Wednesday, November 10, 2010

Deficit Panel

This is a big deal. If any legislation passes that comes even close to the proposals of the deficit panel, the US could finally begin to see the kind of change in the machinery of government that has long been needed - less fraud, influence, lobbying, etc. Economic stakeholders want clarity, uniformity and stability in the institutional rules and procedures. These proposed changes would provide for these stakeholder needs, likely resulting in increased investment and risk taking, with proper incentives in these activities that would lead to fewer economic imbalances.

This will be almost impossible to accomplish. The interests that will be lined up against this proposal are huge, powerful and wealthy. Perhaps the biggest change is the elimination of the mortgage interest write off. If there was ever a time to be able to get support for this kind of massive change from consumers, it is now. Given the total number of mortgages underwater/jingle mailed/foreclosed and the age of the average mortgage that is above water, this is the best time to get consumers behind this change. But the institutions such as home builders, with massive political influence, will fight this all the way. This will be an important battle to watch over the coming months and years.