OTTAWA - Finance Minister Jim Flaherty says Canadians should brace for "significant" and "very regrettable" job losses and a difficult year ahead that may require even more stimulus spending than what's contained in the budget that he delivered to the Commons last week.
Flaherty said that he's "open to the possibility of doing more . . . but the first job is to get the budget passed and implement the stimulus."
The budget projects $64 billion in deficits over the next two years, although several observers have said the numbers are based on assumptions that appear to be too optimistic.
Parliamentary budget officer Kevin Page, for one, has cast doubt on the size and effectiveness of the minister's $39.9 billion stimulus package over two years.
Flaherty said he had not read Page's 15-page analysis, but that he disagreed with several of the budget officers' assumptions.
The minister also predicted that a monthly employment report to be issued Friday morning by Statistics Canada and the U.S. Labor Department will be bleak.
"We are going to get some job numbers tomorrow that are going to be very regrettable," he told reporters.
"So is the United States. This is going to be a difficult year for Canadians, there's going to be significant job losses."
He said with opposition co-operation, it may be possible to pass the budget's implementation bills by late March, more than two months earlier than last year.
Liberal finance critic John McCallum said his party still did the right thing in voting for the budget because it contains many helpful measures, but he added "there's still time" to bring in additional stimulus before the summer break if necessary.
But the NDP's Thomas Mulcair said Page's assessment of the budget numbers confirms that the budget's claim the stimulus will boost economic growth by 1.9 per cent "is a pure mirage."
Page's overall analysis of the budget is that while it adequately takes into account the downside risks for the first year, it is overly rosy about the economy's ability to bounce back.
He notes that the budget anticipates the current slump will be milder than the recessions of the early 1980s and 1990s, when the unemployment rate was far higher than the current 6.6 per cent.
"In terms of a cumulative amount in unrealized output, (our) analysis suggests that this projected economic downturn may already by more severe than either the last two recessions," Page said.
In the early '80s recession, the jobless rate hit 13 per cent, while the recession of 1991-93 saw unemployment top 11 per cent.
The consensus of economists ahead of the Statistics Canada report was that Canada shed another 40,000 jobs in January -- following a retreat of 84,000 workers the previous two months.
A TD Bank report forecast on Wednesday also estimates Canada could lose about 325,000 jobs this year, the worst record in almost two decades.
Page also argues that the government is unrealistically counting on revenues from corporate taxes to rebound more quickly than is likely, which would mean Ottawa may remain in deficit longer than four years.
The budget officer's analysis is in the same vein as several private sector economists in expecting the deficit to last longer. Earlier this week, IHS-Global Insight's Dale Orr said a more reasonable estimate is for six more years of red ink.
A key reason for Page's view that the stimulus is actually smaller than advertised is the fact that it carries forward $8.7 billion in projected asset sales and departmental cuts introduced in last November's failed economic update.
If carried through, says Page, they would act as a drag on growth undercutting the stimulus elements of the budget.
"Adjusting for restraint measures proposed in 2008 economic statement and contribution to stimulus associated with maintaining current (employment insurance) premium rates, the public budget office estimated that the total net stimulus could be about 20 per cent smaller, $31.8 billion, than reported in budget 2009," Page said.
The budget officer came under some stiff questioning from Conservative members of the committee, who questioned his methodology and whether his analysis can be trusted.
"When you try to forecast the comportment of humans, you can (make) mistakes," said Tory MP Maxime Bernier. "That's why these forecasts are not so accurate."
Page agreed that there is great uncertainty about what will happen to the economy.
Given the "significant uncertainty," he questioned whether Flaherty had factored in enough downside risk in the budget assumptions.
18:02ET 05-02-09
