The current economic crisis and the attempts to bail out an ever-widening circle of companies has many turning to review the perhaps forgotten lessons of the Great Depression. Some of the parallels are clear and some things are different. Today, there are a greater number of tools available to regulators and a greater willingness to use them, but the question becomes when enough is enough and how the U.S. should deploy its assets.

At the time of the stock-market crash in October 1929, brokerage firms would lend investors $9 for every $1 invested. The market was on a winning streak during the 1920s, and everyone thought it was a sure thing and climbed aboard. When the market fell, people could not make payments when margins were called, setting off an economic chain reaction. Today, the sure-thing global housing market has collapsed, dragging down the economy in a similar chain reaction set off by “creative” mortgages.

In 1930, people were reluctant to add new debt and stopped buying things, contributing to the economic cascade. That is happening today, as demonstrated by failing automakers. But many of their problems are self-inflicted because they failed to adjust to changing market conditions. The bailout of Citigroup is another example of this short-term thinking, as the company bet on higher-risk activities in search of ever richer rewards.

What should the role of government be in an economy? Progressive economists say regulation is good because capitalism tends to create unbalanced accumulation of wealth, which is adjusted through inevitable boom-bust cycles with no regulation other than the market itself. Once panic sets in, people stop spending, either voluntarily or involuntarily, leading to a further economic decline. Because of that retrenchment, construction is going to suffer badly in the coming year.

State highway departments already are cutting back on billions of dollars of projects because their revenue is being choked by consumers stingy with fuel. The funding of projects by fuel and other user taxes is collapsing. A slide also is coming in manufacturing, industrial, residential and nonresidential markets

Construction forecasts for next year assume an effective stimulus package that has an infrastructure component. Instead of throwing money at dead and dying companies that need and deserve bankruptcy reorganization, the federal government should replay the past with a massive infrastructure rebuilding program. One component could be a National Infrastructure Reinvestment Bank, such as the one proposed earlier this year by President-elect Barack Obama. It calls for investment of $60 billion over a decade to rebuild deteriorating road, bridges and waterways. The money would be repaid with interest, and the bank would maximize return on the public investment by depoliticizing project financing and focusing on need.

The only problem with the proposed bank is that $60 billion is not enough when trillions are flowing. Surely, $1 trillion could rebuild a hefty portion of America.