The deficit's increase came as no surprise as the Conservatives predicted it as early as January budget. January’s budget predicted a deficit of $64 billion over the next five years. That prediction has been revised upwards to approximately $80 billion.
$50 Billion Tops Mulroney Era Deficit
This year’s deficit tops the previous record set by Brian Mulroney in 1992-93 of $39 billion. In his January budget Finance Minister Jim Flaherty forecasted a deficit of $34 billion. According to Flaherty the $16 billion increase was due to the recession. In remarks published on ctv.ca he admitted the recession was stronger than anticipated: “We are going through a deeper economic slowdown than anticipated.”
The money given to the auto industry contributed to the higher deficit. The federal government has given approximately $7 billion so far to the three automakers. Some experts predict it could grow to around $10 billion.
In comments published on ctv.ca Flaherty attributed increase in the amount of Canadians seeking Employment Insurance: “Government sources say half of the deficit is a result of falling revenues and having to pay people more unemployment insurance.” Provinces hit by unemployment include Alberta where it increased by 131% and 80.5% in British Columbia. Since October national unemployment has climbed by 36.2%.
The deficit is the highest in recorded Canadian history. Flaherty presents a full economic update to Parliament in June.
Opposition’s Reaction To $50 Billion Deficit
According to ctv.ca the Liberals reacted to Flaherty’s announcement with a news release of their own. The release hinted Prime Minister Stephen Harper could raise taxes in order to deal with the deficit. The exact wording: “Stephen Harper admitted he will not introduce another budget until we need to raise taxes.”
The NDP critic (New Democratic Party) Thomas Mulcair weighed in for his party. In comments published by Stockhouse he insisted that if Canada wanted to get out of the recession the government should start being honest: “If we want to get out of this mess, the government’s got to start telling the truth.”
Employment Insurance (EI) is the other big issue. The Liberals have proposed a plan that would standardize the amount of time workers need to wait in order to receive benefits. In comments published on ctv.ca, Harper defended his government’s record: “When we did our pre-budget consultations the Liberal Party wanted two more weeks of unemployment insurance. So we did five more weeks, plus all kinds of additional money for training for people both on EI and not on EI.”
His comments continued defending the predicted deficits as affordable and short-term.
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