Canadian Finance Minister Pledges to Keep Deficit Spending Temporary

(CEP News – Christine Wong)

Canadian Finance Minister Jim Flaherty said Tuesday that although Ottawa will run a deficit in 2009, it will only be temporary.

“We’ll ensure we don’t create a structural deficit,” Flaherty told media after a Toronto event announcing extended contribution deadlines for the Registered Disability Savings Plan. “We’ll ensure (any) spending that puts us into deficit will be temporary.” He said the government specifically wants to avoid a fiscal situation seen in the 1970s and ‘80s, when he said excessive program spending only worsened the shortfall on the federal books.

Flaherty and Conservative Prime Minister Stephen Harper only recently moved from previous public pronouncements to avoid slipping into a deficit at any cost, with Harper telling CTV in a year-end interview the 2009 deficit will likely be about $30 billion.

Flaherty did not say how long Ottawa would be in the red, but said the government will lay out its plans for how it will get back into the black in the January 27, 2009 federal budget.

Flaherty said the issue of banks loosening their consumer lending practices will likely come up when he meets with the heads of Canada’s big five banks in a few weeks. For now, he said, the government plans to work with the banks on the issue rather than forcing a solution by legislative means. “We’ve been hearing concerns about access to credit. It’s a major concern going into 2009,” Flaherty said. “(We’ll) work with (the banks) to ensure (credit) is affordable and accessible.” Read more here.