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But Carney鈥檚 balanced budget pledge comes with one big condition: he would change the way Ottawa looks at spending by breaking the budget in two. One part would be operating spending which includes items such as salaries, transfers to provinces and debt financing. The other piece would be capital spending, which would be for purchases. Carney is only pledging to balance the operational budget. While he didn鈥檛 offer specifics, he said balancing that would allow his government to offer a middle-class tax cut.

Capital spending, which Carney is pledging to do more of, would include money for new infrastructure 鈥� things like roads, ports and bridges, as well as new green energy infrastructure, military procurement and investments in artificial intelligence, all of which could still be paid for by taking on debt.

Carney said he would use artificial intelligence and investments in technology to allow the government to cap the size of the public service.

鈥淭he essence of this is to spend less and invest more. That means reining in government spending, so that Canada can invest more as a country,鈥� he said.

Carney’s rivals in the Liberal leadership race have also released some fiscal details. Former Liberal finance minister Chrystia Freeland has pledged a 1.5 per cent tax cut on incomes between $57,375 and $114,750 and former government House leader Karina Gould has promised a one-year reduction in the GST to four per cent.

Conservative Leader Pierre Poilievre said Carney鈥檚 proposal would give him licence to spend with abandon.

鈥淲ith his announcement today, Mark Carney is planning to cook the books with a sneaky accounting trick to take billions of dollars of new Liberal spending off the budget records,鈥� he said. 鈥淐arney can鈥檛 change the fact that all spending must be paid for, either through higher taxes or inflationary debt and money printing, all of which Canadians end up paying for.

Currently, the federal government is promising a $30.4-billion deficit three years from now in the 2027-2028 fiscal year.

Kevin Page, CEO of the Institute of Fiscal Studies and Democracy at the University of Ottawa, who was also the country鈥檚 first parliamentary budget officer, said when the government鈥檚 capital spending across departments is added up, it would equal the deficit.

鈥淢y own kind of back of the envelope calculations, there’s probably something in the neighbourhood of $30 billion a year right now,鈥� he said.

Page said separating the government鈥檚 capital and operating budgets is a move other countries have already made and it could paint a clearer picture of the government鈥檚 true finances.

鈥淭here’s a difference between when you debt finance a dental program or pharmacare program versus when you finance physical infrastructure,鈥� he said. 鈥淧hysical infrastructure will be there for your kids, your grandkids.鈥�

Christopher Ragan, a professor at the Max Bell School of Public Policy at McGill University, said separating capital and operating spending is a good idea. However, the government will have to be careful with how it defines a true long-term expense and something short term, he said.

鈥淎 successful naval ship that stays afloat, is going to stay afloat for 50 years that is clearly a long-lived asset, but an M-16 machine gun probably should not be treated that way.鈥�

Ragan said that will mean some arbitrary accounting decisions about where something falls, but that鈥檚 hard to avoid.

鈥淎rbitrary doesn’t mean it’s not sensible, but that’s the kind of decisions you’re going to have to make.鈥�

He said Canadian government spending has surged significantly under the Trudeau Liberals and it’s a good time to rein it in and focus on what really matters.

鈥淚t doesn’t have to be hacking and slashing. It doesn’t have to be Elon Musk style, but you could absolutely make a Paul Martin from the mid-1990s style.鈥� It was Martin who, as federal finance minister, cut spending and eliminated a massive budget deficit.听