Business
Don’t be fooled by high-speed rail
From the Frontier Centre for Public Policy
Rail advocates admit that trains can’t compete with airliners over long distances or with cars over short distances but claim there is a middle distance – supposedly around 150 to 800 kilometers – in which rail has an advantage over its competitors. That would be true only if the trains were almost 100 percent subsidized.
The Canadian government is considering spending $6 billion to $12 billion to introduce what it calls “high-frequency trains” between Toronto and Quebec City. Though some media reports have described these as high-speed trains (which generally means trains capable of going 250 kilometers per hour), they won’t be. Building such a rail line would easily cost $60 billion and probably much more.
Passenger-train advocates argue that Canada needs to join the international race to have the fastest trains in the world. But this is a race Canada can afford to lose because the country has something that is faster and far less costly: jet airliners.
High-speed trains were already obsolete in 1964, when Japan started operating its first bullet trains. Six years before that, Boeing had introduced the 707 and Douglas the DC-8, both of which cruised four times faster than the early bullet trains and twice as fast as the fastest trains in the world today.
Aside from speed, airliners also have a huge cost advantage because they don’t require a lot of expensive infrastructure between cities. While airports are infrastructure, the only infrastructure airliners really need are paved runways and perhaps a Quonset hut for ticket agents, baggage handling, and a waiting room—which is all that some of Canada’s more remote airports have.
Today’s big-city airports with huge concourses, shops, and jetways were built up over time and mostly paid for out of ticket fees. In contrast, rail advocates want taxpayers to put up tens of billions of dollars before a single wheel turns in the hope that trains that are slower than flying, less convenient than driving, and more expensive than both will somehow attract a significant number of travelers.
Rail advocates admit that trains can’t compete with airliners over long distances or with cars over short distances but claim there is a middle distance – supposedly around 150 to 800 kilometers – in which rail has an advantage over its competitors. That would be true only if the trains were almost 100 percent subsidized.
Air Canada and its competitors currently offer more than three dozen flights a day between Toronto and Montreal with fares starting at $118, less than 25 cents per passenger-kilometer. Fares on VIA Rail Canada averaged 68 cents per passenger-kilometer in 2022, and more than half of its costs are subsidized. People are simply not going to ride high-speed trains in large numbers if those trains cost far more than airlines, buses, or driving.
Amtrak’s only high-speed train, the Acela, collected fares of CN$1.80 per passenger-kilometer in 2022, and while Amtrak claims it covers its operating costs, all of its infrastructure costs are paid for by taxpayers. Amtrak brags that it carries more passengers in the Washington-New York corridor than the airlines, but cars and buses in this corridor carry well over 10 times as many intercity passengers as Amtrak.
The other argument rail advocates make is that high-speed trains will offer shorter downtown-to-downtown times than airlines in some markets. But most people neither work nor live downtown. Toronto and Montreal each have three commercial airports and residents are more likely to be near one of those airports than downtown.
Finally, rail proponents claim that high-speed trains will emit fewer greenhouse gases than cars or planes. But as usual they ignore the construction costs—that is, the billions of kilograms of greenhouse gases that would be emitted to build a high-speed rail line. It is likely that operational savings would never recover this cost, especially since it would be far less expensive to power jets and automobiles with biofuels.
One thing is certain: building high-speed or even high-frequency rail will require lots of workers. Far from being a benefit, Canada is currently suffering a labour shortage that is not expected to end soon. If the government decides to spend billions on a rail line, it will only make the costs of housing, cars, and just about everything else rise even faster.
China, Japan, and Spain have practically wrecked their economies by spending too much on high-speed trains. Just because other countries are foolishly building high-speed rail lines doesn’t mean Canada should do so any more than the country should spend billions on other obsolete technologies such as telegraphs, electric typewriters, or slide rules. Taxpayers should tell the government not to waste money on such boondoggles.
Randal O’Toole is a transportation policy analyst and author of Building 21st Century Transit Systems for Canadian Cities. (20 pages) March 12,2024.
MxM News
Quick Hit:
During Wednesday’s Cabinet meeting, Treasury Secretary Scott Bessent said the U.S. is prepared to move forward with a minerals agreement with Ukraine. President Trump has framed the deal as a way to recover U.S. aid and establish an American presence to deter Russian threats.
Key Details:
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Bessent confirmed during a Cabinet meeting that the U.S. is “ready to sign this afternoon,” even as Ukrainian officials introduced last-minute changes to the agreement. “We’re sure that they will reconsider that,” he added during the Cabinet discussion.
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Ukrainian Economy Minister Yulia Svyrydenko was reportedly in Washington on Wednesday to iron out remaining details with American officials.
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The deal is expected to outline a rare earth mineral partnership between Washington and Kyiv, with Ukrainian Armed Forces Lt. Denis Yaroslavsky calling it a potential turning point: “The minerals deal is the first step. Ukraine should sign it on an equal basis. Russia is afraid of this deal.”
Diving Deeper:
The United States is poised to sign a long-anticipated rare earth minerals agreement with Ukraine, Treasury Secretary Scott Bessent announced during a Cabinet meeting on Wednesday. According to Bessent, Ukrainians introduced “last minute changes” late Tuesday night, complicating the final phase of negotiations. Still, he emphasized the U.S. remains prepared to move forward: “We’re sure that they will reconsider that, and we are ready to sign this afternoon.”
As first reported by Ukrainian media and confirmed by multiple Ukrainian officials, Economy Minister Yulia Svyrydenko is in Washington this week for the final stages of negotiations. “We are finalizing the last details with our American colleagues,” Ukrainian Prime Minister Denys Shmyhal told Telemarathon.
The deal follows months of complex talks that nearly collapsed earlier this year. In February, President Trump dispatched top officials, including Bessent, to meet with President Volodymyr Zelensky in Ukraine to hammer out terms. According to officials familiar with the matter, Trump grew frustrated when Kyiv initially refused U.S. conditions. Still, the two sides ultimately reached what Bessent described as an “improved” version of the deal by late February.
The effort nearly fell apart again during Zelensky’s February 28th visit to the White House, where a heated Oval Office exchange between the Ukrainian president, Trump, and Vice President JD Vance led to Zelensky being removed from the building and the deal left unsigned.
Despite those setbacks, the deal appears to be back on track. While no public text of the agreement has been released, the framework is expected to center on U.S.-Ukraine cooperation in extracting rare earth minerals—resources vital to modern manufacturing, electronics, and defense technologies.
President Trump has publicly defended the arrangement as a strategic and financial win for the United States. “We want something for our efforts beyond what you would think would be acceptable, and we said, ‘rare earth, they’re very good,’” he said during the Cabinet meeting. “It’s also good for them, because you’ll have an American presence at the site and the American presence will keep a lot of bad actors out of the country—or certainly out of the area where we’re doing the digging.”
Trump has emphasized that the deal would serve as a form of “security guarantee” for Ukraine, providing a stabilizing American footprint amid ongoing Russian aggression. He framed it as a tangible return on the billions in U.S. aid sent to Kyiv since the start of Russia’s 2022 invasion.
Business
New federal government plans to run larger deficits and borrow more money than predecessor’s plan
Fr0m the Fraser Institute
By Jake Fuss and Grady Munro
The only difference, despite all the rhetoric regarding change and Prime Minister Carney’s criticism of the Trudeau government’s fiscal approach, is that the Carney government plans to run larger deficits and borrow more money.
As part of his successful election campaign, Prime Minister Mark Carney promised a “very different approach” to fiscal policy than that of the Trudeau government. But when you peel back the rhetoric and look at his plan for deficits and debt, things begin to look eerily similar—if not worse.
The Carney government’s “responsible” new approach is centered around the idea of “spending less” in order to “invest more.” The government plans to separate spending into two budgets: the operating budget (which appears to include bureaucrat salaries, cash transfers and benefits) and the capital budget (which includes any spending that “builds an asset”). The government plans to balance the operating budget by 2028/29 (meaning operating spending will be fully covered by revenues) while funding the capital budget through borrowing.
Aside from the fact that this clearly complicates federal finances, this “very different” approach to spending actually represents more of the same by continuing to pursue endless borrowing and a larger role for the government in the economy.
The chart below compares projected annual federal budget balances for the next four years, from both the 2024 Fall Economic Statement (FES)—the Trudeau government’s last fiscal update—and the 2025 Liberal Party platform. Importantly, deficits from the 2025 platform show the overall budget balance including both operating and capital spending.
Let’s start with the similarities.
In its final fiscal update last fall, the Trudeau government planned to borrow tens of billions of dollars each year to fund annual spending, with no end in sight. Based on its election platform, the Carney government also plans to run multi-billion-dollar deficits each year with no plan to balance the overall budget. The only difference, despite all the rhetoric regarding change and Prime Minister Carney’s criticism of the Trudeau government’s fiscal approach, is that the Carney government plans to run larger deficits and borrow more money.
In the current fiscal year (2025/26) the Trudeau government had planned to run a $42.2 billion deficit. The Carney government now plans to increase that deficit to $62.3 billion. Trudeau’s most recent fiscal plan forecasted annual deficits from 2025/26 to 2028/29 representing a cumulative $131.4 billion in federal government borrowing. Over that same period, the Carney government now plans to borrow a cumulative $224.8 billion.
The Carney government’s fiscal plan does include a number of tax changes that are expected to lower revenues in years to come—including (but not limited to) a personal income tax cut, the elimination of the GST for some first-time homebuyers, and the cancelling of the planned capital gains tax hike. But even if you exclude these factors from the overall budget, the Carney government still plans to borrow $52.9 billion more than the Trudeau government had planned over the next four years.
By continuing (if not worsening) this same approach of endless borrowing and rising debt, the Carney government will impose real costs on Canadians. Indeed, 16-year-olds can already expect to pay an additional $29,663 in personal income taxes over their lifetime as a result of debt accumulation under the previous federal government, before accounting for the promised increases.
One of the key promises made by Prime Minister Carney is that his government will take a different approach to fiscal policy than his predecessor. While we won’t know for certain until the new government releases its first budget, it appears this approach will continue the same costly habits of endless borrowing and rising debt.
Jake Fuss
Director, Fiscal Studies, Fraser Institute
Grady Munro
Policy Analyst, Fraser Institute
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