Terminating the mortgage interest deduction is part of a proposed deficit reduction plan being tossed around in Washington these days. Will it be cut? Let’s take a look. 

All great empires fail. Not a single one has survived the test of time. Do you know what wipes them out? War? Population growth? Mayan Clocks? Nope. The dominant empires of their time have been wiped out by the same thing – debt. We, the United States, have learned nothing and are headed down the same path.

As I write this, the national debt is currently just below $14 trillion. Depending on your politics, you will undoubtedly think this is the fault of that Socialist Obama or that War Criminal Bush. Wrong. In truth, the debt has been going up like mad since the days of Regan. It has gone up during Republican Administrations and it has gone up during Democrat Administrations. It has also gone up with either party has controlled Congress. The point I am trying to make is this is not a party issue despite what both and the biased media on both sides would have you believe. 

The simple fact is this. We are screwed, blue and tattooed. The current national debt of nearly $14 trillion is ghastly. What is worse is this is a sliver of the real problem. Our unaccounted debts from Medicare, Medical and Social Security are between $60 and $100 trillion over the next 30 years depending on how you do the calculation. Don’t believe we have a problem? Consider this. If we eliminated every program but Social Security, Medicare and Medicaid, we would still run an annual budget deficit. Yes, we are in serious trouble. 

So, what do we do about this? Well, we have to do something. President Obama appointed a group of Democrats and Republicans to the National Commission on Fiscal Responsibility and Reform to take a look at the problem. They came up with a plan that would slash spending and raise taxes. The politician and media reacted as expected – hysterically, but the plan is pretty much the only real solution we have. 

Part and parcel to the plan is the modification of the mortgage interest deduction. It has been reported that the deduction is to be eliminated, but this is incorrect. Instead, the plan calls for the deduction to be limited to the primary home only and only for the first $500,000 of the mortgage on that home. There would be no deduction at all for second homes, which hardly seems unreasonable. 

Will this plan pass? Not a chance. Why? We aren’t in a crisis yet. Winston Churchill once said you can always count on Americans to do the right thing…after they have tried everything else. We are currently starting to try everything else. When the debt finally becomes to big of a burden for our economy, politicians will have to act. At that point, you can expect something like what is proposed here to happen to the mortgage interest deduction. It may not disappear entirely, but it will be seriously diminished.