This cynical approach to national economic policy is compounded by Congressional fear and demogogary on debt and deficits as opposed to serious consideration of sustainable economic growth. Yet, it is uncommon to read that deficit spending should continue until full employent is reached…4%-5%.

We have a Congress and a White House over populated with economic illiterates. No one understands that public sector deficits equal to the penny net financial assets in the private sector.

Here’s the full proof.http://wallstreetpit.com/8568-the-sector-financial-balances-model-of-aggregate-demand/

As such, and most importantly, the economy’s financial flows are a closed system, so one sector’s deficit is another’s surplus, and vice versa.

If one approaches the problem as one of full employment or “excess demand for labor,” then it is hard to avoid casting a critical glance at the role of immigration, both legal and illegal. Since W was inaugurated in Jan 2001, the U.S. economy has not created any private sector jobs, but more than 10 million legal immigrants have entered the country and there are al least 10-20 million more here illegally. These people want jobs that aren’t being created and must therefore depress wages.

This means that mass immigration, especially of unskilled workers, will conflict with other policy goals — such as increasing the incomes of American workers. The NYT will never say so outright, but they believe that America’s most important policy goal is the evacuation of Central America. They cannot admit that any legitimate policy goal would conflict with that.

So Mr Leonhardt and colleagues may list immigration as one of 14 possible causes of lagging incomes, but they cannot deal with the issue honestly. The Times has its priorities.

Just as Apple has “an app for that:” economists have an “equation for that.” What equation makes wages rise in graduate-school economics models? The “excess demand for labor” equation. “More jobs than workers” makes wages rise. “More workers than jobs” makes wages fall. So as long as you have “More workers than jobs,” workers’ incomes go down. Everything else in the model may influence the “excess demand for labor equation,” but without a positive “excess demand for labor,” wages never rise. Anything that causes jobs to increase faster than the number of workers may be an “ultimate cause” of wage increases, but only “more jobs than workers” can make wages rise. Of course, everything that causes the number of workers to grow faster than the number of jobs causes wages to fall.

Leonhardt’s explanation of why the Times didn’t include “full employment” as an explanatory variable is fraught with obvious contradiction. His ostensible criterion, “Full employment is not a lever by which to change the economy, as are trade policy, education and the other items on our list” does not apply to several items on the list; an “demographic changes” (aging workforce), “changing family structures,” an “innovation plateau,” and “changing cultural norms” are not policy levers.

And some of the 14 items have a very ambiguous effect on aggregate labor demand. “Improving labor productivity” (automation and computers) is usually considered a necessary precondition for wage increases. In fact, this is very well captured in the inconsistency of the NYT list of 14. Number 1 on the list is “automation and computers” and Number 10. “An innovation plateau.” So paychecks are decline in the NYT views both because of too much innovation and too little innovation.

It is the view of a small animal that can only see its local world and does not grasp the larger system they live in. This is the same animal that created cargo cults and sacrifices to the sun.

//so it goes

You’re absolutely right. The lack of full employment is why factory orders haven’t gone way up. People are buying things, but only when they can or when they must absolutely have them. This goes for food, gas, personal items, all the way up to big ticket items.

Then, as another poster mentioned, the unions have taken huge hits, especially in red states. The Obama administration helped lower the wages of Auto workers as a part of the bailout. While this might have been a necessity, and maybe even a prudent concession at the time, with today’s hindsight and looking at unionized labor as a whole, it probably wasn’t the smartest move.

Lastly, and in support of your main point, the economy did add quite a bit of jobs in the private sector over the last four years. Had the states been given more help and not shed so many workers (teachers and other state workers), how much better off would we be right now?

He includes global competition as a factor – that another way of saying a higher supply of labor without a corresponding increase in demand.

Including computers and automation misses the point entirely. These raise productivity and national income. The problem is workers are not sharing, due to their lack of bargaining power in the face of increased supply of available labor (unemployment and global competition) as well as declining unions (also on his list)