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Senate Passes Stimulus Bill, Real Estate Industry Reacts
NAHB estimates that the $15,000 tax credit would boost home sales by almost 500,000
RISMEDIA, February 11, 2009-(MCT/RISMedia)-The Senate, with only scant Republican support, passed an $838 billion economic-stimulus plan Tuesday that would provide significant tax breaks for new car and home buyers but sharply trim billions in aid that states have been seeking. The vote was 61-37.
The House of Representatives passed similar legislation last month, and a negotiating committee of top congressional tax and budget experts plans to begin reconciling differences immediately.
Their goal is to produce legislation that costs no more than $838 billion -the House version was $819 billion - by the end of the week, so that President Barack Obama can sign it Monday, on Presidents Day.
The Senate vote came on a historic day, as the Federal Reserve and Treasury Department unveiled details of their effort to bolster the banking industry and credit markets and Obama took his stimulus campaign to Fort Myers, Fla., which has been rocked by the mortgage foreclosure crisis.
At the Capitol, the drama now shifts to the negotiators, and the final Senate debate Tuesday illustrated the difficulties that they face.
Part of the problem is political, as the vote reinforced the notion that despite Obama’s efforts at bipartisanship, the legislation is very much a Democratic bill.
Democrats hailed the bill as historic and necessary. “Every generation must face up to its own challenge. This economic emergency is ours,” said Senate Finance Committee Chairman Max Baucus, D-Mont. “Let us pass this bill and rise to the economic challenge of our generation.”
Most Republicans, however, dismissed the measure as loaded with spending that would do little to stimulate the economy. Sen. Kay Bailey Hutchison, R-Texas, noted that the bill costs “$1 billion per page.”
Republicans railed against such inclusions as $200 million to consolidate the Department of Homeland Security in Washington, $100 million for grants to small shipyards and about $1 billion to improve parks.
“In every version of the stimulus we’ve seen, wasteful spending has attracted the most attention,” said Senate Republican leader Mitch McConnell of Kentucky. “But even more worrisome to many is the permanent expansion of government programs.”
Republicans, though, control only 178 of the House’s 435 seats and 41 of the 100 Senate seats, giving them little say in the final product.
More crucial will be the three Republican senators who became the only Republicans in either house of Congress to vote for a stimulus bill, Maine’s Olympia Snowe and Susan Collins and Pennsylvania’s Arlen Specter.
They agreed to join the Democrats after winning agreement to cut about $110 billion from the original Democratic-authored Senate package last week.
They’ve signaled that they’re reluctant to see those cuts restored, however, which could prove a problem for House Democrats.
Collins, for instance, has made it clear to the White House that, as she put it, if the bill ends up with “a lot of the unnecessary expenditures crammed back in it” and less tax relief, “the Democrats will lose my vote.”
House Speaker Nancy Pelosi, D-Calif., has called some of the Senate cuts “very damaging,” suggesting that negotiations will be rough.
NAHB: $15,000 Home Buyer Tax Credit Will Get U.S. Economy Back on Track
In a statement released by the National Association of Home Builders (NAHB), the organization applauded Senate passage of economic stimulus legislation.
“The enhanced $15,000 tax credit offers a powerful incentive for home buyers to get off the sidelines and represents the best opportunity for economic recovery,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “Congress must make sure that the full $15,000 tax credit remains in the final stimulus plan.”
The bipartisan amendment to the stimulus package, offered by Sens. Johnny Isakson (R-Ga.) and Joe Lieberman (D-Conn.) and approved by unanimous voice vote, would create a $15,000 home buyer tax credit available to all purchasers of a principle residence for one year after its date of enactment. The tax credit would not have to be repaid and buyers could claim it against their 2008 and/or 2009 tax returns.
The $15,000 home buyer tax credit would replace and sunset a much narrower tax credit that was enacted last year. Available only to first-time home buyers, the current $7,500 tax credit works like an interest-free loan that must be repaid over a 15-year period. It is set to expire on July 1.
Extending and expanding the home buyer tax credit will spark the activity the economy needs to stop shedding jobs and begin creating them, said Robson.
“Increasing demand for housing will create jobs and help reduce excess inventory, stabilize home values, mitigate foreclosures, bolster consumer confidence and set the stage for a broader economic recovery,” said Robson.
NAHB estimates that the $15,000 tax credit would boost home sales by almost 500,000, create more than 255,000 jobs, generate $12.3 billion in wages and salaries and increase federal, state and local tax revenue by $8.7 billion.
The Senate bill also includes several other provisions that will help small businesses and bolster the housing market.
The legislation would:
- Increase bonus depreciation and Section 179 small business expensing;
- Allow a five-year carry back for net operating losses;
- Provide $2 billion in gap financing for the Low Income Housing Tax Credit (LIHTC) program and accelerate credit claims for LIHTC investors;
- Provide up to a 10-year deferral for income taxes arising due to cancelled or restructured business debt;
- Extend the New Markets Tax Credit; and
- Provide an Alternative Minimum Tax patch for 2009.
To lead the economy back to higher ground, Robson said that House and Senate conferees must ensure the $15,000 home buyer tax credit remains intact and is part of the final legislative package.
“The $15,000 housing tax credit has strong support on Main Street and will start working the day the bill is signed into law,” he said. “It offers the best chance to revive housing and the U.S. economy.”
‘Treasury’s New Plan Is Right on Target’
The Real Estate Roundtable also enthusiastically supported the sweeping efforts aimed at removing illiquid assets weighing down the nation’s financial institutions and threatening the economy.
“The Obama Administration’s comprehensive approach to stabilize financial markets by bringing liquidity back to the economy through responsible fiscal policy is right on target,” said Real Estate Roundtable CEO Jeffrey DeBoer.
[The] plan announced by Treasury Secretary Geithner [yesterday] dramatically expands the Fed’s Term Asset-Backed Securities Loan Facility (TALF) to include new commercial real estate securities. “The Treasury’s announcement today is an extremely positive step toward reconnecting the credit markets for the huge commercial real estate sector. Extending the Term Asset Backed Securities Loan Facility to newly originated AAA securities backed by commercial real estate loans is a prudent and common sense reform that will have direct, positive effects for the economy. One especially important element of the plan is how it would attract private capital, which is essential to strengthening the economy and minimizing the impact on the taxpayer,” said DeBoer.
He added, “Treasury is pursuing the right strategy now to help avoid a potential foreclosure disaster in the commercial real estate sector, which is a cornerstone of the economy. With hundreds of billions of commercial real estate mortgages maturing this year alone and no functioning credit market, many people are concerned that borrowers will technically default. Left unchecked, this could have extremely negative implications for local communities, jobs, and investors.”
Real estate directly and indirectly generates economic activity equivalent to about 20 percent of GDP. It creates some 9 million jobs and generates millions of dollars in federal, regional and local tax revenue. Credit to commercial real estate markets from many sources has been paralyzed and needs to be revived. “How and when the slide in property values is abated depends a great deal on policy actions in Washington, and we should pay careful attention to the details to make sure we get this crucial part of the plan right and the program can reach its full potential. Today’s announcement, coupled with the job creating stimulus bill being debated on Capitol Hill, starts to chart a path out of the current downward economic spiral. Additional steps may be necessary, but the essential foundation for restoring a credit market is now being laid,” said DeBoer.
Breaking It Down by State
States took the biggest hit in the Senate package, as members halved the House’s $79 billion State Fiscal Stabilization Fund, aimed at helping states pay education bills, and eliminated a $20 billion school construction fund.
The Senate offers more generous tax breaks, notably $70 billion to help some taxpayers avoid the alternative minimum tax this year, a tax credit of $15,000 or 10 percent of the purchase price of a new home and a tax break for new car buyers.
House Majority Leader Steny Hoyer, D-Md., conceded that the AMT fix probably will stay in the final bill- it has long had broad support- but the fate of the car and home tax breaks is uncertain. States and education groups also are lobbying fiercely to get money restored.
Looming over the deliberations is uneasiness about whether the bill will prod the economy significantly.
A Congressional Budget Office analysis of the Senate measure found that it would add $214 billion to the projected $1.2 trillion fiscal 2009 deficit, and add another $441.2 billion next year.
© 2009, McClatchy-Tribune Information Services.
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