Posted by WARREN MOSLER on July 26th, 2011
Couple of things.
First, corporations currently have low propensities to spend their income, so this means we need a deficit that much larger than otherwise.
Second, this goes back to the ‘labor market’ not being what’s called a ‘fair game’.
That’s because people have to work to eat, while business only hires if it can make a desired rate of profit. So game theory tells us that real wages will stagnate without some form of external support:
Economists at Northeastern University have found that the current economic recovery in the United States has been unusually skewed in favor of corporate profits and against increased wages for workers.
In their newly released study, the Northeastern economists found that since the recovery began in June 2009 following a deep 18-month recession, “corporate profits captured 88 percent of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1 percent” of that growth. The study, “The ‘Jobless and Wageless Recovery’ From the Great Recession of 2007- 2009,” said it was “unprecedented” for American workers to receive such a tiny share of national income growth during a recovery.