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By any measure, the $787 billion stimulus bill will fall well short of solving the problems facing the economy. Over the next two years, the expected shortfall between potential and actual gross domestic product is projected to reach $2 trillion — this legislation doesn’t even come to half of that.

But wait, it gets worse.

Around a third of the stimulus is designed merely to counteract the expected decline in state government spending. States, unlike the federal government, are obligated to balance budgets, and will be forced in the near future to cut spending rather than raise it. Right away, a third of the stimulus bill is spent just treading water.

But wait, it gets worse.

Roughly another third of the bill is in tax cuts. Tax cuts are great, and make no mistake: it was good that both Obama and congressional Republicans pushed for them. In a sense, tax cuts are the ultimate in “shovel-ready” stimulus — their effect begins as soon as you can get the checks out. But tax cuts have a problem: the name of the game in stimulus is to increase spending, and some fraction of every tax cut dollar is going to be saved instead of spent.

Furthermore, the more tax cuts are relied upon as a form of stimulus, the greater the marginal propensity to save will be. In other words, tax cuts have diminishing returns to scale, and give or take a few hundred billion, the stimulus bill exhausts just about all that can or should be achieved with tax cuts.

The great strength of tax cuts is that they reduce the distortionary impact of government involvement and increase the efficiency of the economy (hence the perennial enthusiasm of conservatives for tax cuts). However, the tax cuts in the stimulus bill are not geared to capture these efficiency gains.

Instead, they’re almost entirely given out in the form of lump-sum transfers — the marginal tax rate, the fraction of your next earned dollar that is diverted to the government, will either stay the same or increase for most people. There will be no efficiency gains from this bill.

But wait, it gets even worse.

The most salient failure of the stimulus bill is in the last third, which is good old fashioned spending. The goal of stimulus spending is two-fold: to be shovel-ready (in other words, timely), and productive. The vast majority of the spending fails on both counts — not only is it delayed until well after it is needed, but it’s also of questionable real value.

It’s clear that Democrats banked upon Republicans being unable to offer serious opposition; taking to heart Rahm Emmanuel’s maxim that “no crisis should go to waste,” Democrats stuffed the legislation with all the pet projects that they’ve lusted after for years.

Democrats are fond of saying that the stimulus bill is free of earmarks — but earmark-free doesn’t mean pork-free. It only means that a particular legislative tactic was not used. For all their talk of bipartisanship, the left played this like politics as usual, larding the bill with all the goodies they wanted and responding to Republican outrage by slamming them as anti-government ideologues who would rather sink the country than admit a fault.

In reality, had Democrats simply dropped their pork (or, more cynically, if they’d just let the GOP up to the trough), they could have had near unanimous support for the bill’s passage.

But wait, it gets still worse.

Some are inclined to believe that anything is better than nothing, that taking action, however imperfect, is still better than no action at all. The great Keynes himself once famously quipped that during a recession, governments should pay people to dig holes, and then pay them again to fill them in.

However Keynes missed something in his analysis: make-work projects raise spending, but since they create public debt, they also raise expectations of future belt tightening. Forward looking individuals, in expectation that they’ll have less after-tax income in the future, will save more today, offsetting the spending gain achieved by paying people to squander resources.

Unless spending is done wisely, creating objects of value that promise to either raise future incomes or reduce the need for future government expenditures, it may actually have a dampening effect on the economy.

Even more damning is the partisanship with which Democrats pursued their agenda. Had Democrats cut out their wasteful spending, Republicans would have happily voted for it and would have been in a compromising mood when the inevitable second round of stimulus came by. Instead, it looks like every future step is going to be made against a hardened Republican minority that has become disillusioned by the gap between Democratic rhetoric and action.

Many moderate conservatives like Judd Gregg, taken aback by the rapacious ways of the supposedly post-partisan Obama administration, have withdrawn the goodwill they showed and returned to their trenches. Rather than raise expectations about the economy, this bill has lowered them, not only by condemning us to higher taxes in future years, but also by raising the specter of government gridlock at a time of national crisis.

But wait, because this is the worst.

Fiscal stimulus is only going to work if it is made in tandem with progress in fixing the financial sector. But the financial situation is not being sorted out. The Paulson/TARP plan is solid, and the Obama administration is sticking to it. But, rather than further defining the plan and adding details, all they’ve done is restate the vague road map set out by Bush.

Timothy Geithner, the new treasury secretary, is an intellectual lightweight in over his head. A student of East Asian affairs, not economics, Geithner floundered in his role as president of the Federal Reserve Bank of New York and since his promotion he hasn’t done any better. Being an East Asian hammer, he has a tendency to see things as an East Asia nail; he’s provided as much detail in his China bashing comments as in his Treasury’s plan for absorbing the long tail of risk present in the financial world. Markets have tumbled in response.

The short of things is this: this stimulus measure is, at best, a sloppy stopgap. It does the obvious — counteract declines in state spending and enact moderate tax cuts— but beyond that it’s a mess. With any hope, this bill will provide Congress some breathing room to sharpen their pencils and come back with a second round of stimulus that will be full of productive, shovel-ready projects to get the economy moving again. Ironically (given the campaign slogans), with this president and Congress, hope is something in short supply.