OTTAWA - Canada is headed for a series of shocking federal deficits that will put the federal government more than $172 billion in the hole over the next five years, the TD Bank says in a new analysis.

The report Tuesday doubles the $85 billion total in deficits projected in the Conservative government's January budget and makes clear that it will take Ottawa at least six years to return to balance, not the four that had been anticipated.

Finance Minister Jim Flaherty called the new projections speculation.

"I'm sure different economists will have different views, but they (TD) are on the low side of the private sector forecasters right now," he said.

Liberal critic John McCallum noted TD Bank economists Don Drummond and Derek Burleton were ahead of the curve in publicly questioning the budget projections a few weeks after it was tabled in late January.

They forecast $40-billion shortfall before last week's admission by Flaherty that the deficit had ballooned to more than $50 billion.

"So far those who have been more negative have been more accurate," said McCallum, former chief economist of the Royal Bank.

"I think you have to believe in the tooth fairy to believe the government will be out of deficit in four years."

The TD report used most of the budget's estimates, with the glaring exception than it assumes a much slower rebound from the current deep recession.

Without commenting directly on the TD numbers, Bank of Montreal economist Douglas Porter also said that the budget's assumption of nominal gross domestic product growth above six per cent in years 2011 and 2012 was on the "upper end of what is believable."

Porter said the last time nominal GDP - which measures the value of what Canada produces and directly impacts government revenues - topped six per cent was in 2004 and 2005, when the global economy was booming.

The TD report sees nominal growth below the budget projections in each of the five years except one.

The difference is devastating, with revenues falling by $65 billion during the five year period over what the budget books.

The increase means the national debt will grow to $611 billion by 2012-2013 and more than wipe out nearly 15 years of debt reduction when the economy was growing rapidly and revenues were stronger.

It could also present future governments with tough policy choices - either cut spending on everything from social programs and industrial aid, or live with many more years of deficits - if the economy continues to stagnate.

Fortunately, years of debt reduction has left Canada in a strong position to swallow deficits, as both Flaherty and Prime Minister Stephen Harper have argued.

The International Monetary Fund said recently that Canada's fiscal position is so healthy, it could afford to increase its stimulus spending if the need arises. Even under the TD Bank scenario, the debt-to-GDP (gross domestic product) ratio rises to 36 per cent, about half of what it was in the mid-1990s.

The TD projections do agree with Flaherty's new estimate for this year's deficit at more than $50 billion, which is at least $16 billion more than estimated in the budget.

But that's where the agreement ends.

So far, Flaherty is sticking to the budget estimate of a $30 billion deficit in the next fiscal year, whereas TD says it will actually be more than $45 billion.

The discrepancy is even greater for 2011-2012, when the budget estimates a $13 billion shortfall and the bank a $28.3 billion deficit.

And far from returning to a small surplus in 2013-2014, the economists say Ottawa will still be $19.4 billion in the hole.

Burleton cautioned that the deficits are not as scary as the numbers suggest. He points out that in the last year of the projection, the deficit will only by 1.1 per cent of the size of the economy.

The other major discrepancy between the TD Bank and the Finance Department is when Canada emerges from deficit.

Ottawa says four years, while the TD Bank says at least six and maybe - even likely - more.

Under a scenario where the government slices spending to two per cent growth from 2012-2013 going forward, Ottawa still doesn't balance the budget until 2015-2016. Even if spending was cut to zero in those years, the balance still would take an extra year to return to balance than the budget estimates.

The report suggests both scenarios are unlikely.

"The goal of this simple exercise is to provide an indication of the extent of spending restraint that would be required in order to return to balance over the medium-to-longer term," the report explains.

"By comparison, annual program spending growth has been run at a trend rate of six-to-eight per cent since the late 1990s."

Burleton said the analysis doesn't try to cut spending to the bone before 2012-2013 because it assumes the economy will be too weak to allow any government to slash public expenditures.

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