What is wrong with the U.S. economy?

In classic Keynesian theory (the view basically espoused here), when the typical person's daily life improves, the economy is strengthened, corporate capitalism is strengthened, and the American system goes about its merry way. Jobs. Business formation. Innovation. Ingenuity. Efficiency. Rising revenue. Rising earnings. Rising incomes. Happy families.

But when the reverse occurs, the opposite is true.

I didn't always see things this way. But in graduate school, I detected a flaw in business management theory. Namely, that when labor costs go up, that's always bad for business and corporate earnings; and conversely, when they go down, that's always good. Further research and case studies would reveal that, in fact, once labor costs fall below a certain level, indeed very bad things happen to the economy. Among other negatives, the economy runs out of citizens with incomes adequate to sustain GDP growth, including revenue growth and earnings growth. Does this sound like any economy you know?