The minister's remarks came on another bleak day on equity markets in Europe and Canada amid continuing fears over the pace of economic growth and the possibility of a sovereign debt default by Greece.
Flaherty acknowledged the seriousness of the situation, but said he was holding his course for now.
"If we had some sort of world recession, that would change the picture dramatically," Flaherty said of the government's approach.
"But I'm relatively confident that what we're going to see in Canada is modest economic growth over the next little while. I'm comfortable ... with that anticipation for the next little while."
Flaherty said he was willing to throw overboard plans to balance the budget in four years if a slump hit Canada and more stimulus spending were needed.
Economists were generally supportive of the approach, but said Flaherty would be prudent to prepare to spring into action. The Conservatives were widely criticized in the fall of 2008 for waiting too long to acknowledge the recession and clinging to the notion of a balanced budget, a position that nearly resulted in the fall of the minority government.
"I think the risks of a downturn in North America are serious enough that the government should definitely have a Plan B," said economist Douglas Porter of BMO Capital Markets.
"Infrastructure spending is one of the most effective short-term stimulus measures a government can use, but it takes time to get it going and that's why we should be studying a Plan B right now."
Opposition parties again attacked the government in the House for its wait-and-see stance, saying Canada needs stimulus now.
"There's not anybody out there who doesn't understand not only is there a storm coming, we're in the middle of a storm," said Liberal leader Bob Rae.
NDP finance critic Peggy Nash said Flaherty is throwing money at corporations who don't need it and won't create jobs, while ignoring measures that could put more Canadians back to work.
Ottawa is slated to reduce the corporate tax rate 1.5 points to 15 per cent in January at a time when businesses are sitting on $500 billion in profits, Nash said.
"They are going ahead spending billions of dollars recklessly to give more money to corporations with absolutely no proof that will create jobs. Companies are not investing because they are uncertain about the economy," not because of high taxes, she said.
Flaherty did table legislation Tuesday to give small businesses up to a $1,000 credit for new hires. But at the same time Ottawa has scheduled in payroll tax hikes for employment insurance in January.
Meanwhile, the government is going ahead with plans to trim departmental spending by $4 billion a year. Since most stimulus measures expired in March, government spending is now acting as a drag rather than a boost to economic growth.
Even if there is no official recession, Flaherty concedes the economy will grow more slowly than anticipated. That in itself may result it taking longer than four years to get the budget back to balance.
Economists have downgraded growth projections for this year and next by as much as a full point below the March budget estimates of 2.9 and 2.8 per cent. A rule of thumb is that a one-point drop in gross domestic product will reduce government revenues by $3 billion to $4 billion.
"If growth is a bit below target, Ottawa might allow the resulting drag on revenues to slow the one-year progress on the deficit a bit," said CIBC chief economist Avery Shenfeld.
Flaherty said the current crisis in Europe is evidence enough that he is right to hold the line on spending.
"The lesson of Greece and some other countries in Europe is that accumulating deficits and creating a large public debt over time is the worst thing you can to an economy and to the people of a country and we have no intention in going (in) that direction."
Still, the minister expressed frustration that European leaders are not moving decisively to resolve the Greek crisis.
"We have advocated for flexibility with respect to the size of facility (emergency fund) that the eurozone has agreed to create, and we think that's important ... (to) overwhelm the situation," he said.
"It is time for the eurozone countries to deal with that situation," he added.
At the moment, uncertainty is the enemy, said Porter, sapping confidence and Canadian household wealth tied to the stock market. The Toronto exchange has lost more than 20 per cent of its value since August, and the sell-off continued Tuesday, shedding close to 400 points at one point before recovering to a more modest 74-point loss at the close.
As well, with the global economy slowing, demand is falling for Canadian oil, copper, grain, chemicals, wood and other resources that have underpinned the export sector for years.
That will likely lead to weaker job growth, making it more difficult for Canada's 1.4 million officially unemployed to get jobs and pushing the 7.3 per cent unemployment rate higher.