Fact check: Kevin O’Leary is very, very wrong about defense spending and deficits

We did the math on some of Kevin O’Leary’s claims out of the gate. He, evidently, did not
Justin Ling
Montreal, CA
January 18, 2017, 2:40pm

Kevin O’Leary, the newest addition to an already crowded Conservative Party leadership race, wants everyone to know he is not Donald Trump.

While the businessman-turned-reality star says he wants to work closely with the president-elect on a host of things, he says Trump’s wall-building style isn’t his bag — “I’m the son of an immigrant from Ireland and Lebanon. There’s no walls in my world.”

The one thing the two share, however, is a particular looseness with numbers.

U-A-V to be kidding me

During his first interview, on CTV’s morning show, O’Leary touted his love for the military, and insisted that he’d be able to do better, for cheaper. By way of example, O’Leary brought up the CP-140 Aurora surveillance aircraft.

“We have the largest border on earth, people don’t know that, how do we patrol that? With C-140 prop aircraft at a cost of $38,000 an hour. If we had a drone program we could do it for a fraction of that and save $3 billion a year.”

VICE News ran those numbers, and they’re not exactly accurate.

First off, the CP-140s aren’t exactly “prop” aircraft — they’re heavy-duty, about a third of a football field long, and have recently been upgraded to do advanced signals intelligence and high-tech aerial surveillance. The CP-140s are currently running aerial surveillance over Iraq as part of a coalition effort to defeat the Islamic State.


And O’Leary’s cost-per-flying hour is way off. Depending on how you calculate the cost-per-flying-hour of the Auroras, it ranges from $8,000 — which is the baseline figure that the Department of National Defense provided to VICE News — to $20,000, for the costs required to house and ready the planes.

If you really stretch the numbers to try and get to O’Leary’s figure, you could add in salary costs for the pilots and crew, which gets you to $45,000 — but has very little to do with the Auroras themselves — or you can factor in the cost of purchasing the aircraft, which will inflate the number to $71,800.

As for that $3 billion figure, the Department of National Defense reported in 2014 that its entire maritime air program cost just north of $500 million, while a separate program, run with the the Department of Fisheries and Oceans to do coastal surveillance, costs roughly $15 million a year.

Even over five years, for all missions — including operations in Iraq and Europe — and using the highly inflated flying cost, the total cost to fly the Auroras came out at $2.1 billion dollars. Still nearly a billion off the amount that O’Leary’s promised to save in a year.

Also worth remembering that the entire budget for the Department of National Defense is less than $19 billion — if O’Leary’s point was correct, 15 percent of our defense budget would be spent flying planes over the American border.


Meanwhile, the Department of National Defense is already moving forward with a drone, or UAV, program to run maritime and border surveillance.

Also worth remembering that the American drone surveillance program isn’t exactly cheap — in fact, its drones burn about $12,000 per hour of flight time — and a 2015 report basically concluded it was a waste of money.

Read VICE News Canada’s coverage of last night’s Conservative Party leadership debate.

What’s a trillion amongst friends?

As O’Leary railed against Trudeau for “destroying the country” and Finance Minister Bill Morneau for being a “huge disappointment,” the Dragon’s Den star lamented the government’s addition to the federal debt.

“He’s told young Canadians that he was going to come in and balance the budget in 2019, and we were only going to go $10 billion in deficit, he’s now saying we’re going $1.5 trillion in deficit. It’s so big! Just think about how huge that is. There’s only 36 million Canadians, that buries every one of them $40,000 in debt.”

There are a series of problems with O’Leary’s argument.

For one, O’Leary has confused the concepts of deficit and debt — the former, of course, being the yearly difference between spending and revenue and the latter being the long-term accumulation of borrowed money to pay for those deficits.

A recent long-term projection from Finance Canada, not Morneau himself, projected that if Canada stays on the current trajectory, the federal debt could hit $1.5 trillion by 2045. (It is currently half that.)

Even then, Finance projects that the debt-to-GDP ratio will actually decline slightly, as economic growth outpaces the racking-up of debt.

He is right that Morneau and Trudeau broke their promise about deficit spending. The Liberals pledged to run “small” deficits of $10 billion per year until 2019 — instead, the deficits were more than triple that.

And while Morneau has stayed mum about whether he’ll hit a balanced budget by 2019, there’s still plenty of runway to cut spending or raise taxes and avoid structural deficits.