David Brooks laments the harsh reality that the bank, auto and mortgage bailouts are rewarding too many people for stupid behavior. Yet, if we want to stop the downward spiral, we have no choice.

It makes sense for the government to intervene to try to reduce the oscillation. It makes sense for government to try to restore some communal order. And the sad reality is that in these circumstances government has to spend money on precisely those sectors that have been swinging most wildly — housing, finance, etc. It has to help stabilize people who have been idiots.

Actually executing this is a near-impossible task. Looking at the auto, housing and banking bailouts, we’re getting a sense of how the propeller heads around Obama operate. They try to put together programs that are bold, but without the huge interventions in the market implied by, say, nationalization. They’re balancing so many cross-pressures, they often come up with technocratic Rube Goldberg schemes that alter incentives in lots of medium and small ways. Some economists argue that the plans are too ineffectual, others that they are too opaque (estimates for the mortgage plan range from $75 billion to $275 billion and up). Personally, I hate the idea of 10 guys sitting around in the White House trying to redesign huge swaths of the U.S. economy on legal pads.

But at least they seem to be driven by a spirit of moderation and restraint. They seem to be trying to keep as many market structures in place as possible so things can return to normal relatively smoothly.

And they seem to understand the big thing. The nation’s economy is not just the sum of its individuals. It is an interwoven context that we all share. To stabilize that communal landscape, sometimes you have to shower money upon those who have been foolish or self-indulgent. The greedy idiots may be greedy idiots, but they are our countrymen. And at some level, we’re all in this together. If their lives don’t stabilize, then our lives don’t stabilize.

There will be those who gripe about this and try to whip up anger and opposition to the administration’s efforts, but they won’t offer practical alternatives. They might call for the banks, automakers and homeowners to go bankrupt, but they probably don’t mean it. If they do, it probably means they have no clue of how bad it can get if they get their wish.

Now that the stimulus package has been approved, Fortune offers an inside look at Barack Obama’s economic team.

At this White House there’s no time to settle in. Even as their wall art sat in bubble wrap, Obama’s economic team was pushing through Congress the most expensive emergency spending package in the nation’s history. And they were helping Treasury Secretary Timothy Geithner craft his own sweeping plan to rescue the nation’s banking and housing sectors, phase two of a $700 billion effort launched by his predecessor, Hank Paulson.

That’s just the start. The team is fast at work on health-care reform, energy independence, vast changes in banking regulations, and the possibility of a “grand bargain” to curb entitlement costs that envisions historic sacrifices on both sides of the aisle: Republicans supporting tax increases and Democrats conceding to benefits cuts. “This is not a small-ball President,” says Summers, Obama’s top economic advisor and chair of the National Economic Council. “He wants to take on the large issues.”

There is a breadth and breathlessness to these under-takings, a frenzy of policymaking that will shape the contours of America’s economic future. Top Obama advisors who talked (often as they walked) with Fortune in early February put a premium on speed – speed to catch the right moment to turn around a deepening recession, speed to take advantage of this moment of crisis to put in place a Democratic vision of government’s role, speed to pass major legislation while the President is riding high in the polls. Obama’s White House has been endlessly compared to Lincoln’s team of rivals, or J.F.K.’s best and brightest. But we might also toss in the image of Sandra Bullock trying to control a runaway busload of passengers before the bomb goes off. (That scene was of course from the movie – “Speed.”)

It’s becoming clear that the upcoming budget will drive home Obama’s desire to pursue a very ambitios agenda.

The President’s first budget, expected to be unveiled by budget director Peter Orszag within weeks, will chart much of the administration’s ambitious course beyond stimulus and TARP – and it will be a document that Obama’s own shop, not Congress, produces. “In his budget the President is going to lay down markers around his seriousness on all the major issues,” notes Summers.

It’s likely that the decisions and debates on these issues – ranging from health-care reform to what government programs should be cut to ease the deficit – will keep on coming at Congress at mind-numbing speed. The President wouldn’t have it any other way.

I’m anxious to see which cuts they will be proposing. Our current budget is littered with programs that waste money, from farm subsidies, unnecessary weapons systems and much of the war on drugs. It’s also littered with tax loopholes bought by lobbyists, along with ridiculous restrictions preventing the government from negotiating bulk prices for drugs purchased by Medicare. If Obama can offer some serious cuts here, he’ll gain considerable credibility in his attempt to reorder the priorities of the nation.

When Republicans gained full control of the government during the Bush years, they abandoned the “pay-as-you-go” budget requirement that helped Bill Clinton and the GOP congress to balance the budget and ultimately create surpluses in the 1990s. The results were disastrous, as the national debt nearly doubled during the Bush years.

Many Blue-Dog Democrats have wanted a return to these policies, and Obama has pledged that all spending and tax changes enacted after the stimulus will be held to this standard.

House Democrats won a key procedural vote Tuesday on the stimulus after a last-minute promise from the Obama administration to return to “pay-as-you-go” budget rules after the stimulus is approved.

In a 224-199 vote, the House approved a resolution allowing the stimulus bill to come to the floor for debate. Twenty-seven Democrats – 24 of them members of the conservative Blue Dog Coalition – bucked their leadership and voted against the measure.

But according to Democratic leadership sources, the number was almost much higher – and could have been high enough to hand the Republicans a monumental victory – had it not been for a letter from President Obama’s budget director Peter Orszag.

The letter addressed to House Appropriations Committee Chairman David promised to return to “pay-as-you-go budgeting,” and stressed that the stimulus was an “extraordinary response to an extraordinary process” and thus subject to different rules.

“It should not be seen as an opportunity to abandon the fiscal discipline that we owe each and every taxpayer in spending their money – and that is critical to keeping the United States strong in a global, interdependent economy,” the letter stated.

Orszag also emphasized that Obama’s support for paying for any temporary tax cuts in the stimulus that he would like to make permanent. The budget director said Obama would detail those offsets in his budget.

“Moving forward, we need to return to the fiscal responsibility and pay-as-you-go budgeting that we had in the 1990’s for all non-emergency measures,” Orszag continued. “The President and his economic team look forward to working with the Congress to develop budget enforcement rules that are based on the tools that helped create the surpluses of a decade ago.

“Putting the country back on the path of fiscal responsibility will mean tough choices and difficult trade-offs, but for the long-term health of our economy, the President believes that they must be made.”

Though addressed to Obey, Democratic sources said copies of the letter were distributed in a last minute flurry to Blue Dogs, many of whom were already on the floor and ready to cast their votes. The centrist group already was ruffled by the fact the package included far more spending than Obama had called for, and were prepared to vote as a block against the resolution, Democratic sources said.

Many of the left and the right have long complained that the game was rigged in Washington. That will probably never end, but President Obama seems determined to change the climate in Washington by lessening the role of lobbyists and making the government more transparent.

New lobbying and records rules issued by President Obama yesterday appear to go beyond changes implemented by previous presidents, and could usher in an era of openness in federal government, according to ethics experts and open-government advocates.

In two executive orders and three presidential directives, Obama laid out stringent lobbying limits that will bar any appointees from seeking lobbying jobs while he is president and will ban gifts from lobbyists to anyone in the administration. He also ordered agencies to presume that records should be publicly released unless there are compelling reasons not to do so, and he loosened restrictions on the release of records related to former presidents and vice presidents.

Open-government advocates described the moves as a sharp departure from the policies of former president George W. Bush and former vice president Richard B. Cheney, who sought to shield details about White House inner workings from public view and imposed public records restrictions.

These changes are very significant. We’ve just endured one of the most secretive administrations in history, rivaling the paranoia of the Nixon years. Obama wants to opposite. Energy policy will not be set in secret meetings with industry executives.

The changes regarding the records of former presidents are most interesting.

In a separate order, Obama mandated more openness for presidential records following a congressionally established five-year waiting period after any president leaves office. The order permits a review by the attorney general and the White House counsel of claims by former presidents that information should be withheld under the doctrine of “executive privilege.” It also leaves the final decision in the hands of the incumbent president — not the former president, as provided in a 2001 order from Bush.

This accelerates how quickly we will learn what really happened during the Bush years.

President Obama continues the clean break from the policies of the Bush administration. Today he signed new executive orders regarding the closure of the Guantanamo detention facility within a year, the review of military trials of terror suspects and a ban of the harshest interrogation techniques. Obama made his intentions clear:

The message we are sending around the world is that the US intends to prosecute the ongoing struggle against violence and terrorism and we are going to do so vigilantly, we are going to do so effectively, and we are going to do so in a manner that is consistent with our values and our ideals … We intend to win this fight, and we intend to win it on our terms.

I find it interesting that he did not use the phrase “war on terror.” I have no idea if that was intentional, but as I’ve said in the past that phrase was always overly broad and misleading. Hopefully we can move beyond simple slogans to a more sophisticated policy that effectively fights those who wish to do us harm and rebuilds our bonds with moderate and peace-seeking peoples around the world.

George W. Bush’s farewell tour has been just as pathetic as his actual presidency. In several days, we’ll finally be able to turn the page on one of the worst presidencies in American history.

As I’ve said repeatedly for the past 6 years, Bush’s failures have little to do with ideology and instead can be traced to his utter lack of competence. He screwed up practically everything he touched.

The Republican Party helped him along. Most Republicans are so consumed with partisan bitterness that George W. Bush still gets an approval rating in the 70 percent range with Republicans. Republicans also went along with massive spending and deficits and an ill-conceived war that has crippled our nation.

I’m very optimistic about Barack Obama’s ability to chart a new path for our country that will return us to peace and prosperity. Many Americans share this optimism according to the polls. Obama’s leadership skills have been on display throughout the transition, and thus far he’s been impressive.

I expect Obama and his team to hit the ground running on Wednesday. They face huge challenges, and yet they will not shrink from doing big things like health care reform and transitioning to a green economy.

The Washington Post reports that the Obama team is back off one of its tax cut proposals, as many Democrats have expressed concern tha the $3,000 jobs tax credit would be difficult to administer and could easily be abused.

I’m not sure this is the case, but it’s refreshing to see flexibility from the Obama team. Even more interesting was this observation in the article:

Even before assuming office, Obama is taking an unusually direct role in legislative efforts to move both bills forward, personally phoning lawmakers and dispatching senior aides to Capitol Hill on a near-daily basis. Today the president-elect will speak to Senate Democrats at their weekly luncheon, and he will soon appear before House Democrats, although a date has not been set, a senior Obama aide said.

Obama expects to meet with Republicans in both chambers, the aide added, although not until after he is inaugurated next Tuesday.

Obama is showing that he’s wlling to mix it up and get his hands dirty. He cares about the details, and he wants to be involved in the details. He expects government to perform well, and he’s setting the standard.

Obviously, this presents a stark contrast to George W. Bush. As I’ve said many times, expect a much different tone and work ethic over the next eight years.

With “Fiasco,” Tom Ricks wrote one of the definitive books on the Iraq War, and he’s not optimstic about the situation we face in 2009.

Obama’s first year in Iraq is going to be tougher than Bush’s last year. Three reasons for that: First, three rounds of elections are scheduled in 2009, and those tend to be violent in Iraq. Second, the easy U.S. troop withdrawals have been made, and the pullouts at the end of this year will be riskier. Finally, none of the basic existential problems facing Iraq have been answered-the power relationships between groups, leadership of the Shiites, the sharing of oil revenue, the status of the disputed city of Kirkuk, to name just the most pressing ones. Compounding the problem will be the incorrect perception of many Americans that the Iraq was all but over when Obama took office.

Despite the conventional wisdom that the war is nearly over, Obama’s war in Iraq may last longer than Bush’s, which clocks in at a robust 5 years and 10 months. “So now you back in the trap–just that, trapped,” to quote Big Boi and Dre. My best guess is that we will have at least 35,000 troops there in 2015, as Obama’s likely second term is winding down. (Self-promotional moment: more on all this in my book “The Gamble: General Petraeus and the American Military Adventure in Iraq, 2006-08,” out Feb. 9 from Penguin Press.)

I have no idea what’s going to happen in Iraq, but I suspect Obama will push hard to change the strategic situation in the Middle East, and he’s determined to wind down this war. Having 35,000 troops there in 2015 would be a disappointment.

I just heard this on MSNBC. Having Leon Panetta run the CIA is another brilliant appointment by Obama. The CIA has been a problem for years, as the United States has suffered through intelligence failures and corruption scandals in the military procurement process. More importantly, the last administration cherry-picked intelligence when selling the war.

Leon Panetta isn’t the first person that comes to mind when considering a CIA director, but Panetta is one of the most capable and respected public officials in the country. He’s not a spin doctor and he doesn’t sugar-coat problems. He’s a serious man, and we need people like him in government. He also knows his way around Washington.

I suspect that this also signals that Obama is serious about cutting unnecessary military spending. The procurement process os out of control, and Panetta is a serious budget hawk. Panetta can work with Bob Gates to take on the big spenders in congress.

Barack Obama is serious about getting the economy moving again, and the inclusion of tax cuts in the stimulous plan makes sense.

Aiming to foster bipartisan support for his record-setting economic stimulus, President-elect Obama plans to propose huge tax cuts for businesses and middle-class workers that will total about 40 percent of the package, or up to $310 billion, congressional officials said.

The revelation is part of an intricately orchestrated roll-out of the plan that includes an appearance by Obama on Capitol Hill on Monday and a major speech about the economy later in the week.

Obama plans to ask Congress for a stimulus package of $675 billion to $775 billion, so the planned tax cuts will total about $270 billion to $310 billion, the officials said.

Obama strategists say he wants to get 80 or more votes in the 100-member Senate, and the emphasis on tax cuts is a way to defuse conservative criticism and enlist Republican support.

But officials say the tax cuts will be based on historical and empirical evidence of what works, not ideology. Rather, the targeted tax cuts will be designed to stimulate job growth in the private sector and help middle class families, the officials said.

For families, the tax cuts include the $500 “Making Work Pay” payroll tax credit Obama proposed during the campaign.

For businesses, the tax cuts would include breaks for small employers and a “new jobs credit.”

If he can get this through quickly with bi-partisan support, we have a much better chance of avoiding a complete meltdown.