(Community Matters) During the Q&A in posting below, Texas Republican Congressman Jeb -> Hensarling from Dallas and East Texas, asked the President about deficits, suggesting that government debt was tripling under President Obama
President Obama corrected Rep Hensarling, reminding him that: when this administration came into office, the deficit was already $1.3 trillion with $8 trillion more of debt projected for the next decade because of unfunded mandates, programs and other commitments.
When Republicans took over the White House and Congress in 2000, they enjoyed a surplus of $200 billion. They enacted 2 tax cuts that weren’t paid for, passed a prescription drug plan (the biggest entitlement program launched in decades and didn’t pay for it) and failed to pay for 2 wars. Additionally, the deficit increased by another $3 trillion as a result of the economic slowdown, even before Obama was sworn into office. Legislation passed under Obama, has added $1 trillion to the deficit.
Ok, we agree – unsustainable deficits and spending need be brought under control. But, if the conversation is about fiscal responsibility, if it deteriorates into blame, we start with what this administration has inherited and who has acted most fiscally irresponsible. Though, that’s much less productive than moving forward.
We must also be sensitive to the economic recovery. Our relapse in the Great Depression happened when Washington prematurely reacted to the deficits and retreated on economic stimulus. And, it’s a reality that a progressive agenda won the election – we will enact healthcare reforms, environmental protections and investment in infrastructure & education. Taxes will increase – primarily to pay for the $9 trillion+ inherited deficit.
Community Matters 
Eugene – people often bristle when they hear the term “tax increase.” The cry often goes out “raise other people’s taxes, not mine…” Or we hear “tax increases will reduce incentives and create distortions.” The latter argument is the strongest one – taxes do destroy wealth, it is what economists call “deadweight loss” of taxes.
So, when we talk of increasing government revenues we have to take into consideration these downsides of raising taxes. Therefore, one of the least distortive ways of raising revenues is to do it in a way that either corrects a distortion that already exists or seeks in create some other positive outcome (other than the government getting more revenue).
With this in mind one source of revenue the federal government should look at is repeal or greatly scaling back the home mortgage interest deduction.
What this deduction has done is it has encouraged the building of bigger and bigger homes (that use more energy and more natural resources) and drain capital away from other sectors of the economy (R&D, education, etc).
Of course those in the home building industry will be hurt – many are already unemployed – but the benefit to society of removing this distortion along with the revenue it generates for the federal government is probably worth it.
Keep the interest deduction for the working poor, but end it for those in the middle and upper middle class. That will negative impact you and me Eugene, but it is probably the correct thing to do.
I love that idea Michael. We don’t owe much on our house anyway :). And, I’m willing to pay more anyway as long as we’re assured of good fiscal stewardship
I love that idea, too. The current system is arguably unfair and certainly encourages people to buy bigger houses than they need.
This commonsense proposal, however, could never be made by a politician. Many Americans seem to think that the government’s job is to make real estate prices rise.
Next thing you know he’ll blame that hairpiece on Obama!