Thursday, August 6, 2009

U.S. Senator Johnny Isakson (R-GA)
Floor Statement on Expanding the Homebuyer Tax Credit
Remarks as Delivered on the Senate Floor

Madam President, I want to address this amendment for a moment, and I want to set the stage for the amendment. This amendment was first offered by myself and others in January of 2008. It is an amendment that would provide a $15,000 income tax credit to a family that purchases and occupies as their home any single-family dwelling in the United States, regardless of their age, their income, or their State. Six months later, in the middle of 2008, the Finance Committee did pass a $7,500 tax credit which was an interest-free loan, trying to incentivize first-time home buyers to come to the market. But because it was a loan, it didn't do anything. So in December of last year, we changed it to an $8,000 tax credit for only first-time home buyers with incomes less than $75,000 for individuals and $150,000 for couples.

It has worked. In fact, if we look at sales figures from January through through July, we will find that entry-level housing, that housing under $180 to $200,000, has actually begun to recover. But if we examine the marketplace, we find terrible numbers, such as the following: 47 percent of all the homes in the United States of America are worth less than what is owed upon them. That is a tragedy. Worst of all, in the month of June, 57 percent of all sales in America were foreclosures or short sales; 43 percent were arm's-length sales. The housing market continues to flounder. Values continue to decline, and equities continue to dissipate.

This amendment is added to the cash for clunkers bill for a very important reason. As Senators Stabenow and Levin will tell us, the up-to-$4,500 incentive to buy a new, fuel-efficient car by trading in an old gas-guzzling car worked. It worked so well that in 1 week the money disappeared.

That demonstrates what I have known all my life. Positive incentives cause positive results. The problem is, though, it was not the automobile market that disappeared first in America. It was the collapse of housing in the last quarter of 2007, which accelerated in early 2008, which pulled away the equity, reduced the amount of credit folks had and caused car loans to go bad and people to not buy cars. The only way we will ever turn the U.S. economy around is to return the biggest engine of the U.S. economy and that is the construction industry and single-family construction and single-family homes.

Right now we are stagnant. The problem is not with first-time buyers. It is with move-up buyers. It is the fellow who has transferred from Atlanta, GA to Hartford, CT who can't sell the house in Atlanta because there is no buyer for it and can't buy a house in Connecticut because he doesn't have the equity out of Atlanta. This tax credit does not take other people's tax money and give it to you to buy a house. It gives you a credit against the taxes that you owe. Rather than buying a depreciable asset such as a car, you are buying an appreciable asset such as real estate. It has a multiplier effect.

When we offered this amendment last year, it was estimated by one economist that it would create 700,000 sales in one year and 685,000 jobs. If there is anything America needs, it is just that. So just as cash for clunkers has demonstrated that positive rewards can cause positive actions on behalf of the consumer, so too would the tax credit do the same.

By the way, the cost of this credit is estimated by CBO at $34.2 billion. In January of 2008, they said that is too much money. Since then, we have spent $85 billion on AIG, $700 billion on TARP, $787 billion on a stimulus, and we are still floundering; and $34 billion sounds like a pretty cheap price to address what is the principle problem in the economy. This amendment says it is paid for. The Secretary of the Treasury is authorized to transfer from the stimulus money to the Internal Revenue Service the claims to cover the tax credits filed by homeowners when they pay their taxes for the houses they have purchased.

Finally and most importantly, there is a rude awakening coming in America, and it is coming on November 30, 2009. That is when the existing tax credit for first-time home buyers goes away. The last incentive for an arm's-length sale will have disappeared. If we think we have economic difficulties now, wait until that happens. But with this amendment, we take, from the date of its passage 1 year ahead, which would be sometime in August of next year, a $15,000 nonmeans-tested credit to replace the $8,000 means-tested credit.

If the economists are right--not me--it will do the one thing the U.S. economy desperately needs. It will generate a legitimate housing market. Values will stabilize. We will reflate in the value of homes. People will buy more cars because of that than they will because of cash for clunkers. So we want to take the evidence of the success of this program, take what we already know has worked in a means-tested manner in first-time home buyers, and apply it to every American, because every American is suffering in this economy. Every American deserves us to look for positive incentives to bring the economy back, restore their equity, improve their value, and return us to a vibrant economy. I hope the men and women of the Senate will adopt this amendment.

To those who are going to say, we can't do it because the House is gone, I ask this question: If we were talking about health care and one body had passed it, the House would be back here in a New York minute. They could come back in a hurry, and we know it.

Restoring our economy is important. Recovering the equity of our homes is important. Repaying the American people for the dissipation of our marketplace is important. The home buyers tax credit will do it. I urge my colleagues to vote yes on the Isakson amendment.