Wednesday, February 4, 2009

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

That is right, and I am delighted the Senator from Tennessee called this colloquy today so we could talk for a few minutes about what Jon Kyl and John Ensign said is the heart of the problem, and that is the U.S. housing market. Our houses are down 25 percent in the last 18 months. Equity lines of credit are dissolved because houses are underwater. One in five houses in the United States is worth less than what is owed on it.

It is rare when you come to the Senate at a time of crisis that you have a roadmap to success. Most of the time, we are trying to feel our way through to find out what to do that is right. We have a roadmap to success.

I ask unanimous consent to have printed in the Record two articles from the New York Times, one from April of 1975 and one from July of 1975.

I will read the headlines: ``New Housing Tax Credit Prompts Rise in Buying; Consumers Respond to Federal Law by Closing Deals on Condominiums and Homes Here, Builders Say,'' and ``Home Buyers Get a New Enticement.''

In 1975, when the average price of a house was $35,000, the United States was in worse shape than we are in today. We are fast approaching it, but we were worse. There was a 3-year supply of unsold houses on the market, and there were no buyers.

Congress, the Democratic Congress, and Gerald Ford, a Republican President, passed a housing tax credit of $2,000 for a family who bought and occupied as their home a standing vacant house in inventory at the time, which is because all the inventory was new homes. That $2,000 tax credit spurred people to go to the marketplace, spurred them to buy those houses, and in 1 year's time we went from a 3-year supply of housing to a 10-month supply of housing. We solved 70 percent of the problem with a tax credit.

What we are talking about in our legislation is a bill I introduced in January of last year. Everybody said it cost too much. Then, it cost $11.4 billion. We have now spent $3 or $4 trillion, and we have not solved the problem yet. I suggest it is time we looked at an economical solution.

What we have offered is a $15,000 or 10 percent of the purchase price of the house, whichever is less, tax credit which could be claimed against the 2008 tax return that will be filed in April or can be taken 50 percent in 2009, 50 percent in 2010. What the family gets is a $15,000 tax credit or, as I said, 10 percent of the purchase price, whichever is less.

This is going to benefit mainstream America. When they receive it, they have to live in the house for 3 years as their home. If for some reason they move out during that time, it is prorated. But what will happen in America now is what happened in 1975 when these articles in the Times reported: Sales will come back, the floor will be put under the housing market, values will stabilize, and they will begin to appreciate. And, as they do, equity will return to America's families; stability will return to the basic biggest asset our families have, their home; and we will begin to work our way out of this deep downward spiral we are currently in.

As has been said, it is not a catch phrase and it is not a slogan. If we do not fix housing first, it does not matter what else we fix because throwing money at the symptoms, as Jon Kyl said, will not work. If you are a doctor and you are trying to cure a patient, you go to the root of the infection or the root of the problem, and you cut it out or you deal with it.

This proposal, providing good, efficient, effective mortgage money for refinance for Americans with good credit or those with Freddie Mac and Fannie Mae loans, this will bring borrowers who are in the market back to the market and will solve the problem.

My last comment to the Senator from Tennessee--I call people who used to work for me all the time to see how it is going. I call them in various States, including the State of Tennessee.

In Atlanta, GA, a couple of weeks ago, I talked to Glennis Beacham, who is very successful. I said: Glennis, have you got a lot of buyers?

She said: I have a lot of buyers, Johnnie. They have money. They want one of two things: They want a foreclosure or a short sale.

Right now you have a bottom-fishing market. You do not have people who see any opportunity, and the buyers who are in are exploiting; they are not investing. It is time we incentivize all American families with their own money because it is their tax money against which the credit will be taken to go out and buy a house. When we do, we will begin to fix housing first, and we will begin to stabilize a very teetering economy.

***

Madam President, first, I want to thank Senator Lieberman for his very responsive remarks and for his cosponsorship for this legislation that creates a floor for housing once again and for us to end what has become a terrible economic crisis.

I called this amendment up last night and now I wish to ask unanimous consent to send a modification of the amendment to the desk for replacement of the existing amendment.

Madam President, the amendment is merely a technical amendment on dates and no other substantial change.

It is rare that we have a roadmap to success in times of difficulty, but this country has once before realized a housing crisis every bit as bad as the one we have today and economic troubles and unemployment every bit as dangerous, and that was in 1974. In 1975, the Democratic Congress and a Republican President, Gerald Ford, came together for the American people and passed a $2,000 tax credit for the purchase of any standing, vacant, new house and in one year's time a 3-year inventory had been dissipated to 10 months, housing was restored, values returned, and the economy again began to prosper.

Thirteen months ago, in January of last year, I introduced this same amendment. It was scored at that time by Joint Tax at a cost of $11.4 billion. The Finance Committee in its wisdom elected not to include this in the proposal because they said it was too expensive. Since they said that was too expensive, we have spent $4 trillion between the Federal Reserve and the Congress and the U.S. Treasury, and the problem is worse. So I would submit this is a very small price to pay for a solution that at least we have an historical precedent that it works.

The score on this legislation is $18.9 billion. The legislation provides a $15,000 tax credit, or 10 percent of the purchase price, against either 2008 income where one can monetize it at the closing date this year, or half in 2009 and half in 2010, for anyone who buys as their principal residence any single-family dwelling or single-family condominium or attached townhouse available in the United States of America. We have a pervasive housing problem, and the worst hurt right now are the people who are paying their mortgages, the people who are in decent shape, the people who are having to sell because of a transfer; they have no market and they don't because everybody is going for short sales or they are going for foreclosures or they are going bottom fishing. They are bottom fishing with your equity and mine. They are bottom fishing to find the best deal they can get at the bottom of the trough. It is going to keep spiraling down until this Congress and this country address the root of the problem which is the death of the housing market, puts a floor under it, stabilizes it, and gives it a motivation to improve.

Senator Lieberman's quote is absolutely correct. Right now, we are at a housing sale rate of a half a million houses a year. This country averaged 1.2 million in the last 10 years. This bill will take us back to 1.2 million, as his statistics prove. We have tremendous unemployment. This legislation will bring about estimates of 500,000 to 600,000 jobs back to America, not in 2 years, not in 10 years, but now. So I respectfully submit we have a chance to join together, learn from history, repeat history that worked, and adopt this amendment.

I thank Senator Lieberman for his support. I thank Senator Chambliss for coming on as a cosponsor and Senator Corker and, as I understand from the calls I have had in the last day, many more from both sides of the aisle. It is time to fix America's problem, not throw money at the symptoms. It is time to fix housing first in the United States of America.