Let’s not forget that it’s the private sector that drives our great economy towards success. Prosperity-killing actions from Washington, like tax hikes, trade protectionism, or massive over-regulation, would certainly stunt the long-run health of the economy.

Ultimately, market prices in the housing sector must adjust. That is the only viable solution. And while some families will be forced to become renters, other families will have a chance to purchase a new home at affordable prices. Capitalism is all about winners and losers, and it’s the market that must drive the adjustment, not the government.

A real recession may have started, although in the fourth quarter of 2007, aggregate hours worked increased, as they did in the third quarter, and oil prices have declined. Economic fears can, however, become self-fulfilling by paralyzing decisions to consume and invest. Often, the wise response to an economic correction is "Don't just do something, stand there," because the market is doing the right things. But corrections provoke political competition to provide relief. And when government "fine-tunes" the economy with "demand management," it responds to economic conditions as they were, not as they have become. The ameliorative measures Congress will legislate, perhaps by March, will be responsive to economic conditions indicated by statistics collected many months before the measures will begin to affect economic behavior, if they do affect it.