I'm not sure if we should listen to anyone who hasn't quite mastered the quote function yet.
This condition cannot right itself until the excesses of the last bubble are cleared away. When the excess stock of housing disappears,
actually supply equals demand so there are no excesses, unless, liberal government interferes with, for example, unemployment compensation or programs to keep people in homes they can't pay for.
Wrong.
This is ideological fantasy. It demonstrates critical errors in the assumption of human behavior. It assumes that human beings have infinite capacity to calculate the probabilities of all future events, and adjust accordingly. It assumes that people never react on emotion. It assumes that people are everywhere and always rational. IOW, it assumes a human being that does not exist. It makes assumptions of human behavior that people who study human behavior reject categorically.
If there are never any excesses, then there would never be any bubbles anywhere, ever. If there were never any excesses, there would never be a business cycle. If there were never any excesses, there would never be no externalities. None of this is true.
Conservative ideologues make the mistake that economics everywhere and always characterized by a negative feedback loop, i.e. people are never irrational en mass. IOW, if your neighbor tells you that he is getting rich buying dotcom stocks, you won't ever feel jealous and envious of your neighbor, and you won't try to get rich like him by buying dotcom stock. Likewise, people will never build too many houses because they will never, ever get taken in by stories of how their friends and relatives are getting rich flipping Miami condos. Instead, according to the ideologues, people act as emotionless automatrons, and instead of trying to capitalize on prices going to the sky, will always sell or short sell the asset going to the moon.
I remember watching some clueless dogmatic ideologue say that the stock market crash of 1987 wasn't a crash at all. Crashes can't happen in efficient markets, after all. I wonder what colour the sky is in that world?
The Democrats are partly right in that government spending must replace the collapse in private spending
of course that is pure liberal lunacy. Government spending comes from taxing. If liberal government taxes or steals a dollar from a private citizen so he can't spend it, the economy contracts it does not expand. The dollar does not become magical just because liberals spend it!!
Taking water from one side of the lake and pouring into the other side does not expand the lake! Marxists know that but get great mileage from it because liberals lack the IQ to know it.
Wrong.
Government spending does not come just from taxing. It also comes from borrowing.
I expect the conservative who does not understand how markets work to then to respond "Borrowing comes from taxes." Not so. Governments can continuously roll over it's debt and never pay back the debt. Government debt is a claim on all assets, and the interest cost is payment from taxes, but investment in policing, infrastructure and education provides a return on capital. So as long as the return on capital is as great as or equal to the cost of capital, wealth is created and the debt never has to be paid back, just refinanced. (Having said that, government is generally a poor allocator of capital, and taxation is often an inefficient use of capital and destroyer of wealth.)
The lake analogy is cute but betrays a fundamental ignorance about basic economies. A better analogy of a recession is a bathtub that is being drained. To keep the water level in the tub, government spending turns the tap on to keep the water level.
BTW Here is a question. What is the net present value of your newborn baby's income throughout his or her lifetime when he is born? If you can't answer that question, then you can't argue that markets always and everywhere work. (If you've studied economics, you should know the answer why.)
Also, the argument assumes monetary velocity is fixed. It is not.
So the supply-side prescriptions are the wrong as well because the problem is that we have excess supply.
More nearly perfect liberal lunacy!! Supply and demand are a function of price. This is day one, page one, Econ 101. There is no excess of supply at prices that everyone can afford. We got from the stone age to here because of supply at prices that everyone could pay!
Wrong.
This assumes that supply is perfectly elastic. In Microeconomics 201, you learn that supply curves vary but in the near-term, they are generally inelastic. This is especially true of real estate. Real estate in the near-term has an almost perfectly inelastic supply curve. In the long-term, it is highly elastic. But in the near and intermediate-term, it is inelastic.
