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Job Creation Tops Obama’s State of the Union

By Stacey Moncrieff, Editor in Chief, REALTOR® Magazine

In his State of the Union address Tuesday night, President Barack Obama made scant reference to housing and no mention of the mortgage interest deduction. That was probably a wise move on his part — not only because most Americans favor the deduction and there’s speculation (but no evidence that I know of) that he’ll get behind efforts to reform it, but also because such a mention would have been an odd duck in a speech that set out to inspire a country wearied by economic and political turmoil — and to focus the nation’s attention on jobs.

Chief Speechwriter Jon Favreau and President Barack Obama put the finishing touches on president's Jan. 25, 2011, State of the Union speech. (Source: whitehouse.gov)

White House Chief Speechwriter Jon Favreau and President Barack Obama put the finishing touches on the president’s Jan. 25, 2011, State of the Union address. (Source: whitehouse.gov)

That said, don’t get too comfortable. During the one-hour speech, Obama made clear his belief that tax reform is critical to reducing the nation’s deficit. Although no significant tax reform legislation is expected to gain traction in 2011 or even in 2012, count on NAR leaders to give new meaning to the term hawk as they keep an eye out for any proposals that could impact housing values and, in turn, hurt local governments.

Opening the State of the Union with a nod to new House Speaker John Boehner (R-Ohio), Obama went on to deliver blunt truths (“Our own engineers graded our nation’s infrastructure a ‘D’“; “America has fallen to 9th in the proportion of young people with a college degree.”); recall the nation’s great triumphs, from the transcontinental railroad to the space program to creation of the Internet; and call on Congress to help foster innovation, improve the education system, and rebuild the nation’s infrastructure. All three are essential to his top priority, he said, which is job creation:  “We need to out-innovate, out-educate, and out-build the rest of the world. We have to make America the best place on Earth to do business.”

In the real estate industry, that was bound to be a welcome message since healthy real estate markets depend on a strong job base. Whether Obama’s rhetoric will translate into a lower unemployment rate depends to some extent on how well the Democratic president, Republican-controlled House, and Democratic-controlled Senate work together.

 

A House United, Somewhat

Both before and after Obama’s speech, commentators talked about the sense of civility — in the wake of the Jan. 8 Tucson, Ariz., shootings — that permeated the chamber. House and Senate members, sitting in an unorthodox arrangement, wore black-and-white ribbons to honor the shooting victims. The family of Christina-Taylor Green attended the event as guests of First Lady Michelle Obama, and Mark Kelly watched from the Houston hospital room, where is wife, Rep. Gabrielle Giffords (D-Ariz.) is being treated.

REALTOR® Magazine Senior Editor Katherine Tarbox was in Washington for the speech, and reported on the civil tone of the evening:

Following from his progress during the lame-duck session, President Obama struck a chord of bipartisanship — and members of Congress got in on the act. For the first time in history, members from opposing parties sat together, applauding as the leader of the free world praised America for its greatness.  “Remember, for all the hits we’ve taken these last few years, for all the naysayers predicting our decline, America still has the largest, most prosperous economy in the world,” Obama said.

Referencing House efforts to repeal the health care law that passed in 2010, Obama said he welcomed Republican suggestions for improving the law. “We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses,” he said. He also reiterated his willingness to entertain an idea long sought by Republicans: tort reform. But he said he wouldn’t back down on provisions that expand coverage and prevent insurance companies from denying coverage for pre-existing conditions.

In the Republican response, House Budget Committee Chairman Paul Ryan (R-Wis.) didn’t challenge Obama’s remarks and even called some of Obama’s words “reassuring.” But he faulted the Obama administration for runaway spending. “We face a crushing burden of debt [that] will soon eclipse our entire economy and grow to catastrophic levels in the years ahead,” he said. Rep. Michele Bachman (R-Minn.), speaking on behalf of the Tea Party, echoed Ryan’s call to rein in government spending.

So while the parties seemed to agree on some basic principles (deficit = bad; jobs = good), don’t expect smooth sailing in the 112th Congress. Obama said as much near the close of his speech: “We should have no illusions about the work ahead of us. . . . none of this is easy. All of it will take time,” he said. “And it will be harder because we will argue about everything. … And yet, as contentious and frustrating and messy as our democracy can sometimes be, I know there isn’t a person here who would trade places with any other nation on Earth.”

As bipartisan moments go, that was a winner, drawing a standing O from just about everyone in the room.

 

What He Said About Taxes

 Obama peppered his speech with tax references but offered few specifics. He said last year’s tax cuts, along with a provision enabling businesses to write off the full cost of a new investment, put more money in Americans’ pockets and contributed to the 1 million jobs created last year.  However, he reiterated that he doesn’t support permanently extending the Bush tax cuts for the wealthiest 2 percent of Americans.

As for future tax reforms, Obama urged Congress to take away oil-company subsidies and divert the money to new energy sources. He also called for the closing of loopholes that enable some corporations to pay no taxes while “others are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change.”

Individual income tax reform didn’t surface until the president was more than two thirds of the way through his remarks. Although the MID wasn’t mentioned, it could well have been on his mind when he called for a simplification of the tax code. “This will be a tough job, but members of both parties have expressed interest in doing this, and I am prepared to join them,” he said.

Obama’s only reference to housing came as part of a call to streamline the federal government. “The last major reorganization of the government happened in the age of black and white TV,” he said. “There are twelve different agencies that deal with exports. There are at least five different entities that deal with housing policy.” He promised “in the coming months” a proposal to merge, consolidate, and reorganize the government in a way that would make the country more competitive.

For now, NAR leaders have their eye on two closer milestones: In February, the Treasury Department is expected to release its long-awaited report on the future of Fannie Mae and Freddie Mac, and the administration is scheduled to release its 2012 budget. That’s when we’ll see whether serious tax-reform debate is in our near future. In any discussions around tax provisions for real estate — residential or commercial — you can be sure NAR will have a front seat.

See C-Span coverage, and read the transcript of Obama’s speech.

Stacey Moncrieff

Stacey is vice president of business-to-business communications for the National Association of REALTORS®, overseeing the association's key communications with NAR members and REALTOR® association executives.

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Comments
  1. diana lorenzo

    Just a quick comment, the President took over with a huge deficit due to the war.

    He can only do what is humanly possible and if this country wants to come back they have to help along side our Presifdent.

    Job creations how can we create jobs when you call any comopany and get a voice prompt or talk to someone in another country.

    We need to make these copanies do away with automation and start using human beings that you can talk to. As the world progresses we lose touch with people.

    No sure if this is a good thing.

    I think the President is doing a great job, and if the country wants to thrive then the Republicans should stop fooling around with their stupid goal to do away with Health reform. What has worked here.

    The Insurance compnaies have this country under their contrl and nothing is working. Maybe if the House sat down with the president and tried to create a better plan instead of stromtropping we would get this done
    Stand behind this man .

  2. I don’t know about everyone else…but I don’t want to be competitive. I don’t care if the rest of the world does GREAT….as a matter of fact I hope they do.
    but
    1. Health Care Law is a violation of our freedoms. No one should tell us what we have to buy.
    2. Investments into the job creation…another word for taxes. The price of doing business is going up…as our paychecks go down. government spending and giving buyouts and incentives to companies that leave our nation and do not pay the money back is going to eventually bankrupt the country. It is hurting us everyday. NO MORE SPENDING, NO more government programs, NO more buyouts, NO more incentives. Incentives are unfair to the country. I want freedom, and the money that I bust to make and the money everyone busts to make to stay in our pockets!
    3. if you don’t work…get there. I am not and Im sure most of you are not working to support those who live off of govt $$.
    Please start looking into who is illegally obtaining government assistance. Its RAMPID
    then we will start saving some $$
    4. Corporate Tax Cuts of 2%…on corporations not employing or existing in the United States..Raise their Taxes. on corporations staying here in the United States and circulating their money with employees, leases and Real Estate Taxes…cut them.
    5. give the benefits to Americans

    Start today..buying American, saving money, and being responsible for your own actions. this is to EVERY American.,…start now..
    as a lot of Americans have done: spend to much on credit…and go bankrupt
    there is no avoidance of excessive anything
    MODERATION and Buy American

  3. Berni Bishop Pirollo

    I think NAR should back off of the MID elimination, if it comes up, and let it pass. They are only for mortgages over 500K or on 2nd homes, investment properties, etc. It won’t effect the middle class and I’m tired of everyone implying it will effect the average American homeowner when it won’t. Everyone has to sacrifice and the middle class has sacrificed enough. The top 2% got their tax cuts extended so let them lose their MIR. They shouldn’t get both during tough times. I doubt it will effect many agent’s business and may allow for more incentives for the average home buyer. If the wealthy want their MIR, they can sell some stock or cash in a couple CDs, whatever, and pay down their mortgage below 500K and then start taking it again. And if they do this, they will be putting more cash into the system that can be utilized by the little guys – who are the bulk of the home owners in this country.

  4. Scott Lingo

    As a Realtor owner of Target Real Estate located in Northeast Michigan our company has been faced with many challenges. Our local market is composed of many vacation properties. As jobs leave Michigan, lower home values have saturated the state, we have seen a large drop in retirees heading our way. Boomers have lost the majority of equity in their homes and refuse to sell for the current market values. Prohibiting them from purchasing retirement homes within the area. Until Southern Michigan’s employment front recovers, home values inch upward, and fuel prices stabilize all vacation and recreational markets in Northern Mi. and else where will suffer. When gas prices topped $ 4 dollars per gallon , the downward trend began. Less reliance on opec, and more production of gasoline within our oil rich country sure would aid in the recovery of the economy. What will the Obama administration do to ensure that fuel prices do not cripple the entire country?

  5. I have made an inquiry to Senator Durbins office regarding the handling or lack of it of the short sales by banks. The Bank inquestion is Citi Mortgage, both my Broker and I go right to the top and call executive response team and got some answers. What came out of this is that it seems like Federal Agencies like Fannie Mae and Freddie Mac are also pushing for foreclosure. I had an offer on one of my short sales since August and on the first round of sending in the offer, the negotiator, did not even present it and rejected it out of hand. Then Citi did a licensed appraisal and they wanted 20,000 over what their own appraiser’s value of the property. Now, Citi claimed it was Fannie Mae and like children, Fannie Mae said it was Citi.
    So, in the process of finally deciding they did not want to work with the offer, they transferred servicers to IBM Lender Business Process Services where finally we will close today. It seems like there are some strange bed fellows here. Someone has to fight on our behalf. We are working harder and harder for less and less and I am a Realtor for 24 years. I have never seen the manueverings that have gone on now, in this present moment. We need to unify and really do something to help the Realtor so we can help our clients. This is of crisis proportion now. None of this was addressed in the State of the Union though our State of our Real Estate has been badly bruised and beated. We need help and we need it now!!!

  6. Michael Baron

    Buy American, Buy American );

    The problem is you can’t buy anything any more from the USA & sad to say the general public is so self-absorbed they don’t care or understand the consequences of an unending trade-deficit, and a loss of our industrial-base & sovereignty, but one of these days the bill is going to come due. So until then they’ll keep buying their cheap “slave goods” from China at the local Wal Mart. The Government & Big Business sold us out long ago with NAFTA, GATT & The SPP, (Thanks Bill Clinton & George Bush).

    The Real Estate Market is in turmoil and tumult because of 3 things,
    THE FEDERAL RESERVE (Which is about as Federal as the Federal Express),
    Big Mega Banks & The Government. They were responsible for lowering Interest Rates so low & allowing people to borrow that should have been renting, allowing the creation of derivatives and abolishing “Glass-Steagle” (among other things) . All that allowed this Real Estate Bubble to grow and burst, with no way of paying back the debt (it’s mathematically impossible), which has now been strapped on the back of the tax paying Americans while the Bankers make record profits. Come on, the Fed, The Treasury & Goldman Sachs are Revolving doors! So until the real problems are addressed it’s going to be status quo for those in power.

    Bottom-line the other night was just another show and if you really care about this country it should make you sick. Republicans, Democrats there all the same and the President has no power, he does what he is told. “We The People” run this country not the politicians. “We The People” should all put aside our differences (Republican, Democrat, Race & Religion, etc) and determine our own destiny.

  7. Patsy Humphrey

    The only reason Congress is “willing to work together” is because the Democrats got “shellacked” in November. The president hasn’t kept the promises he made prior to entering the oval office so what makes any of you think he will keep any promises now? Why is it that the “wealthy” who have worked through their adult lives to be able to have second homes, investments, etc. now have to be penalized for the sins of those who don’t. Why is it that no one remembers in 1999 that Bill Clinton and Barney Frank were the “good guys” when they pressured the lending institutions to make home ownership affordable for everyone? We are reaping the rewards of the no-doc loans, the negative amortization loans, and the line-of-credit loans that were touted to make every man a homeowner~at least for a while. Real estate is the backbone of wealth and the White House is trying to break the back of our industry at every turn. Where is our political action committee. Have any of you noticed that real estate agents are dropping from our ranks like flies? My favorite lender for the past 16 years has left the business because he cannot get a loan approved, due to the stringent underwriting guidelines now in place, due to the short sale, foreclosure avalanche. Who is on Capital Hill defending you and me and our clients? I’ve had enough broken promises and expect some action from the real estate PAC dollars!

  8. Nancy Ryan

    MID. This is essential to homebuyers and factored into their budget when deciding whether to buy or not. Eliminating MID on second homes will have a huge impact on resort and retirement areas. NAR should take a stand against this. Also NAR needs to take a stand against the sales tax on homes sold that was snuck into the health care bill. This is so wrong.

  9. Unfortunately, despite great hopes, I believe we have been served poorly by four of the last five Presidents.

    One party loves to lay all blame on the other without acknowledging their own part in contributing to the problem. Republicans love to attack Obamacare, but where were they when we were saddled with the unfunded Dubyacare medical plan? They also love to point out how much Democrats spend overbudget. But, how many tax cuts have the Republicans driven through without cutting expenses in government spending?

    Should the government have the right to force Americans to pay for health insurance? Should the govenment have the right to force Americans to wear seat belts or buy car insurance? To my mind, these questions are linked.

    The fundamental fact is that the Founding Fathers did not trust People in government jobs to conduct the Peoples business. So they set up a system where only if all the branches are in general agreement, something can get done. That’s a strength, not a weakness.

    The sooner the Democrats, the Republicans, and the Tea Partiers come to the realization that we are all in this together, the sooner we will move forward to our next era of American Greatness.

  10. Ed Berry

    The real estate industry is propogating the decline of the home prices by allowing short sales to enter the market at below market prices, when the bank will not aggree to such a rediculously low price. This is causing buyers to expect the low price and any one who is under water to jump into the game. No listing should be able to be published having an arbitrary price that needs to be approved.

    The industry should stop this process. Everyday, I see training courses on how to be a short sale specialists. The market that I serve has 50% short sales. It is going to get higher do to neighbors seeing their neighbors get out of their under water loans, even when they can aford them. We are driving a downward spiral..

    We need to stop this process in order to maintain price stability and also an industry that is not fraudulent on listing a price that does not exist.

    Jump on the band wagon…only bank accepted short sale prices should be allowed for advertizing purposes, rather than falsely listing a lowball price to pull in a buyer who never closes on the house, but is only used as a sacrafice to determine what the bank will accept. How does this make the real estate industry look to the general public?

    Any one else feel the same???

    Be proud of the Real Estate Industry and stop the short sale non-sense, that makes our industry look like the switch and bait saleman….

    Why doesn’t NAR do something about this ?? Are too many of you hooked into obtaining short sales at all costs, no matter if it is ethical or not to advertize a price that does not exist?????

  11. Susan Baker

    If President Obama is serious about tax cuts and the federal gov lowering the amount of money spent, it would be a nice gesture on his part to step forward and offer to pay back the amount of money he spent on his inaugration. Even if it ment doing fund raisers. That sum even though is small compared to the overall debt, is money that was in excess and would be a wake up call to the congress/house and Americans to step forward and do our part.

  12. Tong Nguyen

    Everything that was said by Pres. B. Obama sounds great, but these things are like the aboveground structure of a house. For them to be actually built and kept stand ing they must be placed on a sure foundation; if not the whole buidling will fall down sooner or later.

    America was originally built by our forefathers solidly on a foundation of Christian faith in a Christian God. As long as America leaves God out of her life, she will try in vain to stand up and make progress by mere human effort.

    Let’s America turn back to her source of real strength and growth.

  13. The President believes in the ability of Americans to do the right thing – doing the right thing means paying for what you get, investing where it matters, creating a climate for economic competitiveness, and providing a safety net for those that deserve it. It also means reining in out-of-control government programs and spending. This is the opportunity for our ‘greatest generation’ to step up to the plate – as Americans we can come together and thrive – or we can wreck our ship on the shoals of partisan bickering.

    NAR needs to stop the knee-jerk response to be against any proposal that increases revenue and instead focus on what it can do to help. Misleading our members that MID limits on our richest citizens will somehow impact the average homeowner doesn’t help. America’s wealthy are sitting on their funds or investing in foreign economies – they show no evidence of doing anything to address the jobless issues still impacting our lackluster real estate market. If the richest Americans came together to see how they could invest for a brighter future for our country I might feel differently … but they show no signs of doing so.

    NAR should instead be focusing our power on arrogant lenders who still haven’t gotten it – they somehow wish to punish the average homeowner, and Realtors, for problems that they got themselves into. There’s where you need to spend your time.

    And please don’t present arguments against MID limits as representing all Realtors – the split of members that support you vs. those that don’t is probably similar to the split of the population as a whole.

    With respect to the President’s core message – work together for a brighter future – provide leadership to do so rather than once again descend into partisan bickering.

  14. Lloyd Parnell

    Mr. Obama’s speach appeared to address a more “coming to the center” position. Surely we cannot be fooled by this. We discovered that “investments” mean “more spending”. Realtors as well as corporations are taxed right and left. The new “Healthcare Tax Law” is already causing untold numbers of labor hours to conform. Obama’s agenda has not changed. Tax, spend, and socialism are his goal. As Realtors, when financies get low, we cut back on services and stop spending. When financies get bad with our nation, spending more than triples. This is terrible financial management.

  15. He wants to create jobs? He is all talk. His first two years he blamed Bush. Now for the next two years, he will simply blame the Republican’s. End the Cap and Trade Bill.
    End the Fed, and stop forcing Govt. healthcare down our throats.

  16. When I heard the speech I think of Our pledge of allegiance…One nation, under God. Just do it! And yes, there will be hard-ships. We are America! The land of the free. I wouldn’t live anywhere else.

  17. Michele Jones

    I think most of us will agree tax reform is needed. The devil is in the details. But when the committee recomendations came out I did the math ( had to make some assumptions, of course) based on their recomendations. Although I would lose the MID I would be in a much lower tax bracket and come out just about the same.

    Perhaps NAR could participate in some bi-partisianship rather than just dig in our heels. We all hate the special interest folks who don’t agree with our point of view. Its time for us to think of the greater good. It has to start somewhere!

    I’d be delighted if my NAR dues went to creating a fairer, less combative society.

  18. I’m with Wood on this one. We have to realize that we are all in this mess together and WE need to come up with some logical ways to get out of it…TOGETHER. And not just the typical Washington ways of whoever pays the most gets their laws past, but real solutions that help ALL Americans.

    It seems funny to me that we shipped all of our jobs away in the name of reducing costs/outsourcing and now, we have reduced our cost sooo much, no one wants to pay a sustainable wage anymore…. Doh!

  19. Wood, I couldn’t agree more with your statement:

    “The sooner the Democrats, the Republicans, and the Tea Partiers come to the realization that we are all in this together, the sooner we will move forward to our next era of American Greatness.”

    I happened to watch the State of the Union on CBS, and Bob Schieffer expressed almost a sense of relief about the civil tone of the evening. He said people outside of Washington didn’t understand how bad the inter-party rhetoric had gotten. I looked at my husband and said, “Is he kidding?” We understand it!!

    We try to raise our children to have emotional intelligence and solve their problems civilly. We should expect at least as much from members of Congress.

  20. Berni, NAR has provided plenty of information that disputes your claim. First, the MID isn’t even available to investment property owners. As for being of use only for homes over $500k, I speak from personal experience. I bought my house (my only house) for $238,000, and I benefit from the mortgage interest deduction. I also believe my community benefits from policies that encourage home ownership. Please take a look at Rob Freedman’s blog post and video from Jan. 18, “MID Cuts: Hobbesian Choice for Localities.”

  21. Nancy, your comment on the sales tax of homes is a false rumor that has stubbornly persisted for some reason. Linda Goold is a tax expert who works for NAR. She offers a clear explanation of the tax in a video interview with our senior editor, Rob Freedman. It’s a tax on investment income of high-income earners; it affects only a sliver of taxpayers and applies to only a sliver of their earnings. You can watch the video at:

    http://speakingofrealestate.blogs.realtor.org/2010/11/24/the-3-8-tax-is-not-a-real-estate-transfer-tax/

    [Note: Apologies to those on iPhones and iPads, who can't watch our Flash videos - I just got a note from a frustrated reader today, so it's on my mind; we're currently working hard to move our entire site to a new content-management system that will be Flash free. This is a big undertaking. We expect to have the switch completed when we launch our April issue. We appreciate your patience.]

  22. Who says tax reform won’t be a huge boost to the economy? There is more empirical evidence to justify the economic effectiveness and benefit of tax simplification and cuts than there is demonstrating the assertion that the interest deduction is critical to maintaining real estate values.

    If we implemented a flat tax in the US with no deductions of any kind, the economy would take off and foreign capital would flood to our shores. Ditto for making severe cuts to cap gains, dividends, and the corporate income tax. What do you think these cuts would do to real estate? Answer: People buy a lot more homes and buildings. Values would have to increase in such a pro-business, pro-investor environment. Tax revenues would also take off.

    Realtors should be very skeptical of anyone or organization making claims about how re values are dependent on tax deductions and other government added / provided benefits. Remember, government involvement in the mortgage market, and then their lack of any securities oversight created the financial meltdown. All government meddling!

  23. Eric Ferris

    The comments above are a steady stream of regurgitation – beginning with the comment on health care. If health care is against our freedoms then so is mandatory schooling, regardless of who mandated it. Outlaw mandatory education? Sure we can put the 10-year olds back into factories them…

    Obama-bashers need to wake up and smell the coffee. These comments for the most part cant even be taken seriously because there was no thought put into them. Its the ME-TOO club joining the choir of Obama is this and that, did this and that. The national debate needs to progress beyond a 12-year old intellect and mentality.

    Try thinking for yourself for a change… you will see that people of good will are trying the same. Maybe our problems related to business ARE related to health care and education. I am sorry but it is idiotic to repeat the same old mantras that are little more than fear-tactics. If I read the entire stream above…I will probably find something on gun control. This nation of INDIVIDUALS needs to THINK and stop living second-hand opinions…endlessly. I own a gun, by the way…. and I was an elementary teacher. Let’s turn a corner here and do what’s best for our children, our nation of tomorrow. Not just line our pockets today….as we have been doing for 30 years.

  24. Kathryn "Ki" Leffler

    Thank you Berni Bishop Pirollo, Wayne Giroux and Michelle Jones for supporting the change in the MID. I, too, find this a reasonable change that our association should back and encourage other professions to examine any items affecting their area that would benefit deficit reduction. The peek of homeownership was in the 67% range and has dropped to the lower 60%’s so how can we defend MID for second homes? If you can qualify for a mortgage of $500,000 or more you can afford not to have the tax break – same goes for giving up the equity loan MID. We are the only national voice for private property ownership and still a powerful lobby. If we support these changes then our reps and senators will vote for them. Yes – let’s work together. Confidence in the future also makes jobs and sells homes.

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