On the heels of ""Standard & Poor's"":http://www.standardandpoors.com/SPComIPResolver controversial downgrades for U.S. debt ratings, Congress passed the deficit reduction axe to a bipartisan, six-member ""super-committee"" for each chamber, with both parties finally naming lawmakers to the commission Thursday. Capitol watchers say important housing laws and provisions may await the congressional guillotine, with the mortgage tax rate deduction, mortgage debt, and other housing-related giveaways in line.[IMAGE]
House minority leader ""Rep. Nancy Pelosi"":http://www.pelosi.house.gov/ (D-California) tied off her side of the lower chamber's committee by tapping ""Rep. James Clyburn"":http://clyburn.house.gov/ (D-South Carolina), ""Rep. Chris Van Hollen"":http://vanhollen.house.gov/ (D-Maryland), and ""Rep. Xavier Becerra"":http://becerra.house.gov/ (D-California), who will take turns negotiating with Republican colleagues ""Rep. Dave Camp"":http://camp.house.gov/ (R-Michigan), ""Rep. Fred Upton"":http://upton.house.gov/ (R-Michigan), and ""Rep. Jeb Hensarling"":http://hensarling.house.gov/ (R-Texas), according to ""_Bloomberg News_"":http://www.businessweek.com/news/2011-08-10/debt-panelists-draw-skepticism-on-partisanship-tax-stances.html. The Senate side will include ""Sen. Jon Kyl"":http://kyl.senate.gov/ (R-Arizona), ""Sen. Pat Toomey"":http://toomey.senate.gov/ (R-Pennsylvania), and ""Sen. Rob Portman"":http://portman.senate.gov/public/ (R-Ohio) as well as ""Sen. Patty Murray"":http://murray.senate.gov/public/ (D-Washington), ""Sen. John Kerry"":http://kerry.senate.gov/ (D-Massachusetts), and ""Sen. Max Baucus"":http://baucus.senate.gov/ (D-Montana).
Pelosi offered encouraging remarks in a ""statement"":http://pelosi.house.gov/news/press-releases/2011/08/pelosi-joint-select-committee-must-put-prosperity-for-the-american-people-first.shtml, saying the ""Joint Select Committee has a golden opportunity to take its discussions to the higher ground of America's greatness and its values. It must meet the aspirations of the American people for success and keep America number one.""
She outlined several areas that she said deserves the super committee's focus, including deficit reductions helpful to job creation, economic growth, and wage productivity.
The super committee appointments follow a recent Senate proposal that aims to progressively slash the mortgage tax rate deduction. Senators say that trimming the deduction could raise as much as $1 trillion in revenue and slash deficits by about $4 trillion over the next decade. The cost for homeowners: approximately $1.2 trillion in tax hikes over 10 years.
And the $1.2 trillion question: Will the Senate super committee take an axe to the mortgage tax rate deduction?
Edward Pinto, a resident fellow with the ""American Enterprise Institute"":http://www.aei.org/, seems to think so. He says that other tax laws known to benefit the housing industry ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô capital gains taxes, property taxes, home equity loan rates, among others ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô may also have their day in the bicameral hot seat.
Lawmakers ""will probably have more hearings, discussions, and bills they introduce"" as Congress seeks to gouge over $14 trillion out of the national debt, he says.
Not many Americans would agree with the reductions, according to a recent ""_New York Times_/CBS poll"":http://www.nytimes.com/interactive/2011/06/30/business/poll-home-ownership.html.[COLUMN_BREAK]
The poll, released last month, held some 90 percent of Americans opposed deductions in mortgage interest rates, alongside other numbers reflecting that most of the nation's homebuyers value homeownership as an important asset.
Neither, apparently, would the ""National Association of Home Builders"":http://www.nahb.org/ (NAHB), which lobbied House lawmakers back in March to co-sponsor a resolution favoring the mortgage tax rate deduction in response to the Senate proposal. Some 40 lawmakers agreed to co-sponsor the bill.
Commenting on the proposed House resolution in a ""statement"":http://www.nahb.org/news_details.aspx?newsID=12232, NAHB chairman and home builder Bob Nielsen said it ""acknowledges the importance of homeownership to individual households, the economy and the nation,"" adding that ""[t]he mortgage interest deduction has been a cornerstone of the nation's housing policy for almost a century, and it is vital to homeownership and healthy housing markets.""
The tax rate deduction may not be the only benefit that goes, says Mark Calabria, director of financial regulation studies at the ""Cato Institute"":http://www.cato.org/. From his office in Washington, D.C., he says that he thinks other housing-related giveaways, such as the low-income housing tax credit and rental depreciation schedules, may also fall under the axe.
Pinto says that super committee lawmakers may also set agency debt in their sights ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô something he says he agrees with. ""It is not good for the government to be taking 95 percent of all the credit risk in the country from mortgages,"" he says.
He chalks up the problem to a system of competition between Treasury debt and government-backed mortgages, which, in turn, exacerbate the national debt ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô the same crisis begetting S&P debt downgrades and action from Congress in the form of super committees.
""We've now got to this problem where our own Treasury debt is so large and mortgage debt relative to it is so large that buyers are interested in both Treasury debt and mortgage debt with government guarantees,"" he says.
With gridlock in the nation's Capitol at all-time highs, analysts say the super committee may suffer from the same disputes that frustrated public officials ahead of the August 2 debt-ceiling raise. If the committee fails to come to a consensus, the law signed by President Barack Obama creating it will trigger instant cuts in debt, services, and tax deductions across the board.
How important is the deficit to the housing industry and economy at large?
Speaking to _MReport_, Mike Fratatoni, VP of research and economics for the ""Mortgage Bankers Association"":http://mbaa.org/default.htm, says an unaddressed deficit will force the federal government to borrow more and erase gains from the recovery over the next several years.
""Under the current trajectory, U.S. debt will pose a real threat to the economy in just a few years,"" he says. ""You're going to have the federal government borrowing more, and that will impact borrowers and investors.
""People can debate the fine points but the overall trend is troubling, and I think it's important for policymakers to do something,"" he says.