My recent "Government Retrenchment" post produced record feedback on and off line, both positive and negative and very representative of the highly partisan and charged political environment. Folks against government stimulus say enable the private sector to create jobs by cutting taxes and spending. They reject that stimulus has stanched even greater unemployment and financial market crisis and they would like to see reduced government programs leading to lower taxes and smaller deficits.

This supply-side Kool Aid still sounds awfully good-who doesn´t want to pay less taxes? But this elixir has failed miserably-the private sector hasn´t created enough new jobs despite the last decade of federal tax cuts, low interest rates, and increased spending. In fact, we´ve suffered a jobs creation deficit over the past decade. And wages and benefits have stagnated for most Americans who still have jobs.

The problem facing America and ultimately the health of real estate markets doesn´t have to do with the convenient red herrings of high taxes and government spending-albeit government deficits loom as an increasing threat. The intractable problem that no politician wants to talk about or face up to is America is the world´s highest cost labor market in an increasingly competitive global marketplace-people in other parts of the world produce what we do for less because they get paid a lot less than American workers. Bleeding of jobs overseas started decades ago in manufacturing, but now extends to various white collar service and technical jobs across virtually all industries. And the firms moving these jobs overseas are our largest employers-big multinational U.S. companies who can increase profits and raise their stock prices as a result of worker shifts to lower cost overseas labor markets. These employers include not only manufacturers, but also major financial institutions, accounting firms, and technology companies.