The Deficit Commission and the Mortgage Interest Deduction
The National Association of Realtors, the Mortgage Bankers Association, and the National Association of Home Builders are among the housing-industry heavies who have been arguing at length against recommendations, recently presented by the co-chairs of the National Commission on Fiscal Responsibility and Reform, to cap and limit eligibility for the mortgage interest deduction, a tax-code sacred cow.
NAHB’s chairman, Bob Jones, said in a statement released this week that the commission co-chairs’ proposal to limit deduction eligibility to mortgages of $500,000 or less, and their proposal to eliminate second-home mortgages from eligibility, “would put a huge tax increase on millions of middle-class homeowners by eliminating or devaluing the mortgage interest deduction … would further depress home prices,” cause a new wave of foreclosures, and “shrink the local tax base of many communities, causing already cash-strapped state and local governments to further cut jobs and essential services.”
An unemployment-rate interruption
Points taken. For the short term, though, the prospect of quick legislative action on the panel’s MID proposals has been diminished by a couple of developments: (1) the Labor Department’s report this week that shows slower (much slower) job growth for November, which lifted the unemployment rate two tenths of a percent, to 9.8%; and (2) a bipartisan 11-7 vote by the full Deficit Commission, announced Friday, that was obviously in favor of the co-chairs’ package of proposals but still short of the 14 votes needed to prompt congressional votes on the measures.
So attention is focusing once again on the tricky business of shifting the economy into a higher gear. The uptick in unemployment may have quelled some of the bizarrely hyperbolic criticism of the Federal Reserve’s recent attempts at monetary stimulus, but the problem of sluggish economic growth – and its implications for housing – still impatiently awaits further action. And whatever policies emerge to address the issue are going to develop amid the ongoing battles over the Bush tax cuts, proposed extensions to unemployment benefits, etc., so we have to sit tight.
All this amid a backdrop of upbeat stock market behavior and an apparently brighter mood among U.S. consumers, suggested by the Conference Board’s consumer confidence index, which climbed to 54.1 in November from a revised 49.9 in October.
Talk about mixed signals.