Federal deficits to total $156 billion, job losses to mount

The recession will sink the federal government into a $155.9-billion hole over the next five years and cost hundreds of thousands of Canadians their jobs, the parliamentary budget officer predicts.

The projections are close to double the accumulated $84.9-billion deficit over five years estimated by the January budget, and appears to contradict the government's contention that it has a cyclical deficit that will disappear with the slump.

Page's analysis suggests the deficit is now structural - meaning the government will have to take action by reducing spending or raising taxes to get back to balance - and that job losses will be greater than expected.

"Although there is a high degree of uncertainty surrounding estimates of potential output and structural budget balances, the PBO's calculations suggests that the budget is not structurally balanced over the medium term," the report states.

While the deficit numbers are not a total shock - some economists have predicted worse - it's in the area of jobs, or the number that will disappear over the next five years, that Page's report breaks new ground.

The budget officer's average projection is for 257,000 fewer Canadian jobs this year than estimated in the budget.

For next year, the discrepancy rises to 329,000 fewer jobs, and even in the years 2011-2014 - when the recession is expected to be but a painful memory - there are expected to be between 100,000 and 380,000 fewer Canadian jobs each year than the government assumes.

"It's clear the Harper government has mismanaged the economy. They gave away huge corporate tax cuts and reduced the capacity of the federal government to have the funds necessary to deal with the crisis," said NDP Leader Jack Layton.

McCallum also cited Page's assessment in a release that the numbers show the government has a structural deficit as evidence the government has fumbled the economy.

"There is no credible plan to dig Canada out of the hole," he said.

In other economic developments, the Conference Board of Canada issued a new report card on Canada placing it a lacklustre 11th in a ranking of the world's 17 richest countries in 2008, unchanged from the previous year.

Canada, with a "B" grade on its performance, "remains near the back of the class among its peer countries," the Conference Board said.

"We cannot take for granted that Canada will come through the recession better than its peers," it added, noting that Canada is still lagging on key indicators of sustainable economic growth.""


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