Feb. 19 (Bloomberg) -- Enough already with the criticism. What’s your solution?

So sayeth some readers, in so many words, in response to my Feb. 17 column criticizing the concept of fiscal stimulus, though not the specifics of the $787 billion American Recovery and Reinvestment Act President Barack Obama signed into law earlier this week.

I take this put-up-or-shut-up challenge seriously. In the past, I’ve offered the Baum platform -- a flat tax, term limits and tort reform -- and received several nominations for president as a result.

So without further ado, here’s my rescue plan for the U.S. economy. Like Treasury Secretary Timothy Geithner, I’ll leave the details to be filled in later.

First, do no harm.

The inclusion of a “Buy America” provision for iron, steel and manufactured products used in federally funded infrastructure programs violates the Hippocratic Oath taken by physicians and regularly ignored by politicians.

Messieurs Smoot and Hawley may no longer be with us, but the 1930 protectionist trade legislation that bears their names is among the long list of policy mistakes exacerbating the Great Depression.

Given daily comparisons to the 1930s, you have to wonder what Congress was thinking when it started down this rabbit hole.

As a practical matter, the impact of “Buy America” will be limited because it must be “applied in a manner consistent with United States obligations under international agreements,” according to the legislation.

Chinese Checkers

In other words, the rule doesn’t apply to countries that are members of the World Trade Organization or have bilateral trade agreements with the U.S.

As a political matter, the rule risks friction with China. With the U.S. needing trillions of dollars in new borrowing this year, “Buy America” may mean “Sell America” where China is concerned. China is the largest holder of U.S. Treasury securities, with $696.2 billion in December 2008, according to the Treasury. China’s portfolio of Treasuries stood at $477.6 billion a year earlier.

The U.S. would do less harm by pouring less money into zombie banks. Turn over the remaining money Congress authorized for the Troubled Asset Relief Program to the Federal Deposit Insurance Corp. Let the FDIC take over insolvent banks while protecting the depositors, which it was created to do in 1933, liquidate or sell these institutions, and decide whether to sell or hold on to certain assets. Give the management the boot, wipe out the shareholders and let the survivors get on with the business of lending. It’s what Northern Trust Corp. chief economist Paul Kasriel calls “purge and merge.”

No Reinvention

Second, don’t reinvent the wheel.

“We do have mechanisms in place to deal with economic distress,” writes Amar Bhide, professor of business at the Columbia Business School, in a Feb. 17 op-ed in the Wall Street Journal. Aid for low-income families, laws and courts for bankruptcy proceedings, the Federal Reserve, the FDIC: “These mechanisms are not perfect or to everyone’s taste,” he says, “but they have been forged through a much more deliberate, open process than the stimulus bill or TARP.”

Third, stoke and stroke those animal spirits.

If entrepreneurial spirit is what this country needs, make it easier and cheaper to start a business. Eliminate the corporate income tax.

Renters’ Delight

It’s well known corporations don’t pay taxes; people do.

This isn’t a comment on businesses’ endless exploitation of loopholes in the tax code. Rather, it refers to the idea that the taxes corporations fork over to the Internal Revenue Service come from somewhere, be it lower wages, smaller dividends or higher prices. In other words, we pay their taxes.

And if saving or creating 3.5 million jobs is the goal, get rid of the payroll tax. The two-year payroll tax cut of $400 per individual or $800 per couple in the ARRA “probably isn’t going to encourage employers to take on permanent employees,” Bhide says.

But it would make it less costly to retain current workers.

Fourth, let them be renters.

If President Obama’s goal is to stem foreclosures and allow struggling homeowners to stay in their homes, convert them to renters. Many of these folks were owners in name only: They borrowed 100 percent of the purchase price of the home, only to see its value plummet.

Lease ‘n Wash

Forget the bureaucratic nightmare of modifying millions of mortgages, which in half the cases results in higher payments, according to housing analysts. The re-default rate on mortgage modifications is high. Allowing bankruptcy judges to modify loans, a procedure known as “cram down,” will raise the cost of new loans as lenders seek to protect against that risk.

The argument for keeping people in their homes is that it prevents the depreciation of entire neighborhoods of abandoned properties. The counter argument is that renters don’t behave like owners.

While no one ever washed a rented car, according to Obama economic guru Larry Summers, “they do wash leased cars,” Bhide says. “Commercial real estate is leased, not owned.”

Fifth, face reality. There is no quick fix for problems that were decades in the making. The cure for a lack of saving and too much debt isn’t more borrowing and spending. Anyone who tells you differently will be forced to return to the top of this column and read it again in its entirety.

(Caroline Baum, author of “Just What I Said,” is a Bloomberg News columnist. The opinions expressed are her own.)

To contact the writer of this column: Caroline Baum in New York at cabaum@bloomberg.net.

Last Updated: February 19, 2009 00:01 EST