Federal Reserve Bank Official Recommends Reducing Mortgage Deduction

by jhwygirl

Seems everyone is getting on the bandwagon of revenue increases these days – you’ll recall the Senate recently voted to kill ethanol subsidies (we’ll see where the tough-talking House goes with that one…), then GOP leaders in the Senate started talking publicly of revenue increases.

Is that pure BS talk? Certainly some say so (as has been exhaustively argued on these pages)…but there are observers suggesting that Grover Norquist and his “no revenue increase” mantra may be becoming insignificant.

Absent of Republicans, in general, looking at more revenue increasing proposals, we have President Narayana Kocherlakota of the Federal Reserve Bank of Minneapolis – at a weekend bankers conference held here in Montana – calling on Congress to reduce the amount of mortgage interest and debt payments that households and corporations can deduct to trim incentives for leverage.

Now – is that something I can go along with? Capping the mortgage interest deduction? Debt interest? Obama’s been calling for it since he got elected. A bi-partisan White House deficit-reduction commission picked these two things out as something that should be considered.

Anyway – those are my thoughts. Do we have a perfect storm brewing? Are old-school Republicans calling out the Tea Party? If Republicans (the Tea Party, more aptly) continue to ignore any-and-all revenue increasing ideas, they’re going to find themselves on the wrong end of the voting poll. That’s just plain numbers, folks. If all they have left is to attack Social Security and Medicare, then they aren’t honestly looking at the situation.

If they aren’t honestly looking at the situation, they’re saboteurs.

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  1. lizard19

    it’s pretty obvious sabotaging is going on. Rachel Maddow laid it out in stark contrast tonight, listing the things the GOP were for before Obama jumped on, and now they’re against

    cap and trade
    trials in the states for terrorists
    individual health insurance mandate
    endorsing the debt commission

    so in that sense, I see Rob’s point of view. Republicans want to make everything worse to benefit politically (O, and that tantrum i threw, Rob, was misplaced. i previewed the first comment and thought it posted, my mistake).

    but my point is Obama is adopting Republican policy positions, then repeatedly throwing his hands up like he just can’t believe they did another about face and walked away.

    so how many times does he need to get slapped in the face before learning to duck?

    so in that sense, it looks like weak leadership.

    Republicans just won’t let Obama be the Republican he wants to be.

  2. My issues with that idea is very simple.. It is like pissing in the wind when you compare it to the corporate welfare we do with big business subsidies. The Republicans are fighting tooth and nail (and seem willing to let the country go into bankruptcy) to protect Exxon and General Electrics billion dollar subsidies but they have no problem sticking it to us home owners that are just trying to make it paycheck to paycheck. They can have my tax break when they take away those billion dollar corporate handouts.

    • Ingemar Johansson

      Repub’s protecting GE? Really? Guess who makes the CFL bulbs? The ones now that are mandated.

      Guess who owns the majority of NBC?

      Guess who’s Chairman is O’s advisor?

      Quote: “Some combination of aggressive lobbying for green energy tax incentives — for which the administration had pushed aggressively in the Recovery Act and in President Obama’s budgets to Congress over the last two year — and strategies run out of its in-house tax department have made GE one of the leading companies in reducing its corporate tax burden.

      When Immelt was named the chairman of Obama’s Council on Jobs and Competitiveness in January, he acknowledged that his company has a reputation for running most of its business overseas, the result of more than three decades of reducing its domestic operations to minimize costs.”

      Exxon may be our buddy-but GE in the pocket of this adm..

      • Which is all a smoke screen, Ingy…. I was talking about the tax incentives and subsidies that all large corporates seem to get from our government and the Republicans refuse to even talk about. As you well know, it was protecting these tax subsidies that caused the congressional Republicans to walk out of talks over raising the debt limit. Don’t act dumb, you make the point for the Democrats/Progressives when you do.

  3. Turner

    Yes, Rachel nailed it. The Republicans are saboteurs and proud of it. Sad fact: the latest poll shows that more people think the debt limit shouldn’t be raised than raised. The saboteurs have seized control of the media and now have public opinion on their side.

  4. Statistically it is impossible to think that each and everyone of them are saboteurs. So I’m operating from that mindset.

    I also want to ask: What makes ya’all think that capping mortgage deductions is a Republican idea? I’m confident that if you google around a bit, you’ll find that cutting mortgage and debt deductions was talked about by Obama during the 2008 campaign.

    Did you call it a Republican idea when it came from his mouth? Or did you agree when he said he wanted to cut tax cuts to the rich?

    I’m also pretty sure that if you ask housing advocates, they’re going to tell you, also, that capping deductions on mortgage interest is a good thing. Frankly, I can rattle on at length about why this is a good thing. For people like me.

    If you are going to dis down every idea that comes out, you are no better than the saboteurs.

    It’s time to get real.

    • I am not entirely sure who you meant your last couple of comments at. I didn’t really see anyone “dissing” the idea of mortgage deduction caps except me. In fact, I wasn’t really dissing them other than the fact that the idea will hurt private owners a hell of a lot more than the corporations. My issue is that it is a drop in the bucket compared to the corporate welfare that exists today. I am tired of the average wage earner getting burned by these asswhipes (regardless of party) instead of taking it from the people that we SHOULD be focusing on. Exxon… zero tax. General Electric… zero tax paid. What the hell?

      • “capping” is the operative word here, Moorcat. Cap it at a million dollar? So anything above that value isn’t deductible?

        Or use the median cost of a home in said state as determined by the U.S. census data as the break point?

        I don’t know – but capping doesn’t hit the average wage earner – it’s going up the ladder.

        Let me ask – where do you want to raise revenue? Or an I presuming incorrectly that you think that is appropriate?

        • I thought I made that pretty clear…

          1) Kill the Bush tax cuts – the sooner the better
          2) Kill corporate welfare – the fact that over 50 companies with revenues over 500 million effectively paid no taxes last year is criminal in my opinion.

          Those two things alone would make a huge dent in both the deficit and the revenue stream problem.

        • Kirsten

          I don’t know – but capping doesn’t hit the average wage earner – it’s going up the ladder.

          You simply don’t know that unless you know what they’re planning to cap it at. Capping it at $1 million house value is not likely to hit the average home-owning wager earner anytime soon (although eventually it will, given the Fed’s inflationary monetary policy).Capping it at $100,000 most certainly WOULD hit the average home-owning wage earner. Unless you’ve turned up something more specific since our discussion on Twitter (and I haven’t), we don’t know who will be hit.

          What we DO know is that this official’s recommendations included increasing corporate tax breaks- something I know you have tweeted against more than once. If I were a Democrat, I would not be in a hurry to associate myself with bandwagon.

          • He’s not an elected official. He doesn’t propose legislation. What you have to do in an effort to try and get results is to participate in the process as early as possible

            So now we have a Federal Reserve Bank official saying that this should be done – that it is good fiscal policy. Hell if I know – but I want to have the discussion – which, I”m thinking, was the purpose of a Federal Reserve Bank president saying what he did in public.

            We are also seeing any number of officials on both sides of the aisle saying ‘show your cards’ in the form of saying “ok, we won’t raise taxes, but we’re still going to raise revenue but hitting at excessive tax credits’ – for any number of things (I notice Obama called for an end to oil and gas “incentives”).

            So while Federal Reserve Bank president puts out some “revenue increase” ideas (which is really driving the ‘no tax increase’ people nuts because they can’t really call cutting out ridiculously excessive tax breaks a tax increase, although they are wont to do so because they like these sweet deals that are even sweeter for the 2nd and 3rd house crowd…or the yacht crowd,…or the ethanol crowd), he pairs it up with two ideas (cutting corporate tax rate and and a tax credit on first time home buyers) that are revenue reducers that would have to have some balancing to temper the loss in tax income.

            Which means it’d be revenue neutral regardless.

            Unless the House wants to go back on it’s word – led by Boehner – and start giving out tax breaks without balancing them with something that decreases the deficit or increases revenue.

            And regardless – anything like that is revenue neutral – it would not draw down deficit nor would it increase revenues.

            I don’t see how that is going to get any play.

  5. Jesse Homs

    It is pointless to argue these details. You have all bought into the debt-reduction mantra, so you have lost the debate. Both the Democrats and Republicans are holding an ax over your head on a chopping block, with Norquist smiing and sharpening the blades. His game plan works!

    Debt is not a problem, but wars and military spending andtax cuts for high income people are, and the D’s and R’s are OK with all of that. The ideas being floated – end Medicare or cutting every imaginable social program – are always on the table. It’s only a timing issue – by harping on debt, and your buying into it as the big issue, you have fallen for a political trick.

    As I’ve always said, depending on Democrats to save our social infrastructure is like sitting atop a big bowl of Jello. It’s not if you will sell out, but when and how bad. Listen to you! I heel the quivering.

    The only reason Social Security is still somewhat protected is due to its enormous popularity. Were that not the case, it too would be be axes, and Obama and company would be holding the weapon in hand – austerity for all but the wealthy and the military.

    • Ingemar Johansson

      May want to refigure that.

      QOTD: “Even if you did the defense cut, defense cut is $50 billion. You could do that for 30 years, that $50 billion. You could collect all of that money. It wouldn’t recover one year of Obama deficit spending. That is not where the money is. The money isn’t in that or the oil, or the tax breaks the oil companies are getting, which is $2 billion a year. The money is in entitlements.

      And unless Democrats are willing to do something important on entitlements, we won’t get anywhere on this. That, I think, is the ultimate redline. I think Obama decided he doesn’t want to touch entitlements in a significant way, because demagoguing entitlements and Medicare is the way he gets re-elected.” –Charles Krauthammer

      • Do revenue increases make you uncomfortable because it is outside the Norquist mantra of “cut entitlements”? Because those Republicans pledged to not raise taxes and now cutting tax breaks for any number of things is now on the table?

        You can go negative to your crow and say that Obama “doesn’t want to touch entitlements in a significant way, because demagoguing entitlements and Medicare is the way he gets re-elected.” – but the truth is the Republicans know it too and there is no friggin’ way when it comes down to it that the stable barn of Replicans in the Senate that get to sit up there for a minimum of 6 years are going to do anything to jeopardize that cushy job.

        So let’s get real. Clearly you don’t think that we should cut defense spending. I disagree. There’s a whole hell of a lot to pick from – what do you say about eliminating the mortgage deduction? That wouldn’t likely hit you…or maybe we should up it to $1.5 million? What about that?

        I thought everything was on the table.

        What about subsidy for coal and oil and gas? Can we cut those? Doesn’t Exxon and its shareholders make enough?
        What about that?

        Or can you not move from the Americans for Tax Reform hypocrisy?

        Which, as a side note – on way to tell if it is a conservative advocacy group is if the name of it is entirely different from what it advocates.

    • Jesse Homs

      Goddam I wish you’d offer up your own thoughts now and then, and stop mining the Internet for things that you agree with. The deficit is not a crisis, interest on public debt is 2/3 of what it was under Reagan, and war spending should not be cut by $50 billion, but $500 billion. We’d be just as safe, and the rest of the world would be far safer.

      • Jesse Homs

        I should clarify, as I just did this little bit of research this morning but did not word my angry response to Swede correctly. In 1984, Reagan’s mid-term, interest on debt was 3.96% of GDP. In 1990, a year after he left office, it was at 4.6% of GDP.

        In 2010, interest on the debt was 2.82% of the debt. So if it is a crisis now, it was a massive crisis in 1985 or 1990, and yet, no one seemed to care.

        This is merely evidence to support my contention that the whole of the debt crisis is a manufactured scare, and that if Obama gives in and slashes social spending, it will be nothing more than Kabuki theater where, as with health care “reform”, all parties know the outcome before the alleged “showdowns”.

        Politics 101.

        • Now do the “stress test”, Mark. What happens if interest rates go the where they were during the Reagan years? Would that cause a problem?

          • Jesse Homs

            Get the f*** out of here, a**h***. I have no time for your hackery.

            • yo kina zu

              Jesse Homs’ replies to Dave Budge should get him a time out. Ridiculous that it’s still here. The offensive ravings of the incompetent.

          • What you lack is an answer.

            • Ryan Emmett Morton

              Go away.

            • What is “hackery” is to take one data point – interest as a percent of GDP – and call it dispositive.to your argument.

              • Jesse Homs

                It’s a blog comment, oh wise one. A blog comment. It’s part of my much larger argument regarding manufactured crises, two-parties that operate as one using Kabuki Theater, and a general attack on social programs using deficits as a a tactical device.

                The point about the level of interest as a % of GDP merely illustrates that point – that the issue is a Trojan Horse.

              • It was actually a blog post somewhere as I recall. But it’s still hackery and it illustrates almost nothing in economic terms.

              • Jesse Homs

                Your statement has exactly zero content. It is in essence an appeal to your own authority – you speak from a position of mystical expertise without offering details. If your tree does not bear fruit, it should be plowed under. (Aren’t we supposed to be buried under hyper-inflation now? Or is that still yet to come?)

                Don’t you feel just a tad empty-scrotumy debating me here and not at your fenced playground?

          • Jesse Homs

            Oh screw you Budge. You have no balls. Go away.

          • Jesse Homs

            Oh calm down people. Budge and I go way back. He won’t let me post at ECW, insulating himself from his finest critic. I can only gather that it has something to do with my pointing out that he used John C. Calhoun’s talking points in defense of sweatshops. He took that to mean that I was accusing him of supporting slavery. It only meant what it meant. Not to long after that, with no explanation, I was banned. That’s how I see it, and that is why the “no balls” comment.

            Now he wants to engage me here. See how it hangs down off him?

            Anyway, I’ll answer his stress test point: If it comes to a time when we are paying out 5% of GDP in interest payments on the national debt, as we did during the Reagan years, then he has a card in his hand and can speak up. But to complain about interest levels lower than those of Reagan and to offer sky-is-falling scenarios now and not then is sheer hackery, the other word I used.

      • Ingemar Johansson

        Speaking of mining Mark.

        Have you seen this nugget?

        http://www.torontosun.com/2011/06/28/lennon-was-a-closet-republican-assistant

        • Jesse Homs

          I looked to Lennon for edgy music, but his brain was substance-abused mush. Interesting link, though. I too have many problems with Jimmy Carter, one of which is that he doesn’t seem to know the things that went on under his own tenure.

  6. mr benson

    First, the cap on the mortgage deduction is a good idea. If you can afford a multi million dollar mcmansion up big sky, then you don’t need to write off your mcmansion mortgage interest.

    Second, some of the Bush tax cuts are worth keeping; the expensive ones that benefit the middle class.

    That should be offset by getting rid of the caps on how much earned income can be taxed for medicare and social security, and by means testing payouts on SS and medicare.Treat these payroll taxes for what they really are; income taxes that take money from single mother waitresses and transfer it to wealthy senior citizens fattening up on cruise ships.

    Most discussions I’ve seen on tax reform include discussions on lowering corporate tax rates to be more competitive with the rest of the world. Tax on capital is a ridiculous idea; tax on discretionary consumption is a far better idea.

    There has to be a recognition that we are in a serious jam. Tell me, would Congress vote to adopt Greece’s austerity program? I doubt it. But we should do something similar, before we are forced to.

    The reason the spending discussion is so important is that Congress, and the american people need to make choices, and tough choices, not just between no brainers like “waste” and “education” but between good programs and good programs. We need a balanced budget amendment, first. Make the government accountable with a balanced budget amendment, and that will force the choices. Would we bomb Libya if we had to sell yellowstone park to do it?

  7. Despite Mark’s claims to the contrary, in context the debt ceiling is a crisis. All of the Republican talk concerning increased revenue is also in the context of the looming crisis. Since I have been misconstrued since the first discussion on this topic, it will do no harm to reiterate: despite what anyone talks about, the Republicans in Congress tasked with doing something about increasing revenues haven’t and won’t accept doing anything that a) actually is helpful and b) doesn’t hurt the middle and working classes. The ethanol subsidies were set to expire anyway, lacking any Congressional action. The mortgage interest cap has been flown only in context of the current debt negotiations. Beyond those, what has mostly been floated from the right is the idea of repealing the deduction almost in entirety which would inordinately hurt the middle class, and further establish the GOP belief that home-ownership is a privilege that only GOoPer favored Gaultians should be able to afford. (That attitude well predates the Tea Party, and Duncan Black has argued it to be the true effective cause of the housing/financial collapse.)

    As for the Republicans finding themselves on the “wrong end of the voting poll”, one can only hope. But so far, the hostage takers (including Democrat Ben Nelson and Holy Joe LIEberman) have found themselves immune from repercussion.

    If Ezra is correct, and I don’t see a flaw with what he writes, then both parties are now playing chicken with who gets the ‘oooing’ fans at the end of the stand-off. Which inspires me to again reiterate, if the story told is that Democrats, the President specifically, are held responsible for not being able to convince, cajole or connive the Congressional Republicans into agreement then the GOP remains immune from repercussion.

  8. Ingemar Johansson

    So why is it now that the blame lies solely on the reps when the donkeys failed to pass a budget when they controlled the house, senate, and the oval office?

  9. Jesse Homs

    If this is Kabuki Theater, as I claim it is, then there will be a fake standoff, and in private meetings social programs will be severely cut. There might be a bit of military give, but with that budget so out of control, it’s impossible to know what is real.

    The main target appears to be Medicare – that is, all of that talk from Paul Ryan was not Tea Party nonsense, but rather designed to set the boundaries of the debate and allow the Democrats to make huge concessions by merely refusing to marginslize him. Reid has refused to knock Ryan off the table, meaning he is planning large concessions. Obama’s skill, as with health care “reform,” will be to spin it as some kind of victory.

    The specter of looming financial crises caused by deficits is all part of perception management, creating an emergency to justify the betrayal. You should learn to think like a politician.

    Since AHIP had it’s way in the health insurance debate, it is safe to say that they will prevail again. We will be told that no one will be kicked off the bus, and then people will be kicked off the bus. Medicare will be farmed out to private insurers, subsidies will be provided insurers to offer some care for expensive customers, but they will gradually squeeze these people to the point where they no longer have access to quality care.




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