TodayReid Hoffman, Founder of LinkedIn, offered a creative, entrepreneurially -focused stimulus plan for the US economy, via TechCrunch:

1) Ramp up small business lending, presumably via govt subsidies.

2) Abolish the limit on H-1B worker visas and replace it with a 10% payroll tax. Funnel the proceeds of said tax to US worker education.

3) Matching funds for Angel Investment and Venture Capital.

Personally, I like first two ideas, but I'm luke warm on the third. As the eminent VC Fred Wilson of Union Square Ventures explained in his blog, A VC:

The venture capital business, thankfully, does not need any more capital. It's got too much money in it, not too little.

The venture capital business is an asset class where the top 10-20 percent of the firms make 80%+ of the returns. 

The top venture firms don't want, don't need, and are never going to take government money. The same is true of the top entrepreneurs.

The worst firms, on the other hand, will gladly accept government money. And that is what is going to happen with all of these government efforts to pour more money into the "innovation sector". That money will go to bad investors and weak entrepreneurs and management teams for the most part. It's a problem of adverse selection.

To a certain degree, I think Wilson is right: government $$$ will undermine market discipline. However, I think this is true with the more direct government investment of the traditional stimulus variety as well. 
What is market discipline, exactly? you ask. Here's how the idea works…

a) money is scarce (i.e. the supply of it is limited)

b) because money is scarce, investors must actually compete to get their hands on said $$$ 

c) this combination of scarcity and competition pushes investors to be picky about what they invest in

d) investor picky-ness leads to better decision-making and smarter investment economy-wide 

e) bad investors and bad companies tend to die, leading to a darwinian business ecosystem and the hyper-efficient delivery of goods and services to consumers (i.e. the people) that capitalism is famous for

The obverse of market disciple is central planning, where governments decide what companies to fund, what industries to promote and what goods to produce. (See also "socialism.") 

In a capitalist system, consumers choose the winners and losers––and thus it is the individual consumers needs and wants that are served and met. 

In a socialist system or a centrally planned economy, the government chooses the winners and losers––and thus it is the individual government official's (the decisionmaker) needs and wants that are served and met. Hence, bribery and corruption were endemic parts of the centrally planned economies of the Soviet Union. 

In truth, however, market forces are at work in both systems––the variable is who, exactly, is the consumer? In capitalism, buying power is diffused throughout society; in socialism, buying power is centralized in the government's hands. 

Moreover, no system is pure. Capitalism and socialism exist as poles on a spectrum, with a particular society fitting somewhere in between.

Why is this relevant? Because the government "economic stimulus package" necessarily represents a shift on the spectrum away from free-market capitalism and towards central planning & socialism. This may or may not be a good thing, depending on how you see the world. But it is a fact.

The real question, however, is how far will the US slide down the economic spectrum towards socialism? To what extent will the government try to preserve its commitment to free markets? Laziness_1

While it is an imperfect solution and while Fred Wilson is right to point out that government intervention in the market will lead to some increased investor sloppiness, I offer that Reid Hoffman is really onto something here with this matching funds idea for venture capital and other entrepreneurial investment.

The government is gonna pump billions of $$$ into the economy one way or another. Either we can put that money into proven wealth destroying firms like GM or we can dip our hand into the more uncertain waters of entrepreneurship. 

At the very least, it would pit the masses of would-be entrepreneurs in competition against each other––a competition that would likely kill-off a higher percentage of losers and produce many more winners than the high barrier-to-entry (it costs a lot money to get a meeting with a congressman or a senator––money that startups, by their very nature, do not and will never have, but that established if dying firms usually do) game of lobbying for congressional $$$ that's being played now in Washington. 

Startups unite!––and let's go get some of that government cheese!