A proposal to eliminate the mortgage interest tax deduction is doomed to fail, according to N. Gregory Mankiw, an economics professor at Harvard University and chairman of President George W. Bush's Council of Economic Advisors from 2003 to 2005.
In an interview with the radio news show ‘Bloomberg Surveillance,’ Mankiw noted that proposals presented on Nov. 10 by Erskine Bowles and Alan Simpson, co-chairmen of President Obama's deficit commission, will run into several political roadblocks, especially in regard to eliminating tax deductions for home mortgage interest.
‘The home mortgage deduction is politically sacrosanct,’ Mankiw said. ‘But if you really think about the merits of it, economists have long suggested that it's not good for the economy. Even if you think about it from the standpoint of fairness, when you subsidize homeowners, that's pretty much the same as penalizing renters, and there's nothing ignoble about renting.’
Mankiw added that the increasing level of partisan rancor in Washington will create further obstacles to bringing this proposal forward.
‘It's a long political road here, but I think they have some very good ideas,’ Mankiw said. ‘The question is whether this is politically saleable. Right now, the mood in Congress is not toward any sort of bipartisan agreement, and it's going to require that [in order] to do anything as major as a big deficit-reduction package like the Bowles-Simpson plan.’