Schieffer: The fact is, the Congress has been in session since January and it's done basically nothing.

Pelosi: Well you can talk to Mr. Boehner about that.

Schieffer: So it's all their fault. It's not your fault.

Pelosi: Well no, they set the agenda. We have said every day that they're there another day goes by and there's no jobs agenda or jobs bill that has come to the floor. But again, it's about how we can work together to go forward. These issues are bigger than politics, they're bigger than elections. They're about the country that we will live in. And what we will see as we go forward is one vision of America that's encompassed in the Republican budget plan that abolishes Medicare, that makes college unaffordable for nearly ten million young people in our country, that takes us deeper into debt and does not create jobs, or you can talk about an agenda that talks about making it in America, investing in American education, innovation and that's what campaigns are about.

Aggregate private sector balance sheet contraction makes it impossible for the private economy to generate profits on its own. This point isn’t taught in economics 101, but it’s a fact. To sustain profits (essentially, businesses’ rise in wealth) the economy as a whole has to keep increasing its wealth, which is impossible if private balance sheets aren’t expanding. Total assets must be increasing solidly, and liabilities must be rising to finance these increases: no debt creation, no asset creation, no wealth creation, and no profits. The last time the private sector deleveraged was in the early 1930s: wealth creation turned negative, the entire business sector suffered an operating loss and the economy crashed. In the present, milder episode, the rate of wealth creation is the weakest since the second world war.

But there is a way to support profits during private sector deleveraging. This is through very large government deficits, which pump wealth from the public sector into the private economy. Profits have roared back over the past two years because the federal government is using debt to supplement private purchasing power, boosting businesses’ revenues relative to expenses.

“Over the last two years since President Obama has taken office, the federal government has added 200,000 new federal jobs and if some of those jobs are lost in this, so be it. We’re broke!” Boehner exclaimed. “It’s time for us to get serious about how we’re spending the nation’s money.”

We can’t really do much more to realistically lower firms’ costs, and that’s not the problem anyway–businesses know damn well that investing right now would be a complete waste of time (as were QEI and QEII, incidentally, because they were aimed at lowering borrowing costs–that was never the problem). Sales aren’t going to be brisk when 13.5 million of your customers are unemployed and many more underemployed or discouraged. That is the major obstacle to economic recovery.

The government’s plan? More layoffs and wage reductions. This is supposed to encourage entrepreneurs to take the risks about which they are reluctant at the moment. If that seems illogical to you, it’s because it is. It’s sheer lunacy.

What we saw from 2011Q1 is just a taste. It’s going to get much worse. The private sector needs the injections of income that will create profits for those entrepreneurs and induce them to invest. Instead, we are about to further impoverish their potential customers.