The federal government has leaked its 2009 deficit figures: Canada faces a $34 billion deficit this year with more to come.
These deficit numbers imply the federal government’s stimulus package on January 27 may not be big enough and fast enough to adequate protect Canadians from recession.
“The numbers leaked yesterday point to the fact that the government has already failed the test of delivering an adequate stimulus” says Canadian Centre for Policy Alternatives Senior Economist Marc Lee. “Now Canadians will suffer higher unemployment and more hardship than need be the case.”
Canada is expected to run a $14 billion dollar deficit in 2009 without stimulus. Yesterday’s leak of a $34 billion deficit suggests a stimulus package of approximately $20 billion or slightly more than 1% of GDP.
While a $34 billion deficit in 2009/10 sounds large, Canada’s economy is also twice the size it was in the early 1990s.
Once again, Canada is out of step with the rest of the world.
The Canadian stimulus package of 1% of GDP is only half of the 2% that is being called for by the IMF, the OECD and already tabled by many European governments. Both the United States and China have significantly exceeded this target.
Of all the countries in the G7, Canada has the lowest debt burden and is the most able to utilize deficit spending. Unfortunately, while we’re the best positioned, our government seems the least inclined to act aggressively to protect its citizens from coming job losses.
The CCPA has released its Alternative Federal Budget (www.policyalternatives.ca), proposing a stimulus approximately twice the size of the implied government one. It would leave Canada with the lowest debt burden (debt to GDP) ratio in the G7. It would also create 470,000 jobs and buffer Canadians from the worst of the coming recession.
-- David Macdonald, Alternative Federal Budget coordinator for the Canadian Centre for Policy Alternatives