As a general principle, conservatives believe government should not intervene to protect those who have made poor business decisions — even if those decisions have been influenced by excessive government regulation. But there can be rare situations where the cumulative effect of many bad decisions in one sector of the economy can threaten everyone. In these rare cases, government has a critical role in keeping the market’s infrastructure functional. We are in such a situation today.

Treasury Secretary Henry Paulson has presented Congress with an outline of an expensive and potentially costly package of proposals that he believes are necessary to solve the current crisis. As this outline becomes firmer, conservatives must be careful to balance their free market principles. Specifically, lawmakers should: not prop up failed or failing institutions; not prop up stock or housing prices above market levels; not allow the government to become the permanent owner of any assets; and require firms receiving aid to take a deep discount on their assets or pay a significant fee for receiving government assistance.

Most pressing, conservatives must fight to make sure that any new action is narrowly confined to government’s market infrastructure role and does not unnecessarily increase risk to the American taxpayer. Already liberals in Congress are pushing to lard up any plan with their unrelated domestic spending priorities. The Politico reports that Democrats are trying to use Paulson’s plan to influence their “year-end spending bill that includes more than $36 billion in emergency appropriations to finance disaster aid, fuel assistance for the poor and loans for the auto industry.”

Also according to Politico, liberal economist Dean Baker has been telling “congressional Democrats that Bush is the one who is in the delicate situation and would therefore be unlikely to veto whatever package Democrats send to him, as long as it gives Paulson some of what he needs.” Conservatives should not cave to such highway robbery.

The most recent versions of Paulson’s plan already put $700 billion of taxpayer money at risk. There is no reason the American people should be forced to put another $25 billion at risk now, especially for an industry that has not learned from its past mistakes despite previous government bailouts.

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