Congress looks to cutting deficit with housing subsidies

The Street recently reported The Joint Select Committee on Deficit Reduction is trying to find a way to use housing subsidies to reduce the federal deficit. The committee is charged with the task of cutting $1.5 trillion over 10 years or cuts to defense and Medicare will automatically kick in.

Robert Litan, vice president for Research and Policy at the Ewing Marion Kauffman Foundation, told the news source that the mortgage interest deduction would be a good source of revenue, and eliminating it from the tax code could could result in gains between $80 billion to $200 billion per year. But the tax deduction for homeowners shows benefits for the middle class.

"Instead, the idea of Simpson-Bowles of putting an overall cap on personal deductions - including home mortgage - is an idea that may have legs," Litan told the news source.

According to the news source, the Treasury Department has been increasing fees on guaranteeing mortgage-backed securities by Fannie Mae and Freddie Mac. The goal is to decrease the debt the government-sponsored entities owe the Treasury, thus decreasing the deficit.

Fannie Mae recently announced it is seeking an additional $5.1 billion from the U.S. government after it lost $2.9 billion in the second quarter of 2011 and failed to make $2.3 billion in dividend payments to the U.S. Treasury. The government-sponsored enterprise blamed its losses in the second quarter on a weak housing market and high unemployment keeping consumer confidence down. 

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