So, what expenditures should Canada cut to meet its NATO obligations?

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Todd Hirsch is a Calgary-based economist, author and public speaker. He is also the director of the Energy Transition Centre and the former chief economist of ATB Financial.

A few weeks ago, when Donald Trump blathered on about letting Russia invade any NATO country not carrying its weight on military spending, he may have lacked a certain polish and decorum. Yet it’s hard to deny his logic.

A commitment is a commitment. And as most Canadians are becoming awkwardly aware, we are one of the worst laggards in the NATO club on this measure. For Canada to reach its NATO commitment of 2 per cent of GDP spent on the military it would require, roughly, $18-billion in addition to the $30-billion each year we spend on defence. (The figures are approximate and vary depending who you ask, and what you consider “military spending.”)

But how do we find an additional $18-billion? There’re not many sofa cushions to look under.

One might be tempted to suggest that finding $18-billion in savings in a total federal budget of about $500-billion shouldn’t be too difficult – it’s only about 3.6 per cent. Chump change. How hard could it be to trim other budgets and find efficiency savings of that amount?

Indeed, it’s going to be nearly impossible.

The problem is where that $500-billion in federal spending goes. A huge portion of it is transfers to either individuals or other governments, and it’s virtually impossible to cut.

About a quarter of all spending is transferred directly to Canadians, either through elderly benefits (Old Age Security and Guaranteed Income Supplement), Employment Insurance benefits and the Canada Child Benefit. Any government suggesting cuts to these payments does so at extreme peril at the polls.

Another 20 per cent of Ottawa’s spending is transferred directly to the provincial governments. The Canada Health Transfer and the Canada Social Transfer help provinces cover their own program spending on health care and social services. And no province is in the mood right now for a speech from the Prime Minister about how they’re going to be receiving less, rather than more.

Equalization payments account for about $24-billion, but this program is enshrined in the Constitution. Is anyone really in the mood for reopening the Constitution right now?

Interest payments on the debt account for another $47-billion, or almost 10 per cent, and with higher levels of debt and higher interest rates, that figure could go much higher. Even worse, it’s completely non-negotiable. No trimming or efficiency gains here.

Add in assorted other transfers such as the Carbon Tax rebate, transfers to the territories and other sundry transfers, and we are down to $126-billion in what is called “operating spending.” And of that, roughly $30-billion is already spent on the military.

The upshot of all of this is that, while Ottawa’s total spending is $500-billion, only $96-billion in operating spending is discretionary – that is, available for cutting, trimming or finding greater efficiencies. To meet our NATO commitment means redirecting nearly 20 per cent of those funds.

Axe the CBC entirely? That’ll get you 7 per cent of your goal. Completely eliminate all national parks? Terminate the federal justice system? Cancel all funding for Olympic athletes and sports programs? Even taking these very extreme (and unwise) actions doesn’t raise the $18-billion a year required.

Meeting our NATO spending requirements should be a priority. But we cannot be naive about what this requires. Simple-minded solutions, usually boiled down to catchphrases about cutting wasteful spending, aren’t helpful. Yes, we should always cut wasteful spending – who could argue otherwise? But it doesn’t get us $18-billion.

(A ridiculous solution someone suggested to me on social media: expand the GDP. That’s a great general goal, but the NATO commitment is 2 per cent of GDP. So, when the GDP grows, the amount that we need to meet the NATO commitment grows as well. Do the math and you’ll quickly realize the foolishness of this as a solution.)

That leaves the two other options. The first is to raise taxes. It’s laughable to imagine any political party campaigning on hiking taxes in next year’s federal election. The second option is to add another $18-billion to the ever-growing pile of public debt, and essentially wipe out any hope of a balanced budget ever again.

None of these options is good. If Canadians start valuing military spending and putting a higher priority on meeting NATO commitments, we’d have to start a tough conversation.