It has been clear that reinflating the housing bubble and depreciating the massive consumer debt associated with it has been a big part of the strategy of the late Bush and early Obama financial teams (and of Bernanke, who has straddled them both). I don't know economics at this scale well enough to know if the decisions have worsened or softened the damage of last fall's panic and collapse; my guess is that it has mitigated some of the damage for now, but I worry about the long-term impact.

Regardless, from a financial perspective, to own a home or not is a decision that is much better considered from the perspective of a consumer than an investor. In general, you're better off investing in low expense index funds than you are buying a home if you want to invest your money wisely. I don't know that fewer young people buying homes is a bad thing.

When I moved to where I am now, I rented for about a year. It was something like $600 a month and utilities.

One day I came home and couldn't fail to notice the bit For Sale sign in the front yard, which meant that each morning I woke up I knew that I could live there for the next thirty days. Not being comfortable with having to get my shit together in any given month, I decided to buy a place.

I found the house I have now (killer view of the Columbia River Gorge, thank you very much) for a price I could afford, and I have yet to be late on a payment.

Where's my tax credit for meeting my contractual obligation to my lender? I'd have been better off getting more than I could pay for, and have Amy backfill the rest. I must be an idiot.

Where's my tax credit for meeting my contractual obligation to my lender?

Your mortgage interest deduction does not count?

Tax deduction != tax credit.

Good. Let's get rid of the homeowner's mortgage interest tax deduction, the way a real libertarian would. It inflates prices too.

All aboard!

Oh? What happened, you "libertarians?" Did you decide it was better to be in the Liberace Society?

I am not surprised.

I'm in favor of deductions for things that benefit the market or society at large.

Child deductions are beneficial, because it encourages the creation of the next generation. If people stopped having children, where would we be 30 years from now?

I favor deductions for business expenses because it cuts down on overhead to create additional revenues which fuels business expansion & employment increases.

I favor deductions for charitable giving because it encourages social responsibility and it does directly what government is far more indirect about, seeing to the needs of those IN need.

There are good reasons to offer deductions, but each one should be carefully assessed.

As it currently stands, anyone with mortgage interest is allowed to use it for a deduction, no matter what their standing with their lender.

The proposals, as I understand them, is to give some relief to those that figured they could buy a half million dollar house on their $65,000 annual salary, with no money down.

Why do financial fuckups get a break, and I just have to keep making my payments? I should have bought that post and beam job, the one with the big windows, and when I couldn't pay for it, thrown myself upon the mercy of the congress.

Oh, and just FYI, that mortgage deduction doesn't really add up to much for me. I think I could do without it and not change my life all that much. 'course, I only borrowed what I could afford to pay back, so my interest isn't all that much compared to my taxable income.

"Child deductions are beneficial, because it encourages the creation of the next generation. If people stopped having children, where would we be 30 years from now?"

Children are not deductions. They are exemptions. A tax credit is not the same as a deduction either. A deduction is worth about 10-33 percent of the actual expense you deduct depending on your tax bracket. A credit, on the other hand is applied directly or refunded in full and you don't even need to owe any taxes or have any deductions to get it. By the way, the standard deduction (which did not exist in the 1980s) had virtually wiped out the usefulness of a mortgage interest deduction for prudent people since you must clear the standard deduction threshhold, which is almost a thousand a month in interest or other deductable expenses before you begin to benefit from it, if you are a married couple fling jointly. Thresholds are somewhat lower for those filing as single but if they are prudent, the same rules apply. Many fewer people would be voting for Democrats if two things happened; One, they learned how to do math, and two, actually read and understood the parts of the tax code that applies to their situation.
Isabel

"As it currently stands, anyone with mortgage interest is allowed to use it for a deduction, no matter what their standing with their lender."

True but the interest you claim must have been paid in the year that you wish to claim the deduction. You can't accrue thousands of dollars in interest, not pay your mortgage payments and then claim the accrued interest which you didn't actually pay to the lender, as a tax deduction (unless you are part of Obama's cabinet in which case, the rules don't apply.) :-)

I'd gladly give up my home interest tax deduction for a flat 21% city/state/fed tax rate for any income above poverty income level.

How big the region is up in the air, but I suggest it stretch from Boston, NYC to Ohio. that would be about $35K.

Either way, we'd be better off.

Thank you Amy, I've been saying this for years.

I wish that there were no such things are mortgages, and people had to pay cash for houses. The mortgages flood the market with imaginary money, driving the house prices way, way, way up.

I wish things just cost what the cost, with no imaginary fake money driving up the sticker price.

Whatever writes: "I don't know economics at this scale well enough to know if the decisions have worsened or softened the damage of last fall's panic and collapse; my guess is that it has mitigated some of the damage for now, but I worry about the long-term impact."

I'm not a macroeconomics expert either, but I'm pretty sure that continuing the practices that caused the problem in he first place is probably not a good idea. At best, I think the rescue effort has only postponed the day of reckoning a bit longer. And I'm afraid that it will make it worse when that day does come.

"I don't know that fewer young people buying homes is a bad thing."

Over the long term, I think it is. But in the current market, you're probably right. Young people don't need to be saddled with huge debt on overinflated real estate. When I graduated from college, it was a similar situation -- prices weren't that bad, but mortgage interest rates were insane, upwards of 18%. I waited for seven years, until rates plunged, before I bought my first house.

Good. Let's get rid of the homeowner's mortgage interest tax deduction, the way a real libertarian would. It inflates prices too.

Absolutely. Get rid of deductions across the board. Massive simplification.

How about everybody pays for their choices and business investment deductions will be the only deductions allowed?

Lots of people are willing to say "Get rid of all deductions except for my favorite one," but they have different favorites, which is what led to our current too-complicated system. The only way to get critical mass is to clear them out across the board, so everyone can say "I may not get my favorite, but at least we got rid of all those others too."

Whats worse is that I keep getting papers in the mail saying I can get an FHA loan for my house in excess 250K. My house is, or supposedly was when I bought it, worth 110K. Exactly what are they going to confiscate to sell if I default, my children.. I am guessing that if I defaulted I would have to somehow pay off the remainder of my loan and they would get to sell the house again.. I could be wrong..

"Their children cost the rest of us plenty in tax dollars for schooling."

MY home-schooled children don't cost anyone a plug nickle. Just me and my hubby. And yes even with 6 kids and a seventh on the way we pay our fair share of taxes.

"even with 6 kids and a seventh on the way"

Now THAT is funny.