Paikin drops tiny truth bomb

TVO’s Steve Paikin did an “ask me anything” session over at the excellent CanadaPolitics subreddit, mainly about the Ontario provincial election. There was some mildly interesting small talk about the leaders, nothing to write home about. This answer, however, gave me great satisfaction.


Hey Steve, welcome back to our humble subreddit, and thank you for doing another AMA. Transit expansion is now a household issue in the GTA, after perhaps decades of neglect. You have been around for a while, why do you think successive governments stopped investing in public transit after the 1970s or so?


they didn’t. the government from 1990-95 under bob rae’s premiership invested a lot in building new subways. the next government (1995-2003) under mike harris’ and ernie eves’ leadership decided in their wisdom we couldn’t afford to build those lines, so they filled in the holes. in hindsight, it was clearly a mistake, as we’re trying to build those same lines today, only at significantly more cost.

Nothing too fancy, just a simple fact that bears reminding people of. Harris’s decision to cancel the Eglinton line could serve as a textbook illustration of a “false economy.” More generally, the idea that public infrastructure is “too expensive” — in one of the richest cities, in one of the richest countries in the world, just defies all logic.



Paikin drops tiny truth bomb — 4 Comments

  1. “More generally, the idea that public infrastructure is “too expensive” — in one of the richest cities, in one of the richest countries in the world, just defies all logic.”

    I think conservatives (not me personally) would say that it’s the job of private enterprise to build infrastructure.

  2. Paikin’s correct, but there’s an additional factor to consider, one that’s simultaneously more boring and more heart-breaking… accounting rules.

    At some point in the 1970s, accounting practice in Canada stopped allowing governments to break up the cost of capital projects over the projects’ expected useful life, but instead insisted that projects be ‘paid for’ over the period of construction.

    As an example, imagine a hypothetical subway costing $100M that has an expected useful life of 40 years. Built in 1967, that project would appear on the government’s books as a $2.5M annual cost, beginning in 1967 and ending 40 years later. Built in 1987, under the new rules, that project would appear on the government’s books as a $100M cost in 1987 alone. That’s such a big hit that the government might flirt with deficit spending that year, which Must Not Be Borne, at least according to the post-Keynesian orthodoxy under which we still all suffer.

    Unsurprisingly, governments were especially unwilling to invest in infrastructure from about 1970 to about 2000, when public-sector accounting practice changed back to permit accrual accounting for public infrastructure, at least for infrastructure owned by the government. Thus the willingness of the Ontario government to invest in big transit projects that it, via its proxy Metrolinx, can own, such as the Eglinton LRT… but its comparative reluctance to invest in projects like TTC subway extensions. Projects it can’t own must be paid for on a cash basis, which means they are much less likely to be funded.

  3. Jordan: I think most conservatives understand why markets will not supply certain goods — I don’t think anyone is sitting around waiting for the private sector to build subways in Toronto.

    Andrew: very interesting. Anything written on this issue you would recommend?

    Brian: thanks, fixed.