Flaherty says deficit to soar to $50 billion

Finance Minister Jim Flaherty says the federal deficit will balloon to $50 billion this fiscal year, an increase of more than $16 billion from a January forecast.

It's believed to be the highest federal deficit ever.

"We will run a substantial short-term deficit this year which I would estimate at more than $50 billion," Flaherty said Tuesday. "We are going through a deeper economic slowdown than anticipated."

He added that "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."

Ottawa Bureau Chief Robert Fife said the recession has hammered away at government revenues.

"Government sources say half of (the deficit) is a result of falling revenues and having to pay more people unemployment insurance, and the rest of that money is the result of the auto bailout," he told CTV News Channel.

Flaherty hinted yesterday that the deficit would be "substantially more" than the government projected in January's 2009-2010 budget.

The initial deficit forecast was $34 billion. But Flaherty said that government revenues have been hit harder by the recession than expected.

In January, the government also forecast a $30-billion deficit for 2010-2011, and more deficits in the following three years.

Flaherty will give a full update in June when he presents his fiscal update to Parliament, but with 681,400 Canadians now collecting Employment Insurance, the government's fiscal situation will continue to face challenges in the coming months.

The number of Canadians collecting EI has climbed by 36.2 per cent since the economic meltdown began hammering labour markets in October of last year.

That rise includes a surge of 131 per cent in Alberta and nearly 80.5 per cent in British Columbia, the two provinces which led the nation in economic growth for much of the past half decade.

The Liberals were quick to launch an attack after Flaherty's revelation Tuesday, saying Prime Minister Stephen Harper suggested he may have to raise taxes to deal with the soaring deficit.

"Today at 2:23 pm in the House of Commons during Question Period, Prime Minister Stephen Harper admitted that he will not introduce another budget "until we need to raise taxes," the party said in a press release.

Harper, responding to a question about employment insurance, said in full: "When we did our pre-budget consultation, the Liberal party wanted two more weeks of employment insurance.

"So, we did five more weeks, plus all kinds of additional money for training for people, both on EI and not on EI.

These are measures to help the unemployed in this recession. What we're not going to do is every two or three months come up with another economic policy, another budget, until we need to raise taxes.

Our deficits are affordable but they will remain short-term."