Balancing Act

After discussion on the VCF, I felt compelled to write about how much responsibility we need to put on the government. Unfortunate events that may or may not be the government's fault place an enormous amount of accountability on at least one governmental entity. The core question at hand is how much do we expect from our government and how much should they theoretically give?
I feel we first need to understand our political structure and society before claims are made about what they should do. Our liberal democracy is based on a free market capitalist society with limited governmental intervention. However, recently our government seems to be leaning a little further towards intervention (socialism) than liberalism. This said, I still believe that in order for our economic structure to work, there needs to be limited intervention. We are still very much a free market liberal democracy with limited intervention. This is because full intervention and capitalism are not compatible.
Whether citizens agree or disagree with our economic/political structure, we must face the fact that this is the system we are under. We need to expect a certain amount of welfare from the government. Basic needs must be met no matter how our economic system is run. However, I feel that many people think that they should be receiving more from the government without understanding that in order to have a free market economy citizens must sacrifice certain benefits or so called "natural rights".
I do not necessarily agree with the way our system is structured. But I do feel that in order to change the way that it is set up we first must understand how it functions.
So how should the government balance laissez faire politics and meeting fundamental human rights and needs?