Atlas blinked: fiscally conservative Republicans were lost at sea in the Panic of 2008.

• Author: Weigel, David
• Position: Column

EVERY WEDNESDAY in Washington, conservatives gather in the conference room of Grover Norquist's pressure group, Americans for Tax Reform, to hash out arguments and promote their projects. The off-the-record meetings are notorious among liberals: proof of the shudder-inducing organizational powers of the right.

In late September, a White House economist arrived at Norquist's salon to sell a proposed $700 billion bailout of Wall Street firms whose investments in worthless mortgage-backed securities had sparked an international financial crisis. In a tense meeting, the president's emissary was turned into a pinata. Pro-market activists and economists with decades of experience battered him with questions, asking whether the administration was putting an end to capitalism as we knew it. The White House's economist responded coolly. Did these people really want to do nothing in the face of the great 2008 meltdown?

In the end, what fiscal conservatives wanted didn't turn out to matter much. As the Wall Street vapors scrambled every aspect of the 2008 presidential campaign and of George W. Bush's final days in office, no one was as angry as D.C.'s dwindling number of libertarians. They pointed out that Treasury Secretary Henry Paulson's plan involved a massive takeover of private firms and (in its original draft) unchecked executive power. They invoked previous examples of government meddling worsening crises, in the 1930s and the '70s. But as Washington faced the greatest economic panic in a generation, adherents of free markets were spectators in a debate between moderate interventionists and radical re-regulators.

Libertarians proposed alternatives, such as privatizing Fannie Mae and Freddie Mac and letting the market find a bottom. They were shouting into the dark. Instead the feds imposed a two-week ban on short-selling stock and engineered the largest economic intervention since Nixon's wage and price controls. "The market is not functioning properly" warned President Bush. "The government's top economic experts warn that, without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold."

People who should have been primed for such a crisis had little voice in the matter. Take the Republican Study Committee (RSC), the fiscally conservative caucus within the House of Representatives. The RSC regularly responds to pork-filled budgets with thriftier alternatives. As Wall Street shattered...