Some giant American corporations depend on a buoyant American economy and a world-class industrial base in the United States. Others are far less dependent. What comes out of Washington in the next few years will reflect which group has most political clout -- especially if Republicans take over the House and capture more of the Senate this November.

The first group includes national telecoms like Verizon and AT&T that need a prosperous America because most of their sales are here. Same with finance companies like Bank of America and Travelers Insurance whose business strategy has been built around U.S. consumers. Ditto certain giant chains like Home Depot. Naturally, all these companies were especially hard hit by the Great Depression and its devastating impact on American consumers.

The second group includes companies like Coca Cola, Exxon-Mobil, Hewlett-Packard, Intel, and McDonalds, that get substantial revenues from their overseas operations. Increasingly this means China, India, and Brazil. Ford and GM are still largely dependent on US sales but becoming less so. GM sold more cars in China last year than in the US. Not surprisingly, American companies that are less dependent on American consumers have been showing the biggest profits.

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Word from the twelve Federal Reserve Banks, summarized in the Fed's so-called "Beige Book," shows the economy slowing in July and August.

Duh.

But the Fed is quick to point out the economy overall is still growing -- even though it's growing more slowly than in the spring.

Can we have a moment of realism here, please?

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President Obama reportedly will propose two big corporate tax cuts this week.

One would expand and make permanent the research and experimentation tax credit, at a cost of about $100 billion over the next ten years. The other would allow companies to write off 100 percent of their new investments in plant and equipment between now and the end of 2011 at a cost next year of substantially more than $100 billion (but a ten-year cost of about $30 billion since those write-offs wouldn't be taken over the longer-term).

The economy needs two whopping corporate tax cuts right now as much as someone with a serious heart condition needs Botox.

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Welcome to the worst Labor Day in the memory of most Americans. Organized labor is down to about 7 percent of the private work force. Members of non-organized labor -- most of the rest of us -- are unemployed, underemployed or underwater. The Labor Department reported on Friday that just 67,000 new private-sector jobs were created in August, which, when added to the loss of public-sector (mostly temporary Census worker jobs) resulted in a net loss of over 50,000 jobs for the month. But at least 125,000 net new jobs are needed to keep up with the growth of the potential work force.

Face it: The national economy isn't escaping the gravitational pull of the Great Recession. None of the standard booster rockets are working. Near-zero short-term interest rates from the Fed, almost record-low borrowing costs in the bond market, a giant stimulus package, along with tax credits for small businesses that hire the long-term unemployed have all failed to do enough.

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The Great Jobs Depression continues to worsen.

The Labor Department reports this morning that companies created ony 67,000 new jobs in August. That's down from the 107,000 they created in July. And because the government laid off temporary Census workers, the economy as a whole lost 54,000 jobs.

To put this into perspective, we need 125,000 net new jobs a month just to keep up with the growth of the population and the potential workforce.

Think of it this way. The number of Americans willing and able to work but who cannot find a job hasn't stopped growing since the start of 2008. All told, about 22 million Americans are now jobless. Add in those who are working part-time who'd rather be working full time, and we're up to 25 million.

And because most families depend on two paychecks, the practical impact is almost double.

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What passes for business reporting in the United States is too often a series of breathless reports about the stock market. When the Dow rises precipitously, as it did today (Wednesday), the business press predicts an end to the Great Recession. When the stock market plummets, as it did last week, the Great Recession is said to be worsening.

Pay no attention. The stock market has as much to do with the real economy as the weather has to do with geology. Day by day there's no relationship at all. Over time, weather and geology interact but the results aren't evident for many years. The biggest impact of the weather is on peoples' moods, as are the daily ups and downs of the market.

The real economy is jobs and paychecks, what people buy and what they sell. And the real economy -- even viewed from a worldwide perspective -- is as precarious as ever, perhaps more so.

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I have the questionable distinction of appearing on Larry Kudlow's CNBC program several times a week, arguing with people whose positions under normal circumstances would get no serious attention, and defending policies I would have thought so clearly and obviously defensible they should need no justification. But we are living through strange times. The economy is so bad that the social fabric is coming undone, and what used to be merely weird economic theories have become debatable public policies.

Tonight it was Harvard Professor Robert Barro, who opined in today's Wall Street Journal that America's high rate of long-term unemployment is the consequence rather than the cause of today's extended unemployment insurance benefits.

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Can the Fed rescue the economy by making money even cheaper than it already is? A debate is being played out in the Fed about whether it should return to so-called "quantitative easing" - buying more mortgage-backed securities, Treasury bills, and other bonds - in order to lower the cost of capital still further.

The sad reality is cheaper money won't work. Individuals aren't borrowing because they're still under a huge debt load. And as their homes drop in value and their jobs and wages continue to disappear, they're not in a position to borrow. Small businesses aren't borrowing because they have no reason to expand. Retail business is down, construction is down, even manufacturing suppliers are losing ground.

That leaves large corporations. They'll be happy to borrow more at even lower rates than now -- even though they're already sitting on mountains of money.

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The public doesn't understand specific policies but it does understand stories that link them together. The stories give the policies context and meaning, and thereby show where policymakers are taking a nation (and, by implication, where the opposition would take it).

Republicans lack specific policies but they have a story. Obama and the Democrats have lots of specific policies but don't have a story. That spells even more trouble for Democrats.

The Commerce Department reported today (Friday) that the economy grew only 1.6 percent in the second quarter, which is a fancy way of saying what everyone on Main Street already knows. The economy has stalled. Unemployment is still in the stratosphere and shows no sign of improving. The housing market is worsening.

Why? What to do? The Republican story is simple. It's the fault of government. They say Obama's policies have bankrupted the nation and made businesses too uncertain to create jobs. The answer is less government. Cut taxes and spending, privatize, and deregulate.

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We're moving ever closer to a double-dip. Of course, as I've said before, most Americans never got out of the first one.

In previous postings I've suggested ways to reverse course, including a "people's tax cut" exempting the first $20K of income from payroll taxes and making up the revenue loss with a payroll tax on incomes over $250,000.

Yet Democrats seem frozen in the headlights of conservative supply-siders, blue-dog deficit hawks, and pollsters who say the public doesn't trust anything government does.

As to Republicans, now comes John Boehner, capitalizing on this distrust by blaming the bad economy on government bureaucrats.

In an address billed as a major speech on economic policy, the House GOP leader yesterday (Tuesday) attributed our economic woes to the fact that "taxpayers are subsidizing the fattened salaries and pensions of federal bureaucrats who are out there right now making it harder to create private sector jobs."

What?

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Republicans are calling the Democrat's proposal to end the Bush tax cuts on the richest 3 percent a "tax increase," and demagoging that it will hurt the economy and small business. This is baloney, to put it politely. Let me count the ways:

- Bush's ten-year tax cut was designed to end this year, so it's not a tax increase.

- Ending it for the rich simply returns them to the Clinton tax rate, which was hardly confiscatory (reminder: the Clinton years were damn good for business).

- Small businesses would barely be affected. Only 3 percent of small business owners earn over $250,000. And because it's a "marginal" tax, the Clinton rate would apply only to the portion of their incomes over $250,000.

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Connect the dots:

Many Americans (and politicians who the polls) don't want a mosque at Manhattan's Ground Zero.

An increasing percent believe the President is a Muslim.

Most Americans approve of Arizona's new law allowing police to stop anyone who looks Hispanic and demand proof of citizenship.

Most would deny citizenship to children born in the United States to parents who are here illegally.

Where is all this coming from?

It's called fear. When people are deeply anxious about holding on to their homes, their jobs, and their savings, they look for someone to blame. And all too often they find it in "the other" - in people who look or act differently, who come from foreign lands, who have what seem to be strange religions, who cross our borders illegally.

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America's biggest -- and only major -- jobs program is the U.S. military.

Over 1,400,000 Americans are now on active duty; another 833,000 are in the reserves, many full time. Another 1,600,000 Americans work in companies that supply the military with everything from weapons to utensils. (I'm not even including all the foreign contractors employing non-US citizens.)

If we didn't have this giant military jobs program, the U.S. unemployment rate would be over 11.5 percent today instead of 9.5 percent.

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The decline of America's middle class can be charted directly. In the three decades after World War II, the median wage (smack in the middle) grew rapidly, right along with productivity gains. Even as late as 1980, the richest 1 percent of Americans received only about 9 percent of the nation's total income.

But starting in the 1980s -- and increasingly since then -- the economy has made the rich far richer without doing squat for the vast middle. The median hourly wage has barely grown, if you take inflation into account. Indeed, it dropped in the last so-called "recovery" between 2001 and 2007. And health-care and pension benefits have declined; we've gone from defined-benefit pensions to do-it-yourself pensions, while health insurance premiums, deductibles, and co-payments have skyrocketed.

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Washington's latest answer to the worst jobs crisis since the Great Depression is $26 billion in aid to state and local governments. This still leaves the states and locales more than $62 billion in the hole this fiscal year. And because every state except Vermont has to balance its budget, the likely result is 600,000 to 700,000 more state and local jobs vanishing over the next 12 months (including private contractors and other businesses that depend on state and local governments) according to the Center on Budget and Policy Priorities. Say goodbye to even more of the teachers, firefighters, sanitary workers, and police officers we depend on.

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