Following's Wednesday's 244-188 House vote -- one in which, despite President Obama's efforts to cultivate Republican ideas, every House Republican voted against it -- the focus on the stimulus package shifts to the Senate, where plan revisions are likely.

Assuming Senate passage, any differences between the two versions would have to be resolved in a conference committee.

Republicans are complaining that the bill has too many traditional Democratic-constituency-based programs and 'pork,' while some Democrats are concerned the bill does not contain enough spending - - in particular infrastructure spending, to create jobs the U.S. economy needs. The U.S. economy lost more than 2.6 million jobs in 2008 -- including 1 million in the past two months -- and the nation's unemployment rate has soared to 7.2%.

One of the biggest misnomers in the current fiscal stimulus debate concerns the United States' ability to service its budget deficit and national debt (pdf).

Provided the fiscal stimulus package is passed, the national debt ceiling will increase to $12.1 trillion from the current $11.3 trillion.

Deficit approaching intolerable levels?

Economic conservatives, market absolutists, and the like argue that the annual budget deficit and national debt are approaching intolerable levels. In truth, what they're arguing against is a needed government intervention and New Deal-type spending required to jump-start the U.S. economy -- even if it means the economy will plunge into a deeper recession without the stimulus. It seems some economic conservatives would rather see the nation's economy suffer, than to violate one their flawed economic theories.

Readers of this space know that a preferred tactic, stemming from the graduate school years and schmoozing with economists and policy wonks is to 'take the other side in an argument' or 'argue the alternate point-of-view.'

Well, one argument forwarded by economic conservatives, market absolutists and others is that the proposed fiscal stimulus package will be 'inflationary' and that it 'won't stimulate the economy.'

Arguing to the contrary...

Economist Peter Dawson took up the above argument, but only because BloggingStocks required him to do so (Ah, the power of the press!).

"A stimulus package that's both inflationary and that won't stimulate the economy," Dawson said. "Hmm? The logic is a little curious here, because inflation implies that there's demand and economic growth, and a failure to stimulate the economy implies there's very little demand and hence very little or no economic growth. The conclusions contradict, so what do the economic conservatives say the stimulus is going create, demand or no demand? I'll leave it for them to clarify their argument."

New York Times (NYSE: NYT) columnist Thomas Friedman in his latest column and again Tuesday night on 'The Charlie Rose Show' returned to his theme of the U.S. effort at nation building.

Nation building, that is, at home. Friedman, among others, has underscored the need for the nation to begin, in a comprehensive way, to rebuild its dilapidated and/or outmoded infrastructure that includes its electric grid, highways, roads, bridges, mass transit systems, schools and other public buildings.

Further, one doesn't have to be a civil engineer or a mechanical engineer to see that the nation's infrastructure has been neglected, and while at times Friedman's discourses on the gleaming magnificence of yet another high tech airport in Asia can begin to grate, his overall conclusion regarding a period of pronounced underinvestment in U.S. public assets is valid.

'Action' is a two-edge sword

Friedman wants 'radical' action, i.e. bold action by President Obama to make up for lost time, infrastructure-wise, and he believes 'Obi 44' has a rare opportunity to act in a big way, given the economic crisis facing our nation, his high public approval rating, and the general desire of public officials across the spectrum to see him succeed.

Can the U.S. government run $1 trillion budget deficits for two, three years? Indeed it can, Financial Times columnist Martin Wolf argues, and the deficits can even be higher, for a while. After that, there's more work ahead.

The specter of $1 trillion budget deficits may be vociferously opposed by Republicans and other economic conservatives, but Wolf, in so many words, says what other choice does the United States have? What would be the alternative? Simultaneously raising taxes now to lower the deficit? Hardly prudent. Doing nothing? Another dreadful idea. So, it's prime the pump, or sit there at the well and await nothing.

Up ahead: two bigger tasks

What's more, Wolf sees two additional tasks (structural changes) that are just as important to the goal of U.S. economic recovery -- but that may be even harder to implement: removing toxic assets from the banking system and reducing the U.S.'s structural current account deficit (the trade deficit).

The first is the forced write-off of bad assets, fiscal recapitalization of the banks, or debt-for-equity tactic, and it should be done comprehensively and quickly. Slow, gradual bad-debt reduction is not the correct policy, Wolf argues, as it would delay the economic recovery.

It's not as bad or as large as it looks is how one economist put it, but try convincing U.S. taxpayers of that.

The U.S. budget deficit soared to a record $485.2 billion in the federal government's fiscal first quarter, (October-December 2008), the U.S. Treasury Department announced, as the government implemented its financial system stabilization plan.

The December 2008 budget also increased to $83.6 billion from $48.3 billion a year ago.

Further, the deficit is on-track to total more than $1 trillion this year, fiscal 2009. The Congressional Budget Office (pdf) is projecting a $1.2 trillion deficit for the current fiscal year.

In addition, the $485.2 budget record for fiscal Q1 already exceeds last year's budget deficit for the full year of $454.8 billion.

With the U.S. economy in recession and getting weaker by the month, and with the financial system stabilized but credit conditions hardly ideal, the United States over the next few months will embark on policy initiatives that are likely to be historic.

Both fiscal and monetary policy will be used. The incoming Obama Administration is expected seek approval from the new U.S. Congress of a record $700-$850 billion fiscal stimulus package. Meanwhile, the U.S. Federal Reserve will continue with its quantitative easing plan, including $500 billion in purchases of mortgage/asset-backed securities instruments as part of its effort to improve credit market liquidity.

The need for stimulus: incontrovertible

The above initiatives will forward a pair of numbers that some Americans will undoubtedly find hard to imagine, let alone accept: a budget deficit for this year and the next of at least $1 trillion and a Fed balance sheet rising past $2.5 trillion. Most economists argue that the actions are needed to jump-start a U.S. economy that shows almost no signs of pulling out of its deepest and longest recession in decades: corporate earnings are forecast to decline, job losses continue at an alarming rate, with unemployment rising.

President-elect Barack Obama has provided the outline for his 2009 fiscal stimulus package, and a legitimate question for investors is: "Hey, how am I going to benefit from the plan as an investor?"

I'll systematically review the Obama plan as individual programs are specified, but for an overall critique, read an article by my BloggingStocks colleague Peter Cohan, who provided a good axis by which investors can evaluate the merits of Obama's stimulus plan. Cohan argued for stimulus components that serve as investments, as opposed to those that are just costs.

For example, most investors are aware of the poor condition of the nation's roads, highways, and bridges, not to mention its inadequate (and in some cases dilapidated) mass transit systems. Infrastructure work is a top priority in the Obama stimulus plan, and one can see how better highways, roads and transit systems will enhance commerce by making travel faster and safer. Further, electric grid and solar/wind power work also is included in this category: most know that the electric grid must be expanded, and made smart to meet the needs of our growing, dynamic nation, and that alternative energy source development will make the U.S. less-dependent on foreign oil.

What would make the strongest case for a large fiscal stimulus package - - upwards of $1 trillion for infrastructure, energy, education programs, and for aid to the states, for a new electric grid, for the building of hospitals, schools, for improved water and sewerage systems, for the biggest build-out in the United States since the Great Society?

Investors could probably think of dozens, but economist David H. Wang has a compelling one: the condition of the U.S. consumer himself / herself, or what Wang calls the "consumer's dilemma."

Has the U.S. economy changed?

Now Wang proceeds with the assumption that the U.S. consumption-based economy will largely continue. If one disagrees with that premise, then Wang's thesis is mute moot, and we then also have a different U.S. economy that will require very different prescriptions to achieve sustainable growth.

But let's, for the sake of argument, assume that the consumer-based economy - - one that historically has accounted for roughly 60-65% of U.S. GDP - - is not going the way of the Edsel. That creates Wang's "consumer's dilemma." Namely, the U.S. economy requires the consumer to spend (buy things) to grow at capacity, but consumers have already consumed at too high a level for too long - - in some cases saving nothing at all -- and hence many will now increase their rate of savings to begin to make up for their many years of inadequate savings.

It looks like tomorrow could very well become yet another 'brace yourself Friday' or another edition of 'As The U.S. Economy Turns.'

Still, hopefully it won't become a new rendition of 'down goes the Dow' with another visit by our old friend, you guessed it - - Dow 8,000. But analysts and economists haven't ruled the latter out.

The reason? The December 2008 jobs report, to be released by the U.S. Labor Department at 8:30 a.m. EST.

December jobs data won't be pretty

President-elect Barack Obama, D-Illinois, and House Speaker Nancy Pelosi, D-California, said they are bracing for a 'sobering' jobs report, Reuters reported.

Sobering is one way to lower expectations: economists surveyed by Bloomberg News expect the December 2008 jobs report to show a loss of 500,000 jobs. If that occurs, the U.S. economy will have shed more than 2.5 million jobs in 2008 and a staggering 1 million jobs in the last two months alone, November / December 2008. It would also make 2008 the largest job loss year for the United States since World War II.

Economist Peter Dawson told BloggingStocks economists are becoming "very concerned" for two reasons. First, a trend line for job cuts has increased for more than six months. Second, ADP's (NYSE: ADP) private sector job report showed the loss of a staggering 693,000 jobs, and even though the ADP report has not correlated well with the Labor Department report, it still is setting off alarm bells in economists' circles.

Those investors, including market absolutists, who interpret the current economic state-of-things as just a typical downturn that a few tax cuts and some good, old-fashioned, free market-based supply side economics can solve, may want to stop reading the economic data points in the months ahead. At least, that's the view of one economist.

Nouriel Roubini, the once obscure New York University economics professor, who two years ago predicted the current global financial crisis and recession, said the worst is still ahead for the U.S. economy and for economies around the world.

"In the next few months, the macroeconomic news and earnings reports from around the world will be much worse than expected," Roubini wrote in a column for Bloomberg News, adding that the aforementioned will put downward pressure on prices of risky assets.

Further, Roubini said the U.S. economy will remain in recession through at least the end of 2009, with only a mild recovery starting in 2010 -- with GDP growth in the initial recovery year of 1%. For 2009, Roubini also forecasts continued recessions for the United Kingdom, euro zone, Japan and Canada. Russia will also fall into recession, as will Brazil, and China will experience a hard landing, with growth slowing to 5%, he said. India's economy also will slow substantially.

No one likes a budget deficit, but run a deficit - - and a large one - - the U.S. must, and for two years, due to the depth and seriousness of the U.S. recession, so says an economist.

"We will likely have to run $1 trillion deficits for each of the next two years in order to provide adequate fiscal stimulus for the U.S. economy," economist David H. Wang told BloggingStocks Wednesday.

A large problem requires a large stimulus

What's driving the need for a large fiscal stimulus? The worst consumer and business demand conditions in more than 25 years, Wang said. "Every major demand factor in the economy...consumer, business, and capital investment, is retreating. The demand has to occur somewhere, and if the U.S. government does not create it, the recession with lengthen and deepen."

The U.S. recession, which began in December 2007, is already in its 14th month and there's no end in sight, based on leading economic indicators or economic fundamentals. One tell-tale stat: the job market. Or should one say, the 'non-job market.' ADP (NYSE: ADP) announced Wednesday that private employers cut another 693,000 jobs in December 2008. Meanwhile, many economists expect Friday's U.S. Labor Department job report to show a 500,000-job loss in December 2008. If it does, then the U.S. economy will have lost at least 2.5 million jobs in 2008.

Wang said continued monthly job losses above 200,000 would indicate to him "that the economy is entering a vicious cycle of corporate revenue declines, job lay-offs, decreased demand, leading to further corporate revenue declines - - that must be avoided."

Financial Times columnist Martin Wolf argues that the current financial crisis and global recession is best viewed through a Keynesian lens, and it's the lens of a pragmatist.

Wolf sees three Keynesian themes, or lessons, that policy makers would be wise to heed.

Keynes: Markets are essential, but not perfect

The first: if you expect markets to be self-correcting and self-policing, there's trouble up ahead. Wolf: Mistakes occur, even among those who were following standard operating procedure. A market filled with bankers -- or other participants -- following standard operating procedures that were flawed leads to ... what we have today, pretty much -- a global recession and constrained credit.

The second: It's o.k. for a corporation to become more efficient, but it's not necessarily a good thing if a society or nation (or world) does so all at once. This reinforces one of Keynes's tenets: It's a good thing to have consumers amass savings, but if everyone saves everything all the time it would be a disaster.

Or, for the globalization version of the above, economist Richard Felson told BloggingStocks: "We need people in the United States to save more money, but if people in Europe, China, India, Japan, Brazil and Russia do the same thing simultaneously, the global economy will remain in a recession for a very long time."

What could very well be the next shoe to drop in the U.S. recession? State budget deficits.

States could be battling deficits totaling as much as $150 billion in 2009, so says economist David H. Wang.

"As many as 44 or 45 states could be facing deficits in 2009," Wang said. "It's probably one of the least publicized aspects of the cyclical downturn, but one the nation will have to address, nevertheless."

The primary deficit culprits? Decreased revenue from income and sales taxes (fewer people working, decreased consumer spending), and increased social service payments for unemployment compensation, and other social services, such as Medicaid, Wang said.

The National Conference of State Legislatures forecasts that states will have to close deficits totaling as much as $97 billion over the next 18-24 months, or by the end of 2010. Wang called the NCSL's forecast, "very conservative, and somewhat dated, particularly in light of recent, weak economic fundamentals."

The unique characteristics of the global recession will require large, but focused, fiscal stimulus packages by nations around the globe, so says a leading international policy and research group.

The International Monetary Fund said the drop in demand requires a substantial fiscal stimulus of at least 2% of world domestic product (WDP), coordinated action, with a focus on spending and targeted tax cuts.

Roughly 2% of WDP would amount to $1.5-1.8 trillion in fiscal stimulus, according to research compiled by economist Peter Dawson.

"Fiscal stimulus by nations may have to be larger than that, given how much the global economy has slowed during the past year," Dawson said. "The IMF forecasts a WDP growth rate of 2.2% in 2009 but it will probably dip below that, which would suggest a need for an even larger fiscal stimulus, probably upwards of $2.0-2.3 trillion for 2009."

The unique factor driving the need for the above? For the first time in the post-World War II era, all major regions of the world -- U.S., E.U., China/Japan -- are in recession at the same time, as are the emerging market economies of India, Brazil, and Russia, Dawson said.