Editorial — NAR weighs in on proposal to scale back mortgage interest deduction
That draft has become a full-fledged final report due to be considered by the commission on Friday. The Commission released the report today, prompting the NAR to go from it’s previous “nothing to see here” mode to warning that a reduction in the mortgage interest deduction could further damage still struggling housing markets.
Before getting into all of that, it’s important to review a bit of history. President Barack Obama appointed the bipartisan, 18-member commission to come up with a plan to reduce the deficit by 2015. Have a look at the 66-page document to see what all all is included in that report.
The problem the commission faced ought to be obvious to anyone that’s been living in the United States for the past couple of years. Simply put, the government spent a couple of years spending money like a sailor on shore leave (that’s not fair as sailors spend their own money) in hopes of stimulating the economy.
By mid-2009, it became obvious that the government was moving toward putting policies in place that saved money. Here’s the thing about stimulus spending — the goal of it all is to generate enough new jobs to boost the tax base and pay back the money used to help out the economy.
Of course, things didn’t exactly work as planned. The economy is still a mess and the jobs deemed necessary to pull us out of it haven’t materialized. In Arkansas, the 7.8 percent unemployment rate in October is above the 7.5 percent rate last year. Nationally, by the way, the unemployment rate in October was 9.6 percent. Yuck.
So we’re in debt because the U.S. spent trillions of dollars on a bunch of programs that didn’t work. The federal government needs to raise cash and the mortgage interest rate deduction is an attractive target for those in Washington who are looking for ways to be thrifty. Why? Taxpayers save an estimated $130 billion a year thanks to the deduction, so it’s easy to understand why some people want to be rid of the deduction and swipe that money from taxpayers.
The reaction from the NAR was quick. The trade group issued a press release declaring that scaling back the deduction could decrease home values by as much as 15 percent. The NAR also promised to fight any attempts to reduce the deduction.
And the NAR is in the process of whipping its 1.1 million members into a frenzy. Realtors across the United States received a “call to action” from the Realtor Party (the Realtors Political Action Committee’s latest experiment in branding itself) directing agents to call their senators and congressmen and demanding that they put a stop to any attempts to scale back the deduction.
Realtors are complying with that directive, as evidenced by the amount of activity on the Realtor Action Center Facebook page.
There are a at least couple of things worth mentioning here. First of all, it’s fascinating that no one — not even the NAR — appeared to take the idea that the federal government might come after the mortgage interest deduction seriously. People who dared suggest such a thing were generally scoffed at or dismissed — just have a look at this post and the comments to it to get an idea about how seriously people took such suggestions before today.
Second, one has to wonder if the NAR saw this coming. In a letter dated Nov. 16 and sent to the chairmen of the fiscal responsibility commission, the NAR set out why the deduction is important to the U.S. housing industry and stated that even discussing altering it in any way would hurt sales. That same theme played out in the aforementioned Nov. 11 NAR statement claiming that the final report would probably look very different from the final one and, therefore, consumers should relax and not worry about it.
Frankly, this isn’t the first time the federal government has discussed monkeying around with the deduction (a suggestion that might happen seems to pop up about yearly). However, the federal government has a hammer that it’s not had before and it’s one the NAR lobbied for extensively — the tax credits for first time and repeat home buyers. Yes, those were in place in one form or another from April 2008 until April this year and cost the government an estimated $22 billion.
The cynical among us have this theory that the government never gives anything away without expecting something in return. That $22 billion, then, is chump change when you consider the possibility of gaining leverage to start dismantling a deduction that, if eliminated entirely, could generate $130 billion a year for the U.S. treasury.
And, oddly enough, people still don’t seem to regard the possibility of eliminating the deduction all that seriously. Inman.com reports that the final proposal (which bears the ominous title of The Moment of Truth) isn’t expected to pass and must be approved by at least 14 of the 18 commission members.
Keep in mind that some of the same experts who don’t expect the proposal to pass are the ones who didn’t expect it to get this far in the first place.
Benton resident. Rogue journalist. Recovering attorney. Email = Ethan@FirstArkansasNews.net.