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Tom Coburn, Mark Steyn and Rick Santorum

Thursday, March 3, 2011  |  posted by Hugh Hewitt
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Three transcripts coming tonight,all of which will be posted on the transcripts page later.

But the Tom Coburn conversation will also be here on the front page because of his indication that the bipartisan working group of senators think it is a good idea to limit the home mortgage deduction. If passed this would pretty much kill the chance of any economic recovery in California as home prices fell even further in response to the real loss of value represented by the slashing of the deduction. If the senators have talked themselves into this, they really don’t have any idea how the economies in California and other high value home states work, or they don’t care. Balancing the budget with is really a massive tax hike that erodes conserved wealth and owner-investing is among the worst ideas on the table, and crippling an already reeling home building industry that typically leads the U.S. out of economic recession and growth doldrums is worse.

Excerpt from the Coburn transcript:

HH: When we last spoke a few weeks ago, there was an effort, a bipartisan effort to get together and come up with a proposal across some of these things. Has that advanced in the Senate any further?

TC: It’s working. We meet twice a week, and we’re working on it.

HH: And when…how will that be rolled out? Will that be in conjunction with the House budget?

TC: No, it’ll probably be rolled out after we get a blessing that the administration will swallow hard and take it. But even if they don’t, once we negotiate it in the Senate, that’s what we’re going to put on the Senate floor.

HH: Will a federal VAT tax be a part of that, Tom Coburn?

TC: No, sir. Absolutely not.

HH: What about the end of the housing deduction?

TC: No, what there’ll be is there’ll be a limitation on it for one home, and a limitation on the size of the home, probably, $500,000 dollars.

HH: Oh, my gosh. Won’t you kill the real estate market?

TC: I don’t think so.

HH: Oh, boy, that’s going to be tough to swallow. So you’ve got Republicans who agree with that?

TC: Well, you know, the point is that that’s what the Deficit Commission had, so that’s what we’re starting from. We’re not talking about any of the things that we’re actually doing right now.

HH: Okay, in terms of the cost duplication that the GAO found, will that be part of your proposal, to go in and cut stuff like that?

TC: Well, we’re going to have significant cuts in discretionary spending, but this is new, and we won’t go back and approach that. But that’s some of the extra stuff that we’re going to be able to get. So if there’s $100 billion dollars a year there, and I think that’s conservative, that helps us to another trillion dollars.

HH: Yeah, but I’m wondering, how would you propose to take away, for example, the mortgage interest deduction if the government hasn’t even done something like get rid of 80 teacher quality programs?

TC: Well, here’s the goal. The goal is to eliminate tax credits where we quit sending capital in the wrong direction, because the government says to send it that way. And so what you do is you take any money that’s savings from that, and lower everybody’s rates. So the whole deal is to get a renewal of our economic endeavor by lowering everybody’s income tax rates. So it’s a net net.

HH: Oh, I understand that, but I do not understand how you expect to sell something that would dramatically devalue people’s homes. That’s what I…

TC: There’s nothing that dramatically devalues people’s home. What we’re saying is the interest rate deduction on a $500,000 dollar home is deductible. If you have a million dollar home, and this is forward, it’s not what people have now, it’s moving forward. So if you already have it…

HH: No, no, I’m just saying that if you do that, though, you’ll lower the value of every new home bought, because the value of the interest deduction’s priced into that. Isn’t housing dying right now?

TC: Well, let me tell you something, Hugh, the average price of a home in America is not $500,000 dollars. It’s right around $210,000 dollars right now. That’s the average price.

HH: But the latter…well, we’ll have to come back and talk about this…

TC: And so you’re going to cover, we’re going to cover 95% of the people in their homes today.

HH: I’ll come back and talk with you about it next time, because that’s a disaster from the home building industry’s perspective. But I’ll talk to you about it next time. Tom Coburn of Oklahoma, thank you.

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