I said the Republican plan to increase employment by driving down wages was unnecessary, immoral, and unwise compared to the available alternatives. But as Paul Krugman points out, it’s also unworkable:
[W]hen you cut the price of everything — which is more or less what happens when wages fall across the board — there’s nothing else to substitute away from. […] Things are different for a country that shares a currency with other countries. Ireland can raise employment by cutting wages of Irish workers relative to German workers. But America, with its floating dollar, gains nothing — nothing at all — from overall wage cuts. All we get is a magnified real debt burden.
I stand corrected. Indeed, I fell into a form of the flawed analogy between a country and a household. On a national level, there’s nothing for US nominal wages to fall relative too. Our real wages can fall relative to real wages in other countries (and, indeed, this is happening as poor countries catch up), but nominal wages cuts don’t do anything except exacerbate debt problems.