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Financial crisis: the latest blow to free-market 'dogma'

Economic woes give plenty of ammunition to economists and lawmakers calling for new regulations and taxes.

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The financial crisis and the trembling United States economy have dealt a hard blow to conservative economic ideology.

It's "quite devastating to the conservative idea that the best policy towards markets is to leave them alone and let them self-correct," says Bernard Wasow, a senior fellow at the Century Foundation, a liberal think tank.

This is not to say every regulation is right, he adds. There is a middle ground in this area. But when government stays out of the financial markets too much, deregulated financial markets can "go over the cliff and take a good deal of the rest of the economy with them," he says.

It's "almost impossible now" for conservatives to mouth some of their "dogma," says Paul Waldman, a senior fellow at Media Matters for America, a nonprofit advocacy group set up four years ago to guard against what left-of-center analysts regard as conservative (alias Republican) mythology.

For instance, there's the thesis that tax cuts heavily targeted at the rich, such as those passed in the first term of President George W. Bush, will trickle down economic benefits to the middle class and poor. Rather, the rich have been getting richer and little extra income has flowed to those under the top 5 percent.

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