OTTAWA - The Harper government plans to run a deficit totalling up to $30 billion next year in an effort to pump enough cash into the economy to lift Canada out of a painful recession, the Canadian Press has learned.
A senior government official said the deficit could total $20 billion to $30 billion for the 2009-10 fiscal year and that could continue.
The estimate blows away the projections contained in a Finance Department document released at the finance ministers meeting in Saskatchewan that suggested a $5-billion shortfall next year before any stimulus spending.
"We are prepared to run the deliberate, substantial, short-term budget deficits -- plural -- and the short-term budget deficit will be in the range of $20-$30 billion," the official said.
"We want ... to make sure that anybody who is out of work gets put back to work (and) contributes to the economy."
The official said the lion's share of the stimulus will go into public infrastructure spending for such things as roads and bridges and to retrain workers who have lost their jobs.
The Finance Department has projected a $5-billion shortfall next year, followed by another estimated $5.5 billion for 2010-11, prior to any new spending.
That suggests Ottawa is looking to spend $15-$25 billion in stimulus next year, an indication the government believes the economy needs aggressive action.
The new spending could also serve to undermine political opposition for the Jan. 27 budget, particularly from new Liberal Leader Michael Ignatieff, who has said he will wait to see what the government does before deciding whether to vote non-confidence.
While the new deficit numbers appear shocking in the face of 12 consecutive years of surplus budgets, they pale compared to the over $43-billion deficit eliminated by the Liberals in the 1990s. They are also small potatoes to the estimated US$1-trillion deficit being considered by the United States.
Even before the stimulus, Ottawa looked ready to run small deficits for at least the next four years, according to the department document.
While the department officially only projects two years out, applying the methodology used to the projections yields further shortfalls of $4 billion and $1 billion the following years.
And the document warns that the economic situation has deteriorated even more since the numbers were tabulated earlier this month, meaning both revenues and the deficit picture could be worse.
"In the department's view, there is a risk that nominal GDP could be weaker than suggested by the most recent private sector survey and that the corresponding fiscal outcome would be more in line with the low scenario in the statement," says the document.
If that were to occur, the deficit next year could approach $9 billion and be more than $10 billion the following year.
The deficits would occur even if Ottawa proceeds with the billions of dollars in extra revenue and savings through asset sales and cost cutting it has proposed in the doomed Nov. 27 economic update.
As the economy slumps, Ottawa gets lower than expected tax revenues from corporate Canada and from consumers and is forced to spend more on unemployment benefits and other social programs.
The government expects nominal gross domestic product -- the value of goods produced -- will be $20 billion less in each of the next two years than it expected, which it says will reduce government revenues.
Liberal finance critic Scott Brison said the new numbers are more realistic than those in the Nov. 27 statement and he asked Flaherty to drop plans to sell government assets in the current weak real estate market.
"If the government now realizes their rosy projections were unrealistic, it's time for them to recognize their asset sale plan is unrealistic as well," he said.
Flaherty would not be reached for comment Thursday, but earlier he had described the economy as "difficult for Canada and Canadians."
On Thursday, Flaherty created a 12-person economic council headed by former B.C. finance minister Carole Taylor to advise the government in battling the economic malaise, which many economists say will be even worse that Ottawa is saying.
The finance minister also said Thursday he and Bank of Canada Governor Mark Carney will meet with the CEOs of the country's biggest banks in January to ensure they are taking steps to make more credit available to average Canadians.
"I expect (the banks) to make it evident to us that they are taking steps to make that more available in Canada," Flaherty said at a news conference in Saskatoon.
