Krugman was right again. Instead of taking a strong leadership position and insisting on a larger package, Obama played nice with the so-called "moderates" of both parties (i.e. morons who would sell their own mothers to feed their swollen egos). And here we sit, in a stagnating economy that sinks even deeper in recession as jobs are flushed down the drain.

I'm reminded of one of my favorite business books, "Management by Baseball." Author Jeff Angus (who also has a great blog) says one of the most common management mistakes is when a manager assumes a strategy that has been successful for him as a player will apply to all situations when he's a manager. Obama's built his career on being a cautious incrementalist, but what's called for now is bold vision.

So what's Obama going to do about it? Krugman has some suggestions:

So what do we have to counter this scary prospect? We have the Obama stimulus plan, which aims to create 3½ million jobs by late next year. That’s much better than nothing, but it’s not remotely enough. And there doesn’t seem to be much else going on. Do you remember the administration’s plan to sharply reduce the rate of foreclosures, or its plan to get the banks lending again by taking toxic assets off their balance sheets? Neither do I.

All of this is depressingly familiar to anyone who has studied economic policy in the 1930s. Once again a Democratic president has pushed through job-creation policies that will mitigate the slump but aren’t aggressive enough to produce a full recovery. Once again much of the stimulus at the federal level is being undone by budget retrenchment at the state and local level.

So have we failed to learn from history, and are we, therefore, doomed to repeat it? Not necessarily — but it’s up to the president and his economic team to ensure that things are different this time. President Obama and his officials need to ramp up their efforts, starting with a plan to make the stimulus bigger.

Just to be clear, I’m well aware of how difficult it will be to get such a plan enacted.

There won’t be any cooperation from Republican leaders, who have settled on a strategy of total opposition, unconstrained by facts or logic. Indeed, these leaders responded to the latest job numbers by proclaiming the failure of the Obama economic plan. That’s ludicrous, of course. The administration warned from the beginning that it would be several quarters before the plan had any major positive effects. But that didn’t stop the chairman of the Republican Study Committee from issuing a statement demanding: “Where are the jobs?”

It’s also not clear whether the administration will get much help from Senate “centrists,” who partially eviscerated the original stimulus plan by demanding cuts in aid to state and local governments — aid that, as we’re now seeing, was desperately needed. I’d like to think that some of these centrists are feeling remorse, but if they are, I haven’t seen any evidence to that effect.

And as an economist, I’d add that many members of my profession are playing a distinctly unhelpful role.

It has been a rude shock to see so many economists with good reputations recycling old fallacies — like the claim that any rise in government spending automatically displaces an equal amount of private spending, even when there is mass unemployment — and lending their names to grossly exaggerated claims about the evils of short-run budget deficits. (Right now the risks associated with additional debt are much less than the risks associated with failing to give the economy adequate support.)

Also, as in the 1930s, the opponents of action are peddling scare stories about inflation even as deflation looms.

So getting another round of stimulus will be difficult. But it’s essential.

Obama administration economists understand the stakes. Indeed, just a few weeks ago, Christina Romer, the chairwoman of the Council of Economic Advisers, published an article on the “lessons of 1937” — the year that F.D.R. gave in to the deficit and inflation hawks, with disastrous consequences both for the economy and for his political agenda.

What I don’t know is whether the administration has faced up to the inadequacy of what it has done so far.

So here’s my message to the president: You need to get both your economic team and your political people working on additional stimulus, now. Because if you don’t, you’ll soon be facing your own personal 1937.

Anything that produces more jobs is good news, but it's a drop in the bucket when we're losing an average of a half-million jobs per month:

WASHINGTON – President Barack Obama promised Monday to deliver more than 600,000 jobs through his $787 billion stimulus plan this summer, with federal agencies pumping billions into public works projects, schools and summer youth programs.

Obama is ramping up his stimulus program this week even as his advisers are ramping down expectations about when the spending plan will effect a continuing rise in the nation's unemployment.

Many of the stimulus plans that Obama announced Monday already were in the works, including hundreds of maintenance projects at military bases, about 1,600 state road and airport improvements, and federal money states budgeted for 135,000 teachers, principals and school support staff.

The administration had always viewed the summer as a peak for stimulus spending, as better weather permitted more public works construction and federal agencies had processed requests from states and others.

But Obama now promises an accelerated pace of federal spending over the next few months to boost the economy and produce jobs.

Seems like city and state public safety budgets would be a good place to dump some stimulus money:

The recession is altering local law enforcement in the U.S. by forcing some agencies to close precincts, merge with other departments or even shut down.

Once largely spared from the deepest budget cuts, some police departments are struggling to provide basic services, police officials say.

"For the first time, because of the economy, police departments ... may have to change how they do business," says Chuck Wexler, executive director of the Police Executive Research Forum, a law enforcement think tank. "People will see a change in the basic delivery of services," from longer police response times to a dramatically reduced police presence in some communities.

Harlan Johnson, executive director of the Minnesota Chiefs of Police Association, said political leaders are "choosing whether they keep the streets open or the police on patrol," though it's too early to tell whether the changes will increase crime.

The Obama administration's $787 billion stimulus plan gives about $4 billion to local law enforcement, including $1 billion to hire and retain officers. But the hiring money has not been distributed, and applicants have requested more than is available.

Among the recent cuts:

• In Pennsylvania, 19 suburban and rural police agencies have closed in the past 15 months, and seven others have cut patrols. The "unprecedented" closures and cuts have forced the state police — who face their own budget struggles — to assume full or partial public safety responsibility for about 54,000 more people, says Lt. Col. Lenny Bandy, deputy commissioner of operations for the state police.

• In Minnesota, nine small police agencies have closed in the past five months, leaving sheriffs' departments to protect the public. The Elko New Market Police Department was briefly the 10th shuttered agency, until residents last month demanded that the City Council reverse its 2-week-old decision to eliminate it. "A lot of people felt that we were sending a potentially dangerous public message ... without a police department," says Mayor Jason Ponsonby, who opposed the closure.

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Neil Cavuto pressed Republican National Committee chairman Michael Steele on whether the RNC was going to punish the three Republican Senators -- Olympia Snowe, Arlen Specter and Susan Collins -- who voted for Obama's economic-stimulus package:

Cavuto: ... What retribution will you exact?

Steele: Look, my retribution is the retribution of the voters in their states. They're going to have to go through a primary in which they're going to have to explain to those Republican voters in that primary their vote.

Cavuto: I know that, but will you as RNC head recommend no RNC funds being provided to help them?

Steele: That is something I will talk to the state parties about and I will follow their lead.

Cavuto: So in other words, are you open to that, Michael?

Steele: Oh yeah, I'm always open to everything, baby, absolutely.

Cavuto: So -- by being open to that baby, does that mean you would consider punishing them for that vote?

Steele: My responsibility is to follow the lead of the state parties, to get their advice, what their intent is. Those senators are going to have to account to those voters there.

If there were any serious likelihood the state parties would actually take on their senators over an issue in which polls show the voters are actually on the side of the "traitors," this might be an actual warning shot for straying Republicans. Certainly the mighty ideological-purity guardians at Red State seem to think so.

Then again, their grasp on reality hasn't been so firm these days.

But it sure is fun watching Republicans try to figure out that "big tent" thing.

Obama's got a long road ahead of him. Despite today's market gains, stabilizing this economy will be a Herculean task:

President Barack Obama yesterday told Americans that his inauguration symbolized "hope over fear," but on Wall Street, investors stuck with fear.

The Dow Jones industrial average plunged 332.13 points yesterday to close below 8,000 for the first time since the end of November as the largest US banks continue to bleed cash and the Congressional Budget Office casts doubt on the effectiveness of an $825 billion proposal to spend the nation out of recession.

The Dow, which ended at 7,949.09, lost 4 percent of its value, the worst Inauguration Day loss in the 113-year history of the index.

Other indexes suffered steeper losses. The technology-heavy Nasdaq Composite shed nearly 6 percent, or 88.47, to close at 1,440.86. The Standard and Poor's 500 lost more than 5 percent, or 44.90, to end at 805.22.

The sell-off in stock markets, the worst so far this year, began before Obama took the oath of office at about noon. The rout underscored the depth of a recession that many economists expect to be the worst since the Great Depression, and the challenges inherited by Obama.

In the nearly three months between his election and the inauguration, the economy shed more than 1 million jobs and the number of unemployed surpassed 11 million. And despite the injection of $350 billion by the Bush administration to shore up the nation's banks and encourage more lending, the US financial system continues to teeter.

Today held much better news, although probably not for the long haul:

Stocks mounted an impressive comeback on Wednesday, one day after a deep selloff in the financial sector pulled the broader market downward.

As was the case in the market's move down on Tuesday, bank stocks led the way on Wednesday. Driven by double-digit percentage gains for Citigroup, Bank of America and J.P. Morgan Chase, the Dow Jones Industrial Average rose 279.01 points, or 3.5%, to 8228.10. Stocks strengthened as the session wore on, with the rally spreading beyond financials into several other sectors.

The blue-chip measure was also helped by an 11% gain for International Business Machines, which forecast full-year earnings that topped Wall Street's expectations and a 12% rise in fourth-quarter profit.

The S&P 500 gained 35.02 points, or 4.4%, to 840.25. Energy stocks in particular were strong amid a jump in crude-oil prices. Meanwhile, the Nasdaq Composite gained 66.21 points, or 4.6%, to 1507.07. Intel shares gained 3%.

Despite Wednesday's bank-led gains, the sector remains on a more than two-month long decline. Large financial firms are still susceptible to continued weakening of economic conditions and many still have bad assets left to write-down. Should banks fail to at least stabilize, investors say there is little way the market in general, can improve.