OTTAWA - Prime Minister Stephen Harper is suggesting the federal deficit, pegged at $85 billion over the next five years, could get bigger to fight the recession.
Harper told Quebec mayors Thursday that negative balance sheets will grow "as large as they have to" while the economy struggles to recover.
The remarks follow forecasts from public- and private-sector analysts warning that the deficit will balloon because the economy and tax revenues have plunged more than expected.
The prime minister now is dropping hints that figures from the federal Finance Department may get worse.
He said Canada can afford to run temporary deficits because of its relative fiscal strength compared with other countries.
"Our deficits will be large, but they will be temporary," Harper said. "In fact, in the short term they will be as large as they have to be, to help us weather the recession.
"As a country we can afford it. But only if these deficits are temporary and our stimulus spending ends when the recession ends."
He said Canada's debt-to-GDP ratio is the envy of developed countries, and that the country can afford a flurry of spending.
The Conservative government has projected a $34-billion deficit for 2009-10 and an $85-billion shortfall by 2013.
The parliamentary budget officer, Kevin Page, has already warned that the Conservative forecast is rosy, with the fiscal hole $9 billion larger than the government forecast.
The Toronto-Dominion Bank, one of the country's leading private-sector authorities on the budgetary implications of economic shifts, has gone even further than Page.
The bank says the deterioration in conditions since the January budget likely means the deficit could balloon an additional $17.5 billion during the first two years.
Although the budget does not give a figure for real GDP, the consensus forecast at the beginning of the year had been for a relatively modest 0.8 per cent decline in 2009.
The Bank of Canada now forecasts the economy will tumble a full three per cent.
Harper's speech Thursday outlined a multibillion-dollar transfer of infrastructure money to municipalities, promised in the recent federal budget.
He urged mayors, premiers and the federal government to work quickly to get construction projects going.
"These billions of dollars will not be available forever," Harper said. "The stimulus money outlined in our economic action plan will expire at the end of the recession."
Infrastructure dollars have barely begun trickling down to work sites.
Transport Minister John Baird acknowledged the government has handed out only about $15 million from a $4-billion Infrastructure Stimulus Fund announced in the Jan. 27 budget.
But while past infrastructure programs have taken years to get off the ground, he insisted the government is moving at an unprecedented pace.
"This action is 10 times faster than anything in recent history. We are moving as aggressively and as quickly as possible," Baird told the House of Commons government operations committee.
Under pressure from Liberal MP Martha Hall Findlay to detail projects that are underway, Baird was able to offer only a few examples of road work in British Columbia. Still, he said the number will "snowball" and promised a more detailed report next month.
Hall Findlay pointed to projects the government announced that are still not underway. And she expressed doubt that the trickle of money so far will turn into a stream for the summer construction season.
"This money simply has not flowed and we are not seeing shovels in the ground and announcements do not pay wages," she said.
