The considerable pushback to the bailout reflects discomfort with the people sounding the alarm.  Mr. Paulson, a creature of Wall Street, asked Congress for extraordinary powers to take bad loans off the hands of major financial institutions with a proposal that ran all of three pages.  Subprime mortgages have been issued with more paperwork than Mr. Paulson filled out in asking for $700 billion. 

“The situation is like that movie trailer where a guy with a deep, scary voice says, ‘In a world where credit markets are frozen, where banks refuse to lend to each other at any price, only one man, with one plan can save us,’ “ said Jared Bernstein, senior economist at the labor-oriented Economic Policy Institute in Washington. 

And yet, the more he looked at the data, the more Mr. Bernstein became convinced the financial system really does require some sort of bailout. “ Things are scary,” he said. 

For nonfinancial firms during the first three months of the year, the outstanding balance of so-called commercial paper  short-term IOUs that businesses rely upon to finance their daily operations  was growing by more than 10 percent from a year earlier, according to an analysis of Federal Reserve data by Moody’s Economy.com.  From April to June, the balance plunged by more than 9 percent compared with the previous year. 

This week, the rate charged by banks for short-term loans to other banks swelled to three percentage points above the most conservative of investments, Treasury bills, with the gap nearly tripling since the beginning of this month.  In other words, banks are charging more for even minimal risk, making credit tight. 

Suddenly, people who have spent their careers arguing that government is in the way of progress  that its role must be pared to allow market forces to flourish  are calling for the biggest government bailout in American history. 

“We are in a very serious place,” said William W. Beach, an economist at the conservative Heritage Foundation in Washington. “ There is risk of contagion to the entire economy.”