Canada pledged to spend 2% of GDP on its military. Would that transform it? Is it affordable?

For years, Canada and other NATO member countries have faced criticism for falling short of allocating two per cent of their GDP on military spending, a target set in 2014 by the military alliance.

Canada was among the allies who signed on in 2014 to aspire toward that target but has consistently failed to reach it.

However, earlier this month, NATO member leaders pledged to boost spending on national defence, agreeing to make the existing target of two per cent of GDP the minimum spent each year, with one-fifth of that going toward major equipment and research and development.

Still, it's unclear when such a target might be realized. While Canada has agreed to the benchmark, it has not set out a plan to reach it.

The agreement also raises questions about the kind of budgetary pressures Canada would face by spending billions more a year on its military. And would that extra spending fundamentally transform the country's defence forces? 

There would be no way for Canada to meet its NATO spending commitment without taking on significantly more federal deficit and debt than is already planned.

That's according to Jack Fuss, director of fiscal studies at the Fraser Institute, who, in a recent Toronto Sun column, wrote that Canada couldn't boost spending on the military "without seriously weakening its fiscal position," unless it's "finally willing to prioritize such spending over other currently favoured federal initiatives and programs."

According to figures from NATO, the budget for the Canadian military in 2023 is $36.7 billion or 1.29 per cent of GDP. 

Adding 0.7 seven percentage points to reach the two per cent mark this year would mean an extra $20 billion in spending. And that would come as Canada already faces a $40-billion deficit.

"Without touching revenues, this will create a fiscal sustainability problem likely for the federal government," Kevin Page, former parliamentary budget officer for Canada, said in a phone interview with CBC News. "So you can't just add this to the deficit."

 It will also create the conversation,'how are we going to finance this?, he said. 

"What would we do on the revenue side? What would we do on the spending side? Would we try to make room for it by cutting certain types of other programs?"

Pedro Antunes, senior economist for the Conference Board of Canada, said the extra spending on the military would be in line with the overall increase in spending by the Liberal government over the last number of years.

Yet an extra $20 billion would certainly be a significant "chunk of change," he said.