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Critics of Auto Bailout Decry Fallout of Government Intervention

GM Plant in Lansing, Michigan.

Congressional opponents of a taxpayer-funded bailout of America's Big Three automakers -- an action that would, in effect, at least partially nationalize a major American industry -- are raising their voices in hopes of keeping private enterprise just that ... private.

"Having the federal government involved in every aspect of the private sector is very dangerous," Rep. Dan Burton, R-Indiana, told FOX News. "In the long term it could cause us to become a quasi-socialist country. We need to let the free market system work as much as possible.

"Just how far does the taxpayer go and how many industries do we get involved in?" Burton asked. "Do we get involved with banking? Now the newspapers are about to go belly-up. Do we start helping the Chicago Tribune and The New York Times? At some point, we have to let the free-market system work."

Tense talks were continuing in Washington Tuesday on a bill to provide a multibillion-dollar aid package to the Big Three. The White House and congressional Democrats are currently negotiating consequences to General Motors, Ford and Chrysler if they fail to bring costs under control.

But despite general optimism that a swift agreement can be reached on the rescue bill, some conservatives on and off Capitol Hill are holding fast to the principle that the U.S. government shouldn't be in the business of nationalizing private industry.

"History shows Congress is not good at making good decisions," said James Gattuso, a senior research fellow in regulatory policy at the Heritage Foundation, a conservative think tank.

Gattuso said the real danger of another bailout is that the concept will "morph into a generalized concept of economic stimulus and government spending rather than bailing out companies when they're in trouble....

"I'm worried about the next step being a trend toward pumping money into industries as a way to prop up the economy," he said, calling the tendency toward intervention a "well-oiled slope."

"Slippery doesn't even begin to describe it," Gattuso said.

On Tuesday, an aide to one Republican senator told FOX News that a group of GOP lawmakers is "very skeptical" of the existing package and considering its options. Nevada Sen. John Ensign said he is willing to "be the one senator" to hold up the bill via filibuster, which could very seriously affect a proposed bill's chances of passing at this time. Many members in Washington for the lame-duck session leave after this weekend for long-planned congressional delegations overseas, followed by the holiday break. And representatives of labor unions and the Big Three have said they aren't sure the companies can last until the next Congress convenes in January. 

Senate Minority Leader Mitch McConnell, one of the Republicans considering filibuster options, said he doesn't see the benefit of bailing out an industry that hasn't provided a plan for "long-term viability."

"The draft plan released yesterday fails to require the kind of serious reform that will ensure long-term viability for struggling auto companies. By giving the government the option of canceling government assistance in the event that reforms are not being achieved -- rather than requiring it -- we open the door to unlimited federal subsidies in the future," McConnell, R-Ky., said.

"I want to support a bill that revives this industry. But I will not support a bill that revives the patient with taxpayer dollars yet doesn't secure a commitment that the patient will change its ways so future help isn't needed," he added. 

Gattuso believes that, instead of a bailout,  the government should provide the auto industry with regulatory relief (such as abandoning the imposition of fuel efficiency standards), tax provisions and possibly accelerate the purchases of vehicles it makes each year.

"None of that would solve the problem, but it would be helpful," he said.

Daniel Mitchell, a senior fellow at the libertarian Cato Institute, said the government should have no role in helping the industry, except to provide positive economic conditions -- "a lower corporate tax rate, less red tape and things like that," he said.

Mitchell added that if the government takes control of the auto industry, it will be a recipe for disaster.

"The free markets allocate resources and reward people for doing good things and punish them for doing dumb things," he said. "Government misallocates resources and rewards people for doing dumb things and punishing them for doing good things.

"We're in this very dangerous situation where you're going to have people, Harry Reid and Nancy Pelosi, making these decisions," he said. "I wouldn't trust these people mowing my lawn, much less running a private company."

Gattuso said government taking an ownership role in private -- or even public -- industries could block necessary changes to improve them. He gave an example from earlier this decade, when Congress prevented any post office from closing despite the U.S. Postal Service's desire to do so in a restructuring plan.

In the meantime, the Federal Reserve has declined to lend money to the Big Three automakers, saying it is not satisfied that the companies have the assets to secure the loan.  

"The ability of the Federal Reserve to provide credit ... to an auto manufacturing company depends critically on the ability of the auto manufacturer to provide sufficient collateral or other security to ensure repayment of the credit. It is unclear whether the auto manufacturers have unencumbered assets of sufficient amount and quality to meet this requirement," reads a Dec. 5 letter signed by Federal Reserve Chairman Ben Bernanke to Democratic Sen. Chris Dodd, chairman of the Senate Banking Committee and obtained by FOX Business Network.

FOX News' Trish Turner and The Associated Press contributed to this report.