Noted Economist Sees Trouble Ahead

"From a textbook economics point of view, it has been a less-than-satisfactory response to a real crisis," said Holtz-Eakin, a former director of The Congressional Budget Office, who served as director of domestic and economic policy for Republican Sen. John McCain's presidential campaign.

Indeed, Holtz-Eakin gave what he called a "depressing" analysis of the current economy. He said that if you charted the government's response to the economic crisis on a spreadsheet, it would "cause nausea."

Holtz-Eakin's comments come at a time when solution providers of all stripes are grappling with what some are calling the greatest economic downturn since the Great Depression.

The noted economist took questions in a fireside chat-like discussion from Everything Channel CEO Robert Faletra and also was quizzed, chastised and cajoled by solution-provider executives sharing their own views on the economy.

The one-time chief economist for President George W. Bush predicted there will likely be more financial bailouts or stimulus packages coming down the road, given that the classic economic playbook calls for spending in such a crisis that amounts to 15 percent to 20 percent of gross domestic product. For the United States, he said, that amounts to $2 trillion to $3 trillion.

"We haven't devoted anything like those resources to this bailout so far," he said. "There is probably more in the way of (financial bailout) requests coming."

Holtz-Eakin also cautioned that America should be careful not to prop up large insolvent financial institutions as the Japanese did for many years, preventing an economic recovery.

"We are propping up and pouring our money into large institutions but we are not restructuring their basic operations," he said. "We are not respecting the discipline that comes from failure.

"Until we get a clear game plan to resolve this, it is going to be hard to imagine that we get a really strong recovery," he said.

As to what all the economic tussling has to do with running an information technology solutions business, Holtz-Eakin said solution providers should heed the maxim that "cash is king." He warned VARs to be wary of relying on the "highly leveraged" models of the past. "Pay attention to those that have deep pockets and equity finances," he said.

Holtz-Eakin also advised solution providers to work closely with local and state officials to try to get a piece of the stimulus spending for IT projects, but cautioned that the big government spending is destined to dry up.

Brett Scudder, president of The IT Security Suite Network, a network of security professionals, for his part, said he is optimistic about trying to get a piece of that stimulus spending. "I have reached out to local governments," he said. "Whatever the opportunity is, I want to try to pursue it."