The American economy is broken. And it's not likely that the Democrats, even if they do as well as expected in the 2008 elections, are going to fix it. Of course, there's no chance that the Republicans will either, wedded as they are to endless tax cuts.

The experience of the past decade makes clear the need for a sharply new way of thinking about the economy. The subprime mortgage crisis, although dangerous, is not the issue. It's not even the rising prospect of recession and lost jobs. The real problem is that even when the financial times have seemed to be healthy, the economy was not. Since the 2001 recession gross domestic product is up, profits are at record levels and unemployment is low--but wages, capital investment and, now, productivity are weak. Without these, there is little on which to build an economic future.

Wages for the typical male are actually down since 2001. The fabulous accrual of private fortunes comes at a time when a typical household's income is lower than it was in 1999, despite the many working spouses. And while subdued wages have enabled companies to generate soaring profits, capital investment in equipment and computer software has in recent years been significantly lower as a proportion of GDP than it was in the late 1990s.

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