What is the official rationale for this? I can't think of one.

I notice it says "home" rather than "house". Since boats can be treated as second homes, it should be possible to treat one as a first home, right? Does this mean I can get a $15k/10% credit for the 42' ketch I've been thinking of buying with the money I made by shorting the stock market with the funds I got from selling my home in 2007? (Thanks to having followed Dean's excellent advice to sell and rent!)

How many times is it available? Maybe I could flip mine a dozen times and generate an income.

The amendment does stipulate that if the residence is 'flipped' within a year or if it is not occupied as a permanent residence then no credit for you. This is, of course, assuming people enforce these rules.

I don't know about an official rationale, but Senator Isakson himself has a pretty good rationale, which you would think one of the sharp Post reporters might have noticed. From the Senator's Wikipedia profile:

"Shortly after graduating from the University of Georgia, he opened the first Cobb County office of Northside Realty, a prominent Atlanta-area real estate firm. He became company president in 1979, a post he held for 22 years, during which Northside became the biggest independent real estate company in Georgia."

Who would have thunk? Senator Isakson is of course a vigourous opponent of subsidies to the (Michigan/Ohio) based unionized auto industry as he believes in the "free market" and is against Government intervention. But not so great for him and his industry.

Do you get 15,000 in cash or do you get to deduct 15000 from your income before it is taxed?

Dean: You may wish to note the WP's gossipy know-nothing Republican centrism fetishist David Broder praising the selection of Judd Gregg :

Gregg and North Dakota Sen. Kent Conrad, the top Republican and Democrat on the Senate Budget Committee, respectively, have been pushing for the creation of a bipartisan commission that would tackle the looming bankruptcy of the three big entitlement programs -- Social Security, Medicare and Medicaid.

http://tinyurl.com/Broder-an-idiot-Feb-update

El Cid--

I was about to commend you for making it through an entire David Broder column without falling asleep, but then I reread and realized that you'd only read about a David Broder column.

Again, stimulus may be stimulus, but it's not all good. $75 or $375 billion entering the economy can be bad if it's inflating or reinflating a bubble. In fact, this is basically what happened when the Fed cut interes rates in 2001 - the stimulus mostly went into the bubble and we have seen the result. The money was allocated badly by private enterprise, following bad direction from the Fed - so of course Congress is doing the same thing over again. Can we expect better direction from the likes of Isakson?

The media have shifted from outright endorsement of the failed conservative policies to "bipartisanship" which means getting those policies in the back door as amendments to progressive legislation. The policies which get supported are those which benefit the big money interests which supply most campaign donations and which pay the salaries of the media editorialists and pundits.

PeonInChief: I did in fact read teh Broder, out of depressed curiosity, and I made the TinyURL link, which anyone can do by going to www.tinyurl.com

El Cid--

They make drugs to help with that kind of depression.

I refuse to read David Broder. In fact, I refuse to go to the Washington Post website - and help them gain advertising income/impressions. There are all kinds of other places on the web where you can get news and opinion. That news rag is mostly biased propaganda for the political elite.

If you do go to their website, don't help them by clicking through any advertisements.

This is how the New York Times covered it (quoting):

In debate this week, the Senate added provisions aimed at spurring major purchases, including a tax credit for homebuyers of up to $15,000 that Republicans had championed as addressing a root cause of the recession.

The homebuyer tax break, which would cost about $18.5 billion and which the Senate approved by voice vote without opposition, was the second amendment in two days intended to encourage consumers to make major purchases. On Tuesday, the Senate approved a tax incentive for car buyers, sponsored by Senator Barbara A. Mikulski, Democrat of Maryland, that would allow the deduction of sales tax and loan interest on purchases made this year.

But while both of those incentives were applauded by lawmakers who said the bill should quickly induce consumer spending, some economists said they were short-sighted and lacked the forward-thinking approach Mr. Obama has demanded.

Adam Posen, deputy director of the Peterson Institute of International Economics, said that homebuyers would have trouble getting loans because of the continued tightness in the credit markets, and that the car buyer incentive fell short by not focusing on fuel-efficient vehicles. He said the money might be better directed at mass transit.

“They are also structurally unsound,” Mr. Posen said of the two provisions, “reinforcing the attempts of industries that are too large — housing construction, automobile production — to survive based on government distortions.”

He called them both “terrible, pandering ideas.”

But Senator Johnny Isakson, Republican of Georgia, a former real estate broker, who was the prime sponsor of the homebuyer credit, along with Senator Joseph I. Lieberman, Independent of Connecticut, said it was modeled after a similar, $2,000 homebuyer incentive that helped lead the country out of recession in 1975.

“We do have a history in this country with housing and it goes back to the crash of 1974, which actually in terms of inventory and price declines was comparable to what’s happening now,” Mr. Isakson said at a news conference.

“Within one year of the inception of that tax credit, two-thirds of the available inventory that was on the market was gone. The market moved back to a balanced inventory, values stabilized and things became very healthy. The only reason I know all of that is I was selling houses in 1974, that’s what I was doing to feed my family and make a living.”

The tax credit would give buyers 10 percent of the price of a primary residence bought within one year, up to $15,000, and is intended to stabilize plummeting home prices, which caused a wave of foreclosures and led to the near collapse of the financial system as Wall Street firms wrote down billions in mortgage-backed assets.

This is a windfall for wealthy people buying McMansions. In the Midwest, the median home price is way under $100K and the vast majority of the population pays far less than $15K it taxes.

A little money to the middle class. Big bucks to the wealthy.

I'm not sure where this dismal science stuff came from, but every time I come here I get a few laughs. This guy Baker is the Jon Stewart of economics. I can't give higher praise than that...

While cities across America shut down mass transit for lack of money, all the clowns in Washington can think of is to subsidize buying cars and houses. And those economic geniuses have the nerve to complain that they can't think of any productive way of spending the stimulus money since anything that would be productive would allegedly take too long.

It's class war, and it will continue like that until we are either completely broke, or we finally start fighting back.

What we need, and what the media could provide, is some kind of monitoring of lobbyist activity. When politicians, especially Republicans, are pushing for something there is usually one or more special interests behind it. What is the real impetus behind the housing subsidy proposals - is it the real estate industry, the bankers, or who else?

The flaw, I think, is not the tax credit. That would be fine IF, at the same time, we did away with non-recourse mortgages! This is America, investors SHOULD be encouraged to take risk, BUT they should NOT be entitled to walk away from the risk they take with just minor blemishes, especially when so many others are left to pay for their carnage.

What is Baker smoking? It's a tax credit. To get $15k in your pocket, you have to owe at least $15k in taxes after deductions. Your GI would have to be at least $200K or so. Since the average home buyer makes no where near that much, that's why the cost will be no where near Baker's $75 billion. I love your blog, Dean, but apparently it's you who needs a refresher in arithmatic.

Byron,

homebuyers could deduct it against two years worth of taxes, so you would need an average of $7,500 of tax liability per year. the vast majority of homebuyers would fit this bill.

Isn't this just going to raise house prices by up to $15K?

Dean - I don't know if every primary homebuyer is going to have $7500 in taxes to pay each year, but many of those who don't will already be covered by the first-time homebuyer credit which is refundable.

What I dislike about this amendment is it will probably inflate house prices, reducing the potential power of the first-time homebuyer credit.

You are a blast of fresh air. It was Greenspan and Rubin. In 1992 I would tell anyone who asked that Greenspan was at the party too long. They turn me off, esp. Alan big time.