First things first in the stimulus plan

My latest FT column looks at the design of the forthcoming fiscal stimulus:

"Rule one: never allow a crisis to go to waste. They are opportunities to do big things." Rahm Emanuel, who will be chief of staff in the Obama White House, made this observation to an interviewer recently. The big things he has in mind include comprehensive healthcare reform and a greener energy policy to make the US less dependent on foreign oil.

With a lot of luck, he could be right - and how fine it would be to combine strong macroeconomic medicine and far-sighted microeconomic improvement at a stroke. Grand, but none too likely. For the next year and maybe longer, there are great risks in approaching economic policy this way.

With the economy shrinking at a frightening rate, the new administration needs to focus intently on devising an effective fiscal stimulus. This needs to be large, fast, temporary and do as much as possible to support demand. Most of the items on Barack Obama's broad agenda for reform - including health reform and energy policy - rightly have other priorities. So the new administration needs to think hard about what will be feasible and what matters most.