Canada's parliamentary budget watchdog is warning that the federal government is at risk of wiping out the last 11 years of debt payments due to the massive deficits forecasted for the next five years.
Parliamentary budget officer Kevin Page issued the economic and fiscal brief in advance of the highly anticipated Jan. 27 budget, in which the Conservatives are expected to table a $40 billion deficit.
Page estimates that Canada will rack up at least $46 billion in debt over the next five years, and possibly as much as $105 billion.
Canada has paid down about $105 billion in federal debt since 1998.
Liberal finance critic Scott Brison said the report highlights the Conservatives' fiscal mismanagement.
"The Conservatives' irresponsible spending and inability to protect Canada's economy in the event of a recession have diminished our ability to respond to the current economic crisis and demonstrates their mismanagement of the economy," he said.
Making matters worse, is that that $46 billion in debt is "status quo" debt - and does not include the massive economic stimulus package that the Tories are expected to table next week. That package is expected to be in the $20 to $30 billion range.
The pre-budget report is only estimating a $13-billion deficit in this year's budget, far below what Prime Minister Stephen Harper has indicated.
Page told CTV's On the Hill Wednesday nearly all forecasts for 2009 predict a retraction in the Canadian economy.
Page's report also says that an economic rebound is not expected until 2010, which leaves open the potential for more economic stimulus packages in the future.
The report says that Canada is headed for a structural surplus of about $6 billion a year because of permanent tax cuts and new spending by the Conservatives.
"Rough estimates indicate that the Government has a structural surplus of about $6 billion -- though more work needs to be undertaken in this area," the report says. "Thus, any permanent fiscal actions (e.g., permanent tax cuts or permanent spending increases) exceeding $6 billion annually would likely result in structural deficits, limiting the Government's ability to manage future cost pressures due to, for example, population ageing."
Page warned that Canada needs to "stay away from structural budgets."
"We need to be mindful of some of the longer-term issues," he told On the Hill. "There's an aging demographic that is going to put a lot of pressure on our finances five, 10 years out."
"We want to maintain as close as possible a structural balance."
