The federal deficit will soar to more than $50 billion this fiscal year, setting a dubious record far eclipsing the bad old deficit days of the early 1990s.

Finance Minister Jim Flaherty announced Tuesday that the government's shortfall will be more than $16 billion higher in 2009-2010 than he forecast in January's budget.

"We will run a substantial short-term deficit this year which I would estimate at more than $50 billion," Flaherty said.

"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."

The massive revision comes just a month after Flaherty said he was not changing his forecast.

Government had touted surpluses

January's federal budget predicted five years of deficits with a shortfall of $64 billion over the next two years — a figure that will now climb to more than $80 billion.

Just two months before that, the government was touting years of surpluses in its fall economic update.

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 recession has hurt government revenues from personal and corporate taxes and raised spending requirements.

Parliamentary budget officer Kevin Page had said the budget forecast was too rosy. He released a report in March predicting it 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.

During Tuesday's question period in the House of Commons, NDP Leader Jack Layton said the record deficit was the result of the Conservatives' "reckless" tax cuts for banks and big oil companies.

"The Conservatives have now created the largest deficit we’ve seen in the history of Canada, worse than Brian Mulroney’s, for heaven’s sakes, and what [have] they got to show for it? Four-hundred-thousand people thrown out of work," Layton told the House.

In response, Prime Minister Stephen Harper said one of the reasons for the growing deficit is because of all the assistance the government has provided to unemployed Canadians through EI and retraining.

He noted Layton was willing to drop his demands to reverse the corporate tax cuts to enter in a potential coalition government with the Liberals late last year.

"We have the opposition parties … coming in and saying, ‘Well, the deficit is too large, why don’t you spend more?’" the prime minister said, pointing to the other side of the House.

"Mr. Speaker, what is absolutely clear, during the last election and every day since, is that there’s not a person over there that has a single clue what to do about the economy."