Johnny Isakson, United States Senator

Johnny Isakson's Position Statement on the Economy

As our nation continues to struggle through the current economic crisis it is important to stay focused on the recovery aspects. I believe the key to returning stability to the economy lies within the housing market. We must find a way to keep people in their homes, stabilize foreclosures and return consumer confidence to the marketplace. Once stability comes back to the housing market, you will see investors and small business begin to reinvesting in job creating activities, which will put hard-working Americans back to work. I will leave no stone unturned in pushing to address the housing market as the catalyst for turning around our entire economy. Our nation has always demonstrated a strong resiliency and I am confident we will once again bounce back stronger than ever, where hard-working Americans are at the front lines of economic prosperity.

Tax Credits for Homebuyers

I believe our economic problems start with the housing market and that we must restore the house market if we are going to restore our economy. To draw buyers back to the market, I have introduced a proposal to invigorate housing demand and to boost the economy by expanding the first-time homebuyer tax credit passed by Congress earlier year.

Specifically, my legislation would increase the maximum amount of the credit from $8,000 to $15,000 and expand the current tax credit so that it applies to any buyer of any home, not just first-time buyers. My legislation also would eliminate the income caps of $75,000 for an individual and $150,000 for a couple under the current tax credit so that there is no income limit for eligibility. Finally, the legislation would extend the tax credit for one year from date of enactment and would still allow homebuyers to claim the credit on their 2009 tax return for purchases made in 2010.

My legislation has been endorsed by the U.S. Chamber of Commerce, National Association of Realtors, Business Roundtable Housing Working Group and Mortgage Bankers Association.

I am pleased the Senate has twice passed my proposal overwhelmingly, and I will continue to push this tax credit until it is signed into law. I have pushed hard for a non-repayable tax credit for homebuyers because I know that it will work. In the mid-1970s, America faced a similar housing crisis when a period of easy credit and loose underwriting flooded the market with new construction. Interest rates rose, the economy slowed and America was left with a three-year supply of vacant homes. Congress responded by passing a $2,000 tax credit for anyone purchasing a new home for their principal residence. I was in the real estate industry in Atlanta at the time, and the results were clear and swift as home values stabilized, housing inventory dropped and the market recovered.

One of the biggest problems facing the American people today is an illiquid housing market, a decline in their equity, a decline in their net worth and a depression in the housing market that we are obligated to correct if we possibly can. Today, in the United States, one in two sales made every day is a short sale or a foreclosure. That is an unhealthy market, and it is continuing to precipitate a downward spiral in values, loss of equity by the American people and a protracted, difficult economic time for our country.

Our economic crisis started with housing, and our economy will continue to suffer unless we do something now to immediately fix the housing problem.

Economic Stimulus

When President Obama took office in January 2009, he called on Congress to pass a second economic stimulus. The House of Representatives passed its version by a vote of 244-188, but it was a non-starter for me, as it did not address the core problems that created the current economic crisis and devoted far too much money to programs that will not provide the needed stimulus our economy needs.

In the Senate, I worked tirelessly to improve the legislation in a bi-partisan way that was beneficial to the American taxpayer, addressed the root causes of the problem, and provided tangible stimulus to our economy. In this spirit, I offered an amendment that would provide a tax credit in the amount of $15,000 or 10 percent of the purchase price (whichever is less), with the option to utilize all in one year or spread out over two years. The tax credit would be available to all purchasers of any home from date of enactment for one full year. Buyers must occupy the homes for two years as their principle residences, and taxpayers are able to claim the credit against the 2008 tax return. I was pleased that my amendment, which was cosponsored by Senator Joe Lieberman, won unanimous support on the Senate floor. I am certain that this tax credit would provide positive stimulus for qualified homebuyers to purchase homes and will also invigorate credit markets once again.

Unfortunately, during Conference negotiations between the House and Senate on the final stimulus bill, the Isakson-Lieberman homebuyer tax credit that previously won unanimous Senate approval was removed. Instead, the Democrats merely modified the previously passed first-time homebuyer tax credit from the Housing and Economic Recovery Act of 2008, H.R.3221. This dramatically watered down incentive, which passed the Senate on February 13, 2009, and did the following: it extended the availability of their tax credit for homes purchased before December 1, 2009; it retained the requirement that the credit be repaid if the house is sold within three years of purchase; it eliminated the repayment obligation for taxpayers who purchased homes after January 1, 2009; it increased the maximum value of the credit to $8,000, and it removed the prohibition on financing by mortgage revenue bonds. In addition, the Democrats imposed income restrictions, making the tax credit available only to taxpayers with adjusted gross income of $75,000 or less ($150,000 or less in the case of a joint return). Finally, the credit contained in the stimulus bill unfortunately was only for first-time homebuyers purchasing a single-family home.

This economic stimulus package devotes too much money to programs that will not provide the stimulus our economy so desperately needs, and too little money to infrastructure and incentives for investment. I voted no on the stimulus bill H.R.1, and despite my efforts to create a more bipartisan and effective piece of legislation, the stimulus passed the Senate by a vote of 60 to 38.

Troubled Asset Relief Program

On October 1, 2008, the House and Senate passed H.R.1424, the Emergency Economic Stabilization Act. This bipartisan financial package was designed to stabilize credit and restore confidence in U.S. financial markets. Given the information I received in October 2008, there is no doubt that this legislation was absolutely critical at the time to unclogging the financial markets, freeing up credit to the average American and over time restoring the American economy to what it has been and always will be – the best entrepreneurial capitalistic system in the world.

On January 12, 2009, at the request of then President-elect Obama, President Bush transmitted an official request to release the second tranche of funds from the Troubled Asset Relief Program. On January 15, 2009, I voted in favor of “resolution of disapproval” of the release of this second tranche of $350 billion to the Treasury Secretary. I supported the first round of the Troubled Asset Relief Program because at the time it was critical to unfreeze the global credit markets. The Administration, however, then used the money in several different ways than what was planned originally, and the credit markets have not yet responded as strongly we had hoped. As a result, I could not justify supporting the release of the remaining funds. The Senate rejected the “resolution of disapproval” by a vote of 42 to 52.

I understand that this financial crisis is affecting all Americans. I am concerned to hear that banks are reducing individuals’ credit limits. TARP funds authorized by Congress on October 1, 2008, were designed to free up the market in order to encourage lending instead of restricting the ability to exercise. I am confident that as stability returns that banks will become more proactive in their credit lending practices.

Financial Crisis Commission Act

In response to the financial crisis that continues to plague our economy, I introduced legislation with U.S. Senator Kent Conrad, D-N.D., to create a Financial Crisis Commission that will be charged with fully investigating the near collapse of the banking system and the loss of tens of trillions of dollars. It is imperative that we gather all the facts and not rush to legislate as we seek to recover from today’s financial crisis.

On April 22, the Senate overwhelmingly passed my amendment with Senator Conrad to the Senate’s version of the financial fraud bill that would create a Financial Crisis Commission. The House passed the financial fraud bill, 367-59, on May 6 with amended language that included the Financial Crisis Commission. On May 14, the Senate, on a unanimous consent motion, agreed to relatively small changes to the bill and sent it back to the House. On May 18, the House agreed to the Senate’s changes. On May 20, President Obama signed the legislation into law.

The 10-member, bipartisan Financial Markets Commission will be modeled after the 9-11 Commission, which thoroughly and independently investigated the failures leading up to the September 11, 2001, terrorist attacks and made sound recommendations on where we needed to improve to prevent another attack in the future.

Likewise, the Financial Markets Commission will have until December 2010 to investigate all the circumstances that led to this financial crisis. The panel will have the authority to refer to the U.S. Attorney General and state attorneys general any evidence that institutions or individuals may have violated existing laws. At the end of its investigation, the Commission will report its findings and conclusions to the Congress and the President.

This bipartisan Commission will include two appointees each by the Speaker of the House and the Senate Democratic Leader as well as one appointee each from the House Republican Leader, the Senate Republican Leader, the Chairman and the Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, as well as the Chairman and the Ranking Member of the House Financial Services Committee.

The Speaker and Senate Democratic Leader will choose the commission’s chair. The Senate and House Republican Leaders will select the vice-chair. Members of Congress as well as federal and state employees are prohibited from serving on the Commission.

I believe we must not rush to legislate and regulate without all the facts. This legislation will help Congress understand exactly what happened to our financial system and why. I firmly believe a bipartisan and independent commission is best way to investigate what led to the failures in our banking system.