OTTAWA - The federal deficit will soar to over $50 billion this fiscal year -- $16 billion more than forecast and setting a dubious record that eclipses even the bad old deficit days of the 1980s and 90s.
Finance Minister Jim Flaherty dropped the bombshell Tuesday, drawing immediate incredulity from opposition parties wondering why the Conservative government can't seem to get its numbers right.
It followed the grim news that the number of Canadians collecting employment insurance jumped 10.6 per cent in March to 681,400 -- the biggest EI surge since the recession started and viewed by economists as a warning sign of more bad things to come.
Just four months ago, in January's federal budget, Flaherty predicted a shortfall of $34 billion in 2009-10. And just two months before that, he was touting years of surpluses in the fall economic update.
Flaherty stressed that the International Monetary Fund says Canada "has the strongest stimulus package in the G20" group of developed countries.
"But," he said, offering a doozy of a qualifier, "we are going through a deeper economic slowdown than anticipated."
"The systemic stabilizers that we have automatically -- more employment insurance, a couple of billion dollars plus more, and lower taxes -- are to be expected during a recession, which we are seeing.
"We also have the substantial auto payments that are going to be required.
"We will run a substantial short-term deficit this year which I would estimate at more than $50 billion."
The jarring new estimate comes just a month after Flaherty said he was not changing his deficit forecast.
"It's not just a minor miscalculation," Liberal House Leader Ralph Goodale said of Flaherty's massive revision. "Their numbers are absolutely wonky and unreliable."
NDP finance critic Thomas Mulcair was even less kind.
"He's wearing the dunce cap of all Canadian finance ministers," he said of Flaherty. "He swore up and down (last fall) that we would never go back to deficits. Then he said there was not going to be a recession.
"If we want to get out of this mess, the government's got to start telling the truth and the whole truth."
Despite the record deficit number, the country is still in better shape in terms of deficit-to-GDP ratio than in 1984. Back then, the deficit was nearly $39 billion, which made up a record share of almost nine per cent of GDP (total economic output.)
Parliamentary budget officer Kevin Page had said the government's numbers were too rosy. He released a report in March predicting the deficit would be at least $9 billion higher than anticipated over the first two years.
TD Bank chief economist Don Drummond, a former senior finance official, went even further, saying the shortfall would be about $18 billion more.
On Monday, Flaherty revealed for the first time that the deep recession is wreaking havoc on the government treasury and will cause the deficit to balloon "substantially more" than projected.
He said the economic skid has cut government revenues from personal and corporate taxes and raised spending requirements.
Flaherty was also raked in the Commons for his past record as a deficit spender during Ontario's Commons Sense Revolution.
"Mr. Speaker, in 2003 the finance minister was a senior member of the Mike Harris government and they ran on a balanced budget," said Liberal finance critic John McCallum.
"Whoops, it turned out to be a big deficit.
"Last November, he projected never ending surpluses. Whoops again, two months later it was an $80-billion deficit (over two years), which the IMF says is now $120 billion. That is enough to wipe out all the debt reduction since Liberals balanced the budget in 1997.
"Why is the minister so bad with numbers?"
Prime Minister Stephen Harper retorted that the Liberals want to spend yet more by increasing EI benefits at a cost of $1.5 billion a year until the worst of the recession is over.
"Mr. Speaker, virtually every national government in the world is running a deficit. Ours, by comparison, remains much lower than our competitors.
"That member, who was once an esteemed economist, should know that when interest rates are zero and we have a recession like this, and we have the strong, long-term fiscal position we have, that we put money into a deficit to make sure we are helping (unemployed) people in this country."
