1/ Federal deficit for U.S. (on and off budget), general government current account deficits for calendar 1982 for all other countries. Figures

in parenthesis is the U.S. President's estimates for FY 1983.

2/ 1982 personal savings figures for all countries other than the U.S. supplied by Wharton Econometric Forecasting Associates.

bolster the current recovery so that growth of output, income

and jobs does not languish at one-half the pace of past

IV.

V.

VI.

NOTE:

Mortgage Finance: Making It Work for the Eighties
Pension Fund Investment in Housing

TIMS (Trust Investment Mortgage Securities)

Real Estate Brokerage by Federally-Insured Depository
Institutions

At the time these Briefing Papers were prepared, the President's
State of the Union Address had not been delivered and Congress-
ional action had not begun for the 98th Session. However, these
papers are intended to provide an overview of some major
legislative and administrative issues of concern to REALTORS®
for 1983.

FEDERAL BUDGET CONSTITUTIONAL AMENDMENT

BACKGROUND

The main issue for Congress for the last two years has been the Federal Budget, specifically the rapidly increasing deficits (from $73.9 billion in fiscal 1980, to a possible $200 billion in fiscal 1983). The national debt rose from $300 billion in 1960 to over $1.2 trillion today. This explosive growth of deficit spending has placed severe demands on capital markets and curtailed needed investment funds for the private sector. Legislative initiatives to bring future deficits to a decline have passed Congress but still have not assured deficits under $100 billion will be achieved through 1985.

The need for a Constitutional restriction on deficit spending will be even more crucial as it becomes clear that deficit will increase in future years to well over $200 billion unless fiscal restraint is imposed upon Congress and the Administration.

STATUS

Senate

In 1982 the full Senate approved S.J. Res. 58, which proposed a Constitutional Amendment to balance the Budget unless three-fifths of both Houses voted to allow a deficit. The projected rate of increase of revenues for any fiscal year would be limited to the rate of increase in national income for a recent period plus any tax increase passed by both Houses by a majority of the members and signed by the President. The Senate bill also included a provision offered by Senator William Armstrong (R-CO) which prohibited exceeding the national debt ceiling unless three-fifths of both the House and Senate approve and the President signs a bill permitting such an increase. Senator Robert Dole (R-KS) offered but did not bring to a vote a REALTOR®-supported amendment which would have changed the voting requirement for raising taxes from a majority of the members of each House to three-fifths of the members of each House to make it identical to the voting requirement for approving deficits and additional debt.

House

Two days before the recess for elections, a bipartisan coalition in the House, with the aid of Vice President Bush, succeeded in gaining the necessary 218 member signatures on a discharge petition which removes the issue from the Committee's jurisdiction and sends it directly to the House floor. The Democratic leadership then rushed the issue to the floor for a vote in the last hours of the session, giving little opportunity for grass-roots efforts to be applied. The vote of 236 to 187 fell 46 votes short of the necessary two-thirds majority to pass the resolution for an amendment to the Constitution.

While the Senate might quickly pass the Constitutional Amendment resolution it approved last Congress, the House, with 46 new Democrats, is expected to reject the measure by an even greater number than last year if it can be brought to the floor at all. (At one point the House Democratic Caucus proposed a change in House Rules which would have required two-thirds of the members to sign a discharge petition rather than the majority now required, but that proposal was dropped.)

Thirty-one of the required 34 states have thus far called for a Constitutional Convention; perhaps the Congressional deadlock will only break when the state convention movement threatens to hit 34.

REALTOR POSITION

The National Association believes that, although the Constitutional Amendment offers no immediate solution to the current economic situation, the Amendment would be of benefit to make Congress and the President plan balanced budgets for future years. Therefore, we support a Congressional initiative and the states' ratification of a Constitutional Amendment and/or law which will make Congress accountable for excessive spending. The Constitutional Amendment should require a three-fifths vote for raising taxes, as well as for approving a deficit budget or adding to the national debt, in order to create a bias in favor of spending restraint rather than tax increase to balance the budget.

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PROSPECTIVE TAX LEGISLATION

BACKGROUND

Despite the enactment of the Tax Equity and Fiscal Responsibility Act of 1982, future budget deficit projections, assuming current law, exceed $150 billion. Further, these deficit projections do not envision a significant downward trend. The high level of government borrowing needed to finance such deficits assures a continuing tight credit market and a troubled economy. This situation is likely to inspire Congressional and Administrative efforts to reduce federal spending and increase federal tax revenues. Assuming continued Congressional resistence to meaningful spending reductions, it is likely that selected revenue increases will be enacted.

Although such legislation has not yet been introduced in the 98th Congress, possible tax increases which would adversely affect the real estate industry include:

limitation of the home mortgage interest deduction. This proposal was floated by Treasury Secretary Donald Regan as a revenue-raising option and recently has been somewhat withdrawn. In the past such proposals have led to attempts not to limit but to elminate all home mortgage interest deductibility. A leading critic of home mortgage interest deductibility in the past has been the Congressional Budget Office.

lengthening the real property depreciation recovery period from 15
years to 20 years. Lengthening the depreciation recovery period
was suggested during last year's discussions on tax increase options
but was not included in the Tax Equity and Fiscal Responsibility
Act of 1982 because successful arguments were made explaining that
a 15 year recovery period and the acceleration methods provided
under the accelerated cost recovery system are not unreasonable when
compared to the benefits given other assets.

industrial development bond restrictions to require pre-1981
Economic Recovery Tax Act depreciation periods for IDB-financed
property, state government contributions equal to a percentage of
the cost of each IDB-financed project and the inclusion of interest
earned on IDBs in the individual minimum tax preference pool. Pre-
ERTA depreciation periods are 35 years on non-residential buildings.
Past opposition to IDBs has developed because of fundamental opposition
to tax-exempt finance for private business--despite any economic
scenarios.

STATUS/OUTLOOK

At this writing tax increase legislation has not been introduced in the new Congress. The tax debate will likely come to the forefront in early February following the President's State of the Union Address and submission of the Administration's FY 1984 budget proposals.

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