacious case, this bike lanes one may prove to be the most absurd. The court insists there’s no right to bike lanes—government doesn’t have to build them—but that removing existing lanes somehow violates Ontarians’ Section 7 rights. If the Carter trajectory is any guide, the next step is an invented positive right to bike lanes themselves. This, it must be said, is the logical endpoint of the “living tree” ideology that says as soon as politicians establish a constitution, their words and intentions no longer matter. Judicial preferences must then take their place. What’s the solution? Getting better judges is an obvious one, but that will take time. In the U.S., the Federalist Society’s efforts to cultivate (and appoint) a new generation of more prudent and restrained jurists took nearly 40 years. Another is to use the Notwithstanding Clause to assert the sovereignty of the legislature and brush back the excesses of a power-hungry judiciary. The third—and less likely yet perhaps most important—option is to start a slow yet steady campaign to amend Section 7 in order to restore it to its rightful purpose of procedural due process, and eliminate the ambiguity that has turned into a rights-making manufacturing factory for activist judges. Until then, we’ll continue to live under a judiciary willing to discover new constitutional entitlements—today assisted death, tomorrow bike lanes. Carney capitulates to his progressive base on Palestine The Carney government’s decision to recognize the state of Palestine is extraordinary—not merely in substance, but in timing. Even setting aside the fraught debates over Palestinian statehood, the context makes this policy position wholly objectionable. Canada’s longstanding ally was subject to a brutal and massive terrorist attack. Hamas terrorists slaughtered civilians, kidnapped innocents, and triggered an ongoing war in which Israel is still fighting to recover hostages and neutralize the threat. Hamas, of course, is the party that started this war. And today it stands squarely in the way of its conclusion. Its refusal to accept a reasonable settlement or release its hostages prolongs the fighting and the accompanying tragedy. By signalling that Canada is prepared to reward this behaviour with recognition of Palestinian statehood, the Carney government risks reinforcing Hamas’s strategy: use terrorism to provoke international pressure on Israel, then wait for outside actors to hand it diplomatic victories. The logic here is something to behold. It’s a bit like the Canadian government telling the United States in the days after Pearl Harbor that it should “understand Japan’s grievances” and beginning to advocate for Tokyo at the League of Nations while the war in the Pacific was still underway. This episode reminds us of three realities. First, anti-Israel politics have now become dominant within Anglo-American progressivism. A recent episode of the highly popular Pod Save America podcast is a telling example. You now find a steady stream of hostility toward Israel that would have been unthinkable in mainstream liberal politics a generation ago. Second, whatever one thinks of Mark Carney’s own policy preferences, he leads a party with a powerful progressive wing that swims in that same ideological bathwater. From campus activism to elite ideas, the progressive conversation now treats Israel as the problem rather than the victim of terrorist violence. It is, therefore, no surprise that Carney has capitulated to the priorities of his own base. Third, the net effect is that support for Israel is now a partisan issue in Canada. If you’re a pro-Zionist Canadian, the timing and context of this announcement make clear that the Liberal Party has picked its side—and it’s not yours. The commitment to recognize Palestine in the context of an ongoing war precipitated by terrorist attacks out of Gaza is the subordination of moral clarity and national interest in favour of progressive shibboleths. The outcome will be to embolden Hamas and weaken Canada’s credibility with its closest allies.
Sean Speer is The Hub’s Editor-at-Large. He is also a university lecturer at the University of Toronto and Carleton University, as well as a think-tank scholar and columnist. He previously served as a senior economic adviser to Prime Minister Stephen Harper.
