Health reform and a housing credit: Can Congress do two things at once?

By Money Matters Editors

Can Congress do two things at once? Can it think and act at the same time? Money Matters knows it’s a lot, but we have confidence in our national lawmakers.

While also putting the final touches on health care reform bills about to be debated in the House and Senate, respectively, Congress is also getting set to extend the $8,000 federal income tax credit for first-time home buyers.

And, as Money Editors noted earlier, the United States needs both health care reform and an extension of the first-time home buyers’ credit.

Ideally, Congress should extend the program, which expires November 30, through the end of next year, or December 31, 2010. However, it appears Senate support will only go as far as extending the program on a tapered-basis, Bloomberg News reported. The full credit would be extended for homes that close before April 1. The credit would then be decreased to $6,000, then $4,000, then $2000 etc. for homes that close in each following quarters, until the end of 2010, at which time the program would end.

To be sure, the U.S. housing sector has shown signs of stabilizing, as new and existing home sales have trended up for more than a half-year. Still, economists and housing sector analysts are careful to point out that this year’s gains follow the largest decline in housing new/existing sales since the Great Depression, hence the sales gains are starting from a low base. Further, this year’s gains can hardly be categorized as self-sustaining: the housing recovery is young, and could easily stall.

Finally, some have argued against extending the $8,000 credit, saying the market should be left to determine the rate of sales and home prices, without additional tax-based stimulus. The response to that is: the market is working – just think of the tax credit as encouraging people who would buy now to make that purchase now, when that increased demand is sorely needed.

Again, a full $8,000 credit for all of 2010 is preferable, but if there isn’t support for that time period in Congress, a partial credit is better than nothing.