As for why the financial system and the economy imploded, President Bush and Congress deserve much of the blame for their devotion to debt-driven growth and blind deregulatory zeal  although on deregulation, President Clinton and his team (some of whom are back in the White House) were also complicit.

Were it not for those multiple calamities, budget deficits today would be negligible. That does not mean we would be off the hook. An aging population and relentlessly rising health care costs will hit the country with even deeper deficits as the baby boomers retire. Politicians need to pass health care reform now and start thinking seriously about Social Security and tax reform.

So what are the immediate fiscal lessons here? The first lesson is that spending without taxing is a recipe for huge deficits, and that running big deficits when the economy is expanding only sets the country up for bigger deficits when the economy contracts. The second lesson is that once a deep recession takes hold, slashing government spending is not going to solve the problem. It will only make it worse.

WHAT CAN BE DONE NOW? Here is an unpopular but undeniable fact of life: When private sector demand is weak, the federal government must serve as the spender of last resort. Otherwise, collapsing demand sets in motion a negative, self-reinforcing spiral in which lack of demand  for goods, services and new employees  leads to ever deepening economic weakness.

That is why when the banks and the economy began to crumble in 2008, President Bush responded with a $700 billion bank bailout and a $168 billion stimulus package. When Mr. Obama took office, the banks were still shaky and the economy was still plunging as measured by real-life indicators like jobs, consumer spending, credit availability, home equity, retirement savings and business confidence. The new administration made the sound decision to continue the bailout and pushed a $787 billion stimulus through Congress, with very little Republican help.

The stimulus package slowed job losses and helped spur activity  in the third quarter of 2009, the economy grew at an annual rate of 2.2 percent, and the initial fourth-quarter reading was 5.7 percent, a rebound few thought possible a year ago.

Still, without a jobs revival to boost consumer spending and tax revenues  and with the states facing immense budget shortfalls  the economy is unlikely to do anything other than limp along, at best, once the effects of the stimulus fade this year.