The CBO also deals with the effects of transfer payments and federal taxes. Some or all of these theories and observations may have elements of validity. Others besides the CBO have offered explanations. I think there may be more elemental explanations.

Here are a few of my impressions. For decades, it has become more difficult to construct plants in the United States. In part, this has been due to new regulations and environmental law suits. In the forestry business for instance which I know well, whole communities in the Northwest have been devastated. In addition to job losses in forest, paper and packaging products, there have been significant negative impacts in extracted natural resources and in manufacturing. Many good paying jobs have been lost and the composition of the economy has shifted more towards the financial and service sectors. Job growth has been in smaller businesses, many of which have not paid as well as larger businesses.

There are major concerns about the employment prospects and incomes of most Americans. To some degree, this may be associated with the structure of the economy shifting from natural resource and industrial strengths to an orientation towards finance and services. The label made in the U. S. A. is becoming harder to find Income appreciation (life chances) has been exported, and others elsewhere in the world are benefitting from what the United States has lost. Prior to business moving operations outside of the United States, ‘rust belt” states have lost out to “sun belt” states for a variety of reasons. Foreign businesses locating facilities in the United States tend to prefer Sun Belt states. The reasons go far beyond concerns about right to work states in my opinion.

More recently, the purchasing power of the U. S. dollar has weakened as debt has increased, trade imbalances developed, and dependence on imports (including energy) increased. This is eroding the economic viability of the United States, and the prospective life chances of its citizens. If the other economies of the world were stronger, there might be a rush by foreign companies to acquire U. S. assets.

For decades, we have known that savings rates in the United States have been well below needed levels. Many governments (federal, state, local and foreign), businesses and families have become excessively leveraged (owe more money than they are able to service and/or repay). In the U. S., this became visible as the housing price bubble burst exposing the lack of equity in homes and the inability of many borrowers to pay their mortgages and other debts. Many higher risk home loans are related directly or indirectly to governmental policy initiatives. As loans became riskier, the financial sector invented financial instruments to spread the risk associated with these types of loans, especially subprime, variable rate mortgages. Spreading the financial risks through various forms of derivatives was not able to deal with the deep recession associated rise in unemployment; the inability of people to pay their mortgages; and the widespread collapse of housing values. Most of these securities were bought by sophisticated financial institutions which chose to take risks to gain rewards. They made very bad investments, and the financial sector’s foundations were severely shaken. While governmental interventions helped stabilize the financial institutions, most attempts at addressing this situation have been ineffective.

The underclass (especially in inner cities and rural areas) has existed for decades. It continues to struggle. Most programs to assist the underclass have been in the form of social safety net policies, and little has been done to address the root causes. No meaningful policies have been initiated to change of the economics of inner cities and rural areas. Consequentially, life chances for most members of the underclass remain bleak, even though there are a small number of remarkable success stories associated with people who have escaped and have become successful.

In addition to lower labor rates elsewhere in the world and other inducements, the United States’ complex tax code as it developed may have encouraged companies to locate facilities outside of the United States and not repatriate foreign earnings. At the very least, the United States must have tax rates which are competitive with other world competitors in order to retain and attract new businesses. Trade agreements need to be examined for fairness. Domestically, policies can be developed and initiated to encourage the redevelopment of inner cities and rural areas.

The United States educational system gets the blame for much of what has gone wrong. I suspect that this is a convenient target that takes attention away from the unwillingness to deal with more fundamental economic, cultural, social and personal issues. Social and economic mobility is still possible, but it is becoming increasingly difficult for larger numbers of people. Until and unless we address the fundamental problems challenging the economy, a rigorous recovery is unlikely. Life chances can be enhanced for the vast majority of Americans if the core issues are addressed. In my view, this will help address serious problems including concerns about income inequality