Follow the link above to an ongoing debate about trading off the mortgage interest deduction against personalization of Social Security. Here is my letter published there today.
It seems that David Hogberg does not get the "vision thing." His plea for incrementalism ignores the desire for fairness and moral clarity on the part of the electorate. One reason to eliminate the home mortgage deduction is as part of a trade off to save Social Security. That is a big issue where the voters might consider making some compromises. The home mortgage deduction goes exclusively to homeowners. Those who rent or are saving to buy their first home get nothing. Is that fair to the younger generations who already are charged with supporting Social Security? NO!!! But why do anything with housing? Because the best place for the timid to put their personalized Social Security funds is into their own homes. That is the investment they know best. It is likely to be the largest investment they will make in their lifetimes. And it is a tangible asset that has real palpable worth. They do not need to withstand the vagaries of Wall Street. Let the mortgage brokers do that. Now it might be desirable to sell the plan by adopting a phase-in period. Allow the homeowner to deduct mortgage interest on a declining scale. Reduce the deduction 10% a year until phase out after ten years or re-financing of the loan, whichever comes first. Since the average term of a mortgage is well below ten years, this will allow the homeowner to adapt without undue strain. Vision, fairness and practicality; that is the ticket!
8:12 AM Update: Today's Wall Street Journal Capital column by David Wessel (www.wsj.com
subscription required) has the three Democratic camps:
1) The Ostrich (AKA the Kerry Campaign) - there is no problem.
2) Rebecca of Sunnybrook Farm - Growth in the economy will solve the problem for us (maybe so under Republican direction!).
3) The Diamond-Orszag raise taxes & cut benefits plan. Mr. Wessel notes that Peter Diamond is with MIT. While MIT is world renown for its technology, economics is the "dismal science". In economics I'm inclined to sing "M-I-T-K-E-Y..M-O-U-S-E". This plan is to raise the total payroll tax from the current 12.4% (split between employer & employee) to 13.7% in 2045 and then 15.2% in 2075! They also "reduce benefits for those born after 1949 to reflect lengthening life expectancy".
Somehow I don't think Diamond-Orszag is going to be as popular with Generation X as my plan!