And so the deficit-reduction discussion begins.
Your comments in a moment. But first . . .
CURTAILING THE MORTGAGE DEDUCTION
No one I know is talking about taking away the deduction for your mortgage interest on your first home, up to the first $500,000 you borrow; but phasing out the deduction on second, third, and fourth homes, and on mortgage debt above $500,000, makes a lot of sense.
At one time, it was a priority to encourage people to go into debt to build vacation homes and larger, more luxurious residences. Now, at least for a while, we should shift our priorities to encourage even more urgent things, like reducing our deficit – and weatherizing the homes we’ve already got. And renewing that wonderful infrastructure our great grandparents labored so hard to leave us.
Everyone would of course still be completely free to build vacation homes and mansions. It’s just that now is not the time to dip into the Treasury to provide an incentive to do so.
Kathryn: “Hold it right there, Andy! Not so fast! What about current Social Security benefits and Medicare? It sounds as if they want to get rid of those too, or at least reduce them to the point of uselessness.”
☞ I think you can be quite certain Social Securty and Medicare will neither be gotten rid of nor reduced to the point of uselessness.
Joel: “If Obama signs on for all of this, he will have become a Republican, and an enemy of the middle class and working class. I will work as hard to defeat him in the primaries as I did to elect him.”
☞ All our nerves are raw, and with good reason. But going into instant fighting crouch may not help reach the best result.
I’ll never forget the woman, years ago, that the TV news chose to feature commenting on President Clinton’s 4.3-cent-a-gallon hike in the gasoline tax. Part of the 1993 budget that not a single Republican voted for (and that they confidently predicted would wreck the economy), it was outrageous only for how much too small it was. Yet here was this woman, genuinely at wits’ end, telling America that it would simply wreck her life. (It amounted to about $30 a year.)
The Republicans were wrong to kill this effort at deficit reduction. (You will recall that they first proposed such a commission, then reversed course and killed it when President Obama came on board.)
President Obama was right to resurrect it by executive order. It’s a discussion we need to have, and a set of course corrections (whatever their ultimate form) we need to make.
So as I said yesterday: that the process and discussion have finally begun is good news.
Ralph Mason: “This is not a meaningful start on the deficit discussion. To quote Kevin Drum: ‘Any serious long-term deficit plan will spend about 1% of its time on the discretionary budget, 1% on Social Security, and 98% on healthcare. Any proposal that doesn’t maintain approximately that ratio shouldn’t be considered serious. The Simpson-Bowles plan, conversely, goes into loving detail about cuts to the discretionary budget and Social Security but turns suddenly vague and cramped when it gets to Medicare. That’s not serious.’ See his whole comment, and especially his chart, here.”
☞ The health care bill includes a pilot program “for every good idea anybody ever had,” as I recall one analyst putting it – and grants authority to the Secretary of HHS to roll out the ones that work. I wouldn’t sell short the effect this could have on bending down the cost curve over time. Nor sell short the need to make other adjustments, too, like curtailing the mortgage interest deduction, above. (And consider this: especially as the population ages, we may, as a society, choose to spend relatively more on health care, relatively less on, say, enlarging our homes or burning more fuel.) So Drum’s hyperbole – that 98% of the commission’s focus should have been on health care – is a useful perspective to toss into the discussion but, in the end, just that: hyperbole.
Quote of the Day
That I'm their competition.~Famed hedge fund manager Michael Steinhardt, when asked the most important thing an investor could learn from him.
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