I have written at length about why the proposed housing bailouts in their current form are bad housing policy. The basic point is that they would have the government guarantee new mortgages at prices that are still inflated by the housing bubble.

This is bad for three reasons. First, because the prices are still high, it leads to a situation in which homeowners will pay far more on their mortgage and other housing related costs than they would to rent a comparable unit. This takes away money needed for health care, child care and other necessary expenses. That is not a favor to moderate-income families.

Second, since the deflating bubble will cause house prices to fall, homeowners in the bubble areas will not accumulate any equity. The third point follows directly from the second point: because prices in bubble areas are likely to fall below the guarantee price, the government is likely to have to make good on the guarantees. Handing money to banks for their bad loans is not good policy.

But there is a more basic issue that should bother progressives. Progressives usually argue for policies that benefit low and middle income people at the expense of the wealthy. This one goes the other way.

If the main beneficiaries of these bailout programs in their current form are the banks, as I would argue, then we are using taxpayer dollars to shift income upward. We are giving money to the banks' shareholders and their managers, some of the most highly compensated people in the country.

In much of my work, I focus on how the government sets rules for the economy that have the effect of shifting income upward. This is the theme of my book, The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer (free download available here).

Many of the ways in which the rules are set to redistribute income upward are somewhat subtle. For example, our trade rules put non-college educated workers in direct competition with low-paid workers in the developing world, while leaving highly paid professionals largely protected from such competition. This raises the pay of doctors, lawyers, and other highly educated professionals at the expense of other workers.

However, in this bank bailout, there is not much subtlety. The banks made bad loans. Businesses are supposed to suffer the consequences of their business decision, good or bad. That's capitalism. However, instead of letting the banks live with the market, we're chasing after them with buckets of taxpayer dollars.

This is truly painful. We must have big fights to get a few billion dollars to provide health care or childcare for kids. How can we suddenly produce billions for banks, no questions asked?

There are many good things that we can and should demand that the government do. Giving taxpayer dollars to bankers is not on the list.