OTTAWA - How quickly and strongly Canada's economy rebounds from the worst slump in almost two decades could come down to a few lines in Tuesday's federal budget and their execution, economists say.

Last week, Bank of Canada governor Mark Carney presented a rosy picture of the recovery with Canada bouncing back strongly next year.

But Carney had a significant caveat. He was assuming massive and effective stimulus in the United Sates and in Canada to make his sunny prediction work.

All indicators, particularly the Canadian government's own projection of $64 billion in deficits over the next two fiscal years, point to massive stimulus, likely split between spending and tax cuts.

"No single move is perfect, no single move does everything economists want it to do, so maybe the best plan is to sprinkle it among a couple of different areas and that's what it looks like they will do between infrastructure, worker retraining and some kind of tax relief," said Douglas Porter, deputy chief economist with BMO Capital Markets.

Based on the flood of spending announcements that have been released before the budget -- the latest being $7 billion for infrastructure on Monday-- economist Dale Orr believes stimulus spending of $19 billion in 2009-10 fiscal year and $15 next fiscal year.

The deficits will be even larger due to a sharp drop in revenue flowing into the government's coffers because of the downturn.

Most economists view spending on job-intensive infrastructure projects as among the most effective ways to stimulate the economy short term, and praised the announcement Monday.

Benjamin Tal of CIBC World Markets estimated that $10 billion in infrastructure spending is ready to go this year and could potentially create 110,000 jobs, while boosting the country's gross domestic product by 1.5 per cent.

Along with the $6 billion of unspent infrastructure projects Ottawa already has in the pipeline from previous years -- the added commitment, along with provincial and municipal participation -- would put that figure well beyond $10 billion.

"Given the fact we are running a huge infrastructure deficit, I think it's a huge win-win situation," said Tal. "We have to face it, what we are doing now is buying jobs and infrastructure has a much higher multiplier in terms of creating jobs."

But the spending commitments announced still leave Ottawa with about $10 billion to play with in the budget, some or most in the form of tax cuts.

Finance Minister Jim Flaherty said the budget will aim "to stimulate the economy, (encourage people to) buy Canadian, and take some steps to protect Canadians tomorrow."

The latest economic indicators suggest the economy could use all the help it can get.

The Canadian Manufacturers and Exporters said a survey of members showed a deterioration in the number of new orders in the early days of 2009, with 21 per cent saying the value of orders fell by more than 30 per cent compared to October.

In a separate survey, the Conference Board said consumer confidence remains at recessionary levels with a majority expressing concern about their job prospects, although the index was slightly up.

And the housing market continues to decline. The latest figures from Royal LePage showed both unit sales and prices fell in the last three months of 2008, with prices for detached bungalows falling 4.8 per cent, condos by 5.2 per cent and a standard two-storey home by 6.3 per cent.

One way Ottawa can likely effect consumer confidence and spending is to put more money in people's pockets through income tax cuts, or temporary tax rebate or GST cut, say economists.

But there are pros and cons with each approach, they add.

A temporary GST reduction or rebates -- which would only be in effect for a specified time -- could boost spending in the short term, but they might cause spending to stall after the tax holiday runs out, thereby harming the economy going forward.

They have the added drawback that a significant portion of what is spent leaks away if what is purchased is imported.

Economists say income taxes might be more effective, but in this climate of uncertainty many Canadians are likely to save rather than spend, as Americans did last spring's rebates.

Despite the drawbacks, Scotia Capital economist Derek Holt says income tax cuts, particularly impacting lower-income Canadians who are more likely to spend any savings because they have less discretionary room to save, offer the best bang for the buck.

"They are more likely to be powerful if people perceive them to be permanent, even if they are more modest in terms of the immediate impact," he said.

And given that easy money got the world in the current predicament, Porter added that increasing the savings rate of Canadians may not be so bad.