An economics deficit.

The NYT has a pretty indicting editorial criticizing the President’s lack of leadership. For once we agree: the President is looking like a political amateur (when wasn’t he, though?) and Republicans are running all over him and his agenda.

Here’s an argument, however, that I don’t comprehend.

In the absence of presidential leadership, the Republicans have a much stronger hand. The dismal November jobs report, which showed that average wages grew by a Scrooge-like penny an hour and unemployment rose to 9.8 percent from 9.6 percent, made unemployment benefits a more valuable hostage. {emphasis mine}

An economics lesson:

Keynesians and Classicalists have pretty similar views on what wages are supposed to do. The end game is that the real wage — the nominal wage relative to the price level — should remain relatively stable. They disagree in how fast we get there. Classicalists believe wages adjust quickly and neatly, while Keynesians believe they are “sticky.” I am going to go out on a limb here and say the NYT editorial board is of the Keynesian persuasion. But regardless, wages SHOULD be stagnant right now. We have had almost no inflation, and likely had a couple of periods of falling prices. Economic theory suggests then that the equilibrium wage is roughly the same today as it was before the recession, and frankly, might ought to be less.

Even if you are a hardcore Keynesian and are used to reflexively saying that wages are trying to play catch-up, you have to ask yourself, “Catch up to what?”

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