[...I]f [housing] prices stay high, where is the money coming from to support them? Well, from people like me, who do not currently have a home to sell, but would like to acquire one in the not-terribly distant future.
McArdle says the reason for the housing bubble was supply and demand. That is a lie. A much more accurate reason (among many) is that Greenspan set interest rates so low that he created a housing bubble. But if McArdle acknowledged this she would have to acknowledge that conservative economic principles just blew up the economy, and that would mean McArdle was wrong. She can't be wrong--she was born a little better than the common folk, a little smarter and much better educated. So she lies.
To the extent that there is an argument for a housing bailout, I think it rests not on keeping prices high, or keeping people in houses that they could just barely afford when they bought them (or after they refinanced them), but on preventing the price decline from crippling the future financial viability of either the borrowers or the lenders*. [By the way, there's nothing at the end of that asterisk.]
That's the logic behind my lunatic plan--cut the losses to the lenders to the loss on the underlying collateral; keep the housing decline from crippling homeowners without awarding them subsidized housing in exchange for their financial illiteracy.
In other words, let house prices fall to Megan-affordable levels without harming the banks, an impossible feat.