In his Sunday New York Times column, Thomas Friedman called for the government to direct its stimulus "investments" towards projects with significant social, economic, and technological pay-offs, that is to make genuine investments. Some of the areas he would target include batteries for cars and "green" energy infrastructure. He also recommends adding a carbon tax to redirect consumer demand towards these greener alternatives.
One thing that isn't discussed is how the investments should be structured. The government should consider using loans rather than outright grants to make many of these.
Loans would take advantage of the government's good credit and ability to borrow at low rates. They explicitly address the "credit crunch" aspects of the current downturn. And the low rates end up effectively subsidizing the investment projects.
Loans also acknowedge that one way or the other, the funds that are going toward the stimulus will need to be paid back. If the money is really going toward economically worthwhile investments, the direct returns on those investments should be the source of repayment.
As William Nordhaus has long argued, fiscal deficits, including deficits directed toward "induced innovation," should be viewed in terms of their investment components. Why not go one step further and structure the spending the way that businesses and private parties would structure their investments?