If Keynesian economist Paul Krugman were in Canada right now, he would be drowning down a bottle of maple syrup with Prime Minister Justin Trudeau. Why? All of those broken windows.
Over the weekend, a masked mob of vandals calling themselves “The Ungovernables” went on a rampage near downtown Hamilton. In addition to damaging automobiles and setting off fireworks, they threw rocks at store windows. It is estimated that there was $100,000 worth of damage.
From CBC:
Police say a number of storefronts on Locke Street and vehicles were damaged by the group overnight. Police say there were no reported injuries.
“This is a criminal act, no doubt about it. It’s not a peaceful assembly of people obviously, so it’s being investigated as such,” said Hamilton police Insp. Paul Hamilton, who was duty inspector last night.
“Right now my estimate is that there’s 10 mischiefs occurred that we’ve located and that includes businesses along Locke as well as some vehicles in and around that area and the estimate is about $100,000 worth of damage,” said Hamilton.
Police say the group quickly dispersed upon arrival of the police, many discarding their clothing as they fled.
“We collected a number of pieces of evidence that were left behind and we’re going to continue to investigate with the hopes of laying some charges here,” said Hamilton.
But why would there be a police investigation? All of those thugs stimulated the local economy. Just think how many shopkeepers need to spend money to repair the broken windows and all of the other damage! Hamilton needed this. They are heroes.
This is a boon for Hamilton!
Or, so, that’s what the Keynesians would say.
If the economy was suffering from accumulated chronic underinvestment, shifting income from the non-rich to the rich would make sense. Underinvestment would mean there was a shortage of shopping centers, hotels, housing and factories were operating at 100% of capacity but still not able to produce as many cars and other goods as people needed. It might not seem fair, but the quickest way to build up capital is to take income away from the middle class who have a high propensity to consume and give to the rich who have a propensity to save (and invest). Except for periods in the 1950s and 1960s and possibly the 1990’s when tax rates on the rich just happened to be high enough to prevent overinvestment, the economy has generally suffered from periodic overinvestment cycles.
It is not just a coincidence that tax cuts for the rich have preceded both the 1929 and 2007 depressions. The Revenue acts of 1926 and 1928 worked exactly as the Republican Congresses that pushed them through promised. The dramatic reductions in taxes on the upper income brackets and estates of the wealthy did indeed result in increases in savings and investment. However, overinvestment (by 1929 there were over 600 automobile manufacturing companies in the USA) caused the depression that made the rich, and most everyone else, ultimately much poorer.
Since 1969 there has been a tremendous shift in the tax burdens away from the rich on onto the middle class. Corporate income tax receipts, whose incidence falls entirely on the owners of corporations, were 4% of GDP then and are now less than 1%. During that same period, payroll tax rates as percent of GDP have increased dramatically. The overinvestment problem caused by the reduction in taxes on the wealthy is exacerbated by the increased tax burden on the middle class. While overinvestment creates more factories, housing and shopping centers; higher payroll taxes reduces the purchasing power of middle-class consumers. …”
http://seekingalpha.com/article/1543642
Overinvestment didn’t cause the depression, neither did tax cuts. Rapid inflation and the inevitable correction caused the depression.
Lance, All you had to say is ‘I don’t understand economics’. I guess you had to prove why?