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OTTAWA–The federal government’s projected budget deficit this year ballooned because of the unexpectedly fierce economic storm that hit Canada in early 2009, says Finance Minister Jim Flaherty.

"The recession in the first half of this year has been deeper and broader than was anticipated by the private sector economists and (than) was anticipated by us," Flaherty told the House of Commons finance committee today during a discussion of the Conservatives’ economic strategy.

Between January and June, Flaherty’s predicted budget shortfall for this year rose to $50.2 billion from $33.7 billion. But he told the committee that the larger budget deficit was the result of necessary pro-growth spending during the economic downturn.

Flaherty noted that the government is supplying $9 billion in loans to bail out the auto sector and an additional $2.8 billion for benefits to the unemployed in 2009-10.

Liberal MP John McKay told Flaherty the issue is not whether the spending was worthwhile but "the enormity of your error" in projecting Ottawa’s fiscal position creditscores. McKay said the size of the deficit overrun "completely erodes" the finance minister’s credibility.

Flaherty defended the government by pointing out that the Liberals have been demanding additional spending, which would make the deficit even larger. "So the hypocrisy is breathtaking," he said in reference to McKay’s point.

Flaherty also insisted that, because a lot of this year’s spending is a one-time payment, the government will still be able to end its deficit-financing in 2013 as planned. But the Liberals said that, given the size of the current $50.2 billion deficit, it’s unrealistic to think Ottawa can return to budget surpluses in only four years.

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