December 18, 2008
A federal economic stimulus package will likely lead to a deficit in the $20-billion to $30-billion range for the 2009-10 fiscal year, a Prime Minister’s Office official told CBC News on Thursday.
Hours after the announcement, Harper confirmed in a television interview that the Conservative government was planning to take unprecedented action to stimulate the country’s economy.
“Some people are talking in the neighbourhood of a five to 10 billion dollar deficit. Our own assessment is frankly that will not be sufficient given the challenges we’re facing,” Harper told CTV News in a year-end interview.
“I think what will be more realistic in terms of the kind of stimulus our economy is going to need is going to be in the 20-billion to 30-billion dollar range.”
The figure includes the $5-billion deficit the Finance Ministry projected on Wednesday for the next fiscal year, the CBC’s Rosemary Barton reported from Ottawa.
It also includes funding for the planned $3.3-billion auto-sector bailout, as well as unspecified amounts for forestry, housing, job retraining and infrastructure investment, the senior official said.
The new numbers are a stark contrast to the surplus projections of Finance Minister Jim Flaherty’s economic statement, tabled Nov. 27, and show how quickly the government’s perception of the economy has been changing.
In November, the government foresaw surpluses of $800 million in 2008-09, $100 million in 2009-10 and $100 million in 2010-11. Those were to rise to $1.1 billion in 2011-12, $4.2 billion in 2012-13 and $8.1 billion in 2013-14.
On Wednesday, the Finance Ministry posted an update of Flaherty’s economic statement on its website that issued new budgetary projections based on fresh private sector forecasts. They indicated deficits of about $5 billion for 2009-10 and $5.5 billion for 2010-11.
“The level of nominal GDP is expected to be about $20 billion lower in each of the next two years. This suggests that revenues will be weaker than projected in the November statement,” the update said.
Tories ‘in deficit denial’ for weeks: opposition
On Wednesday, Flaherty acknowledged that Canada can’t withstand the turbulence in the global economy.
He said three factors are affecting the economy: falling world GDP; an American recession, which the U.S. National Bureau of Economic Research officially recognized on Dec. 1; and a drop in commodity prices.
But the opposition parties said it’s about time the finance minister admitted what they’ve known all along.
“Finally, they’ve come up with the truth,” Liberal finance critic John McCallum said. “They’ve been in deficit denial for weeks or months, and they’ve known this all along that there was a deficit.”
New Democrat MP Thomas Mulcair said the change in the figures means Flaherty has lost his credibility.
“Is there a problem or isn’t there?” Mulcair said from Montreal. “Of course there is, but he’s been denying it up until now and no one believes him anymore.”
While still projecting a small surplus for the current fiscal year, Wednesday’s update said that the “budgetary balance for the next two years would be about halfway between the average and low scenarios set out in the economic statement.”
Although the updated documents discuss specifically those two fiscal years, their charts suggest there would also be deficits for 2011-12 and 2012-13 of around $4 billion and $1 billion, respectively.
The government won’t see a surplus until the 2013-14 fiscal year, the update chart suggests.
The deficits are forecast to occur even if the government proceeds with billions of dollars in asset sales and cost cutting that it has proposed. The projections also don’t take into account any money spent for a stimulus package to boost the economy.
The federal government hasn’t run a deficit since 1996-97. In the 2006-07 fiscal year, Ottawa’s surplus hit $13.8 billion.
Source | See Also under Economics: Flaherty appoints business leaders to economic advisory council | IMF Chief Warns Of Riots In Response To Economic Crisis | Bank of Canada ready to monetize distressed equities | Canada may backstop ABCP rescue: Flaherty | The ugly spectre of ‘new Keynesianism’ and the self-appointed Guardians | Army ‘Strategic Shock’ Report Says Troops May Be Needed To Quell U.S. Civil Unrest | Federal government, Ontario agree on $3.3B auto bailout package |Ãƒâ€šÃ‚Â ‘Outrage’ greets banks’ failure to match rate cut | State to bail out, control US auto industry | Get close to Obama on economy and security, paper says |Ãƒâ€šÃ‚Â Financial Times: And now for a world government | Terence Corcoran: It’s Twilight for Detroit and the U.S. economy | Mexico to downsize metal in coins to save a few cents | Automakers seek $6B aid package from Ontario, federal government | Bank of England mulls “nuclear option” of cash injection |Ãƒâ€šÃ‚Â Zimbabwe tackles cash shortage amid riots and looting | Icelanders storm central bank in protest | Liberals and NDP sign unprecedented pact; to pursue stimulus, carbon taxes | UN Climate Change Conference open with call for ‘co-operation’ | UK closer to joining euro, EU commission president says | Iceland turns 90 amid economic ruin, currency freeze | TSX drops 600 points, N.Y. also falls | Britain buys control of Royal Bank of Scotland | Iceland inflation soars to 17.1% | Canada in recession: OECD | Maybe we should look at Zimbabwe before trying to print our way out of a money crisis |Ãƒâ€šÃ‚Â Britain to introduce massive stimulus package | Obama appoints architects of economic collapse, financial globalism to economic team | Jim Flaherty Urging Greater Federal, International Control over Canadian economy | Citigroup seeks ‘emergency cash’ | Deficits ‘essential,’ Harper says | Harper vows Canada will remain open to international trade | 5 injured during protest in Iceland over economic meltdown |Ãƒâ€šÃ‚Â ‘Hard decisions’ needed during economic crisis: throne speech |Ãƒâ€šÃ‚Â Paulson, Bernanke defend change of plan: $700-billion now to be given directly to banks | After G20 meeting, Ottawa ready to spend to spark economy |Ãƒâ€šÃ‚Â Congress Accuses Federal Reserve Bagman Of Bailout “Bait and Switch” During Angry Hearing | Flaherty eyes sale of Canadian government assets | Analysts Predict Hyper-Inflation To Push Gold To $2000, Oil to $300 | Terence Corcoran: Rescuers pulling market under | U.S. government won’t use bailout fund to buy troubled assets | Ottawa to pour another $50B into mortgage markets | Bank of Canada adds $8B to credit markets | Merrill CEO: Economic Environment Recalls 1929 | Fed Hides Destination Of $2 Trillion In Bailout Money | PM, premiers agree to speed up infrastructure investment | Flaherty lauds Keynesian global ‘economic stimulus’ strategies | Who are the Architects of Economic Collapse? | The Bush gang’s parting gift: a final, frantic looting of public wealth | IMF may need to “print money”, act as “world’s central bank” as crisis spreads | Morgan Chase Exec Brags Bailout Is for Takeovers, Restructuring, Not Lending | Draft letter calls on IMF to play critical role in financial crisis | Ottawa to guarantee interbank lending | More cash needed to save economy: Bernanke | Wall Street banks in $70bn staff payout | German parliament backs bail-out | Regulator says brokers failed on ABCP, sets new guidelines | US Bailout Cost Heads Towards $5 Trillion | Market Euphoria Dissipates | Loonie leaps, then reverses course | $25B credit backstop for banks ‘not a bailout’: Harper | Brown wants ‘global’ bank support | US considers following British example of taking stakes in banks | New World Order: Global co-operation, nationalisation and state intervention – all in one day | TSX closes up 226 points in wild day after rate cuts | Federal Reserve Moves to Monetize Commercial Paper Debts | Stocks recoup some losses after markets hit by panic selling | Star column blames ‘Capitalism’ for market woes, offers false choice: Authoritarianism or Socialism | Bank of Canada greases financial system with $12B in new cash | Stock markets drop despite bailout | Why Paulson’s Plan is a Fraud | Representatives Were Threatened With Martial Law In America Over Bailout Bill | Congress Rejects (First) Bail-Out Plan | Congressman Ron Paul: Bailout Will Destroy Dollar, World Economy | Paul Martin calls for ‘global solution’ | Markets sink as woes spread | UK banking shares plunge as crisis deepens | Congressman Ron Paul Schools Fed Chairman Bernanke on the Bailout Plan | Bailout is “petty cash”, Inflation is the Federal Reserve’s real crime | Private Federal Reserve Makes Power Grab as Bush, McCain Urge Congress to Approve Plan | Canadian Supreme Court refuses to hear appeal in ABCP case | Last major investment banks in U.S. change status | U.S., British market regulators ban short-selling | Next Federal Reserve bank bailout round could cost taxpayers 1$ Trillion Dollars | Bank of Canada piles on in global inflationary swindle | Central banks continue inflating global economy | Central Banks Move to Transfer Wealth from Taxpayers to Banks | Crisis on Wall St. as firms collapse | Goldman-Sachs Alumni Hold Reins of Financial System | Frontrunners emerge in scramble to save another major bank | Lehman Brothers on Verge of Collapse, Wall Street Fears | US Treasury nationalizes Freddie Mae, Fannie Mac | Cities Debate Giving Away Public Infrastructure to Bankers | Court Grants Big Banks Immunity from Lawsuits over Derivatives Losses | Bush Calls for New Highway Tolls, More Private Funding of Roads | US mortgage firm bailout includes rider clause to expand police state: all credit card transactions now to be reported to IRS | Global ‘liberalization’ illusion under threat. Economist calls for world economic regime, Keynesian saviour. Irony? | Federal Reserve cites global stakes in Fannie and Freddie rescue | Financial ’super cop’ role for Fed | What Really Killed Bear Stearns? | Soros points out regulated markets fail to operate on market fundamentals, calls for more regulation | Competition study calls for lowered barriers to foreign ownership, bank mergers | Massive overhaul urged on foreign investment in airlines, media, and banks | Bilderberg Seeks Bank Centralization Agenda | Secretive Bilderberg Group Reverses Policy, Releases Press Release and Attendance List | Banks face “new world order,” consolidation: report