The federal government will release details of its spending review in the coming days, revealing which programs will face cuts under Prime Minister Mark Carney's plan to find $25 billion in savings by 2028. Officials appeared before a House committee this week to discuss the review, which has been underway since Carney launched it earlier this year. But even if Ottawa hits its $25 billion target, it won't come close to eliminating the projected $92.2 billion deficit for 2025/26—meaning Canadian taxpayers will continue paying massive amounts just to service government debt.

The scale of that debt burden is staggering. Federal and provincial governments have accumulated a combined $2.3 trillion in net debt, costing Canadians between $1,937 and $3,432 per person annually just in interest payments, depending on their province, according to recent research from the Fraser Institute. The federal government alone will spend $53.8 billion on debt interest in 2024/25—more than it spends on child-care benefits or the Canada Health Transfer. That's money flowing to bond holders instead of hospitals, schools, or tax relief. Even with the spending review, a substantial amount of taxpayer dollars will continue flowing toward federal debt interest payments rather than programs and services.

Here's the problem with trying to cut your way out of a debt spiral: Unlike other forms of spending, governments can't simply decide to spend less on debt interest payments in a given year. To lower those payments, they must rein in spending and eliminate deficits so they can start paying down debt. Think of it like a credit card balance—making small payments while still racking up charges each month doesn't get you ahead. All but one province (Saskatchewan) plans to run a deficit in 2025/26, while the federal deficit could exceed $90 billion. The Carney government's $25 billion in cuts over three years won't stop the bleeding when annual deficits are nearly four times that size. Every year Ottawa runs a deficit, it adds to the debt pile, which means higher interest costs eating up more of the budget next year.

The spending review details will show which programs get trimmed, but the real test is whether Ottawa can break the cycle of perpetual deficits. By spending less today, governments can ensure that a larger share of tax dollars go towards programs or tax relief to benefit Canadians rather than simply financing government debt. The alternative is watching billions disappear into debt interest each year while provinces and the federal government scramble to fund basic services. Canada can't cut $25 billion and call it fixed—not when it's borrowing $90 billion annually and paying $54 billion just to service old debts.