Deficits could remain until 2019-20: economist
Last Updated: Thursday, July 16, 2009 | 3:33 PM ET
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The federal government could wind up running deficits until its 2019-20 fiscal year if it chooses to rely on economic expansion to get out of the red, according to a report released Thursday.
Dale Orr of Economic Insight said the government's current forecast of being out of deficit by 2013-14 is not feasible. Orr expects the country will still be running a $17-billion deficit that year.
Orr said the country's deficits will top $10 billion through the federal government's 2015-16 fiscal year if it opts not to increase taxes or cut spending.
"We tried to grow our way out of deficits before and got knocked off base in 1980, 1981 and it was 1997 before we balanced the budget," Orr said.
"Do Canadians really want to pass on that much debt to their children? This is like a sea-change in Canadians' thinking about deficits from where they were a year ago, and [Harper's] own party's thinking."
Orr said that under a plan to grow out of deficits, the country's debt-to-GDP ratio would go to a peak of 35 per cent in 2011 before declining to 27 per cent in 2019-20, which is just under it current position.
Orr characterized those debt ratios as modest, relative to other countries.
Last week, Finance Minister Jim Flaherty said a prediction from parliamentary budget officer Kevin Page — that Canada will add $156 billion in debt over the next five years and has a deficit that will be hard to erase without special measures — is flawed and overly pessimistic.
In the report, Page said the deficit will still be $16.7 billion in the fiscal year 2013-14, and there will be a structural deficit — one that requires tax increases or spending cuts to address — of about $12 billion.
The federal government had projected a surplus of $700 million for 2013-14 in its Jan. 27 budget. It expects that when the federal stimulus spending ends, largely by 2011–12, "the budget balance will improve sharply starting in 2011–12, with a return to surplus in 2013–14."
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