OTTAWA - Down periscope!

The Harper government dove for economic and political cover Tuesday with a federal budget that submerges Canada in a sea of red ink after more than a decade of clear fiscal sailing.

Finance Minister Jim Flaherty presented a spending blueprint that projects $85 billion in deficits by the spring of 2013, when Flaherty hopes Canada's finances can come up for air from a suffocating global recession.

Across-the-board income tax cuts amounting to roughly $2 billion a year were the final conservative stabilizer bolted to a rambling, make-shift budget the Conservatives had been releasing piecemeal for days with unprecedented candour.

While the Bloc Quebecois and NDP immediately torpedoed the blueprint, Liberal Leader Michael Ignatieff kept his powder dry.

Liberal MPs met Tuesday evening and Ignatieff said he'll announce Wednesday whether he will bring down the minority government.

But he hinted the opposition coalition threat has served its purpose: "The government has responded to the combined pressure of the opposition parties and those results are positive."

In a remarkable document for the ostensibly centre-right government of Prime Minister Stephen Harper, the budget exerts Ottawa's influence on everything from multibillion-dollar credit markets to whether to build a new deck on your cottage.

"Deciding whether and how to spend the resources of our fellow Canadians is one of our most serious responsibilities," Flaherty told the newly returned House of Commons in his budget speech.

"In this extraordinary time in our history, it is also one of our most urgent responsibilities."

So urgent, said the government, that Canada has already fallen into deficit for the first time since 1996-97 and will post a $1.1-billion shortfall for the current fiscal year that ends March 31.

It's just the first of five consecutive deficits, according to Finance Department projections. And the $84.9 billion in cumulative deficits will reverse more than four fifths of the national debt repayment Canadians have managed over the past decade.

The sobering news comes barely three months after an election campaign in which Harper flatly dismissed the possibility of a recession or short-term deficits, and exactly two months after an economic statement that projected balanced books.

Program spending will leap 10.7 per cent to $229 billion in 2009-10, up from roughly $207 billion this year, then rise another 3.2 per cent in 2010-11 before falling slightly the following year.

In the meantime, Ottawa's ballast gates are wide open:

-There's money for social housing, aboriginals, high-speed Internet networks, home retrofits and cultural projects.

-There's cash for bridges and highways, for parks and promoting tourism, for railways and Arctic research.

-There's government credit support for automobile leasing and business IT expenditures, and there are improvements to employment insurance and job retraining programs.

Among the few details saved for the actual budget release was some taxpayer eye candy: A modest increase in the basic personal exemption that will help all tax filers; and raising the upper limit of the two lowest personal income-tax brackets.

It's all part of a bid to meet "the challenge of our time," said Flaherty - not to mention the challenge of Canada's 40th Parliament.

A Liberal-NDP coalition, backed by the Bloc, was prepared to defeat the Harper government before Christmas after Flaherty delivered an economic update that proposed slashing government spending, selling off assets - and no economic stimulus.

Tuesday's Tory do-over got short shrift from the Bloc and NDP, with each claiming the big-spending budget reflects Harper's "ideology."

"Nothing in there to obtain our support," sniffed Bloc Leader Gilles Duceppe.

NDP finance critic Thomas Mulcair said the budget provides federal stimulus of only 0.7 per cent of GDP, not the 1.9 per cent that Flaherty touted in his budget speech. Flaherty's figure combined both federal and as-yet unknown provincial expenditures.

"There's no way the NDP can support this document," said Mulcair.

But few observers think the Liberals will sink the Tories over such an ecumenically airtight blueprint.

Ignatieff signalled as much in his initial reaction.

"There are some developments in this budget that would have been unthinkable before Christmas," he said.

Kevin Dancey, CEO of the Canadian Institute of Chartered Accountants, said all budgets are political documents and this one is acutely so.

"It almost says, 'I want to get passed"' said Dancey.

For all its red ink, the Conservative budget may also be overly optimistic.

"There will be no long-running or permanent deficit," Flaherty promised, but soon after added a major qualifier.

"While our projections are based on the best possible information, we cannot guarantee them absolutely."

Derek Holt, senior economist at Scotia Capital, said the government is banking on a short, sharp recession followed by a rapid recovery, a trend-line he and some other private sector economists don't share.

"The $700 million surplus they have (forecast) five years out faces a downside risk if they don't get as quick and sharp a recovery as they're predicting," said Holt.

That's economist-speak for: don't hold your breath waiting for the return of surplus budgets.

Kevin Page, Parliament's independent budget officer, issued a report last week that projected deficits could total as much as $105 billion over the next five years.

"We are in uncharted waters," Flaherty told reporters inside Tuesday's budget lockup.

"The economists have been wrong in their predictions. All of the so-called experts continue to become more pessimistic in their forecasts. Things could get worse and if they get worse, we'll do more."

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