Thursday, February 05, 2009
Senate adds $15,000 homebuyer tax credit to stimulus bill
Here's an interesting item for homebuyers, who will benefit from lawmakers' efforts to boost the housing marketBy DAVID M. HERSZENHORNThe New York TimesWASHINGTON — The Senate on Wednesday voted to expand the economic stimulus package with a tax credit for homebuyers of up to $15,000, a provision championed by Republicans as addressing a root cause of the recession. The vote to add the tax credit, at a cost of about $18.5 billion, came as Senate leaders seemed to be nearing completion of negotiations. The majority leader, Senator Harry Reid of Nevada, suggested that a final vote on the stimulus plan could come on Thursday.
Moderate lawmakers in both parties are pushing to reduce the overall cost of the measure and to focus it more tightly on provisions that will quickly spur spending and create jobs. The vote came as President Obama met with centrist lawmakers to address concerns about the package.
Mr. Obama, while expressing willingness to compromise, also issued a warning to some Republican critics who have said they will press for major changes to the bill, including the removal of many spending programs in favor of wider tax cuts.
“I’ve heard criticisms of this plan that echo the very same failed theories that helped lead us into this crisis, the notion that tax cuts alone will solve all our problems, that we can ignore the fundamental challenges like energy independence and the high cost of health care and still expect our economy and our country to thrive,” he said.
“I reject that theory,” Mr. Obama continued, “and so did the American people when they went to the polls in November and voted resoundingly for change. So I urge members of Congress to act without delay.”
And, as if taking a cue from their president, Senate Democrats on Wednesday evening used their newly strengthened majority to swiftly reject a series of Republican amendments intended to cut spending or broaden the tax package in the stimulus bill.
Presuming Senate Democrats muscle the bill through, the final legislation must be reconciled with the $820 billion measure approved last week by the House.
The tax break for homebuyers, which the Senate approved by voice vote without opposition, was the second amendment in two days intended to encourage consumers to make major purchases. On Tuesday, the Senate approved a tax incentive for car buyers, sponsored by Senator Barbara A. Mikulski, Democrat of Maryland, that would allow the deduction of sales tax and loan interest on purchases made this year.
But while both of those incentives were applauded by lawmakers who said that the bill should quickly induce consumer spending, some economists said they were short-sighted and lacked the forward-thinking approach Mr. Obama has demanded.
Adam Posen, deputy director of the Peterson Institute of International Economics, said that homebuyers would have trouble accessing loans because of the continued tightness in the credit markets and that the car buyer incentive fell short by not focusing on fuel-efficient vehicles, and that the money might be better directed at mass transit.
“They are also structurally unsound,” Mr. Posen said of the two provisions, “reinforcing the attempts of industries that are too large — housing construction, automobile production — to survive based on government distortions.”
He called them both “terrible, pandering ideas.”
But Senator Johnny Isakson, Republican of Georgia, a former real estate broker, who was the prime sponsor of the homebuyer credit, said it was modeled after a similar, $2,000 homebuyer incentive that helped lead the country out of recession in 1975.
“We do have a history in this country with housing and it goes back to the crash of 1974, which actually in terms of inventory and price declines was comparable to what’s happening now,” Mr. Isakson said at a news conference.
“Within one year of the inception of that tax credit, two-thirds of the available inventory that was on the market was gone. The market moved back to a balanced inventory, values stabilized and things became very healthy. The only reason I know all of that is I was selling houses in 1974, that’s what I was doing to feed my family and make a living.”
The tax credit would give buyers 10 percent of the price of a primary residence bought within one year, up to $15,000, and is intended to stabilize plummeting home prices, which caused a wave of foreclosures and led to the near collapse of the financial system as Wall Street firms wrote down billions in mortgage-backed assets.
With Wednesday’s additions, the cost of the Senate package has climbed well above $900 billion — the limit that Mr. Obama has set for the final legislation. Intense negotiations seemed likely over how to reduce the price tag.
At the White House on Wednesday, Senator Olympia J. Snowe, Republican of Maine, personally delivered a list of cuts, totaling about $100 billion, that she said should be made.
Ms. Snowe met one-on-one with Mr. Obama in the Oval Office, and the president met later in the day with Senator Susan Collins, Republican of Maine, and Senator Ben Nelson, Democrat of Nebraska. Ms. Collins and Mr. Nelson have been working on a substitute bill that would strip out spending that they said would not provide an immediate jolt to the economy.
Ms. Snowe, leaving the White House, said it was imperative that “every provision has a job creation component.”
Initiatives that critics hope to remove from the bill include $50 million for the National Endowment for the Arts, $14 million for cyber security research by the Homeland Security Department, $1 billion for the National Science Foundation, $400 million for research and prevention of sexually transmitted diseases, $850 million for Amtrak and $400 million for climate change research.
Jeff Zeleny contributed reporting.Scott Chappell and Brian Bean
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