Economic survey of the United States 2007: Household debt

Contents | Executive Summary | How to obtain this publication | Additional information

The following OECD assessment and recommendations summarise Chapter 4 of the Economic survey of the United States, published on 29 May 2007.

Contents                                                                                                                          

Housing support needs to be reconsidered

The housing market is an example of the adverse effects of certain tax concessions. In principle aimed at promoting homeownership to lower and middle income households, tax preferences have mostly benefited high income households with easy access to homeownership. Furthermore, tax preferences have encouraged investment in residential property at the expense of other household assets, possibly affecting capital formation elsewhere in the economy and, thereby, productivity growth. The mortgage interest tax deduction should be replaced with a tax credit available to all homeowners, with a maximum amount reflecting the average cost of housing, so as to promote homeownership without unduly subsidising housing consumption. The interest deductibility on home equity loans and second homes should be eliminated to avoid encouraging overinvestment in housing. Other distortions arise from the activities of government sponsored enterprises. Their large portfolio of mortgage based securities poses a risk to financial stability and result in a large contingent liability for the federal government. The regulation of government sponsored enterprises (GSE) needs to be tightened and their role refocused, and eventually restricted, as their activities have developed far beyond their original mandate of promoting homeownership. As well, it would be useful to review the legislation considering GSE debt as government securities, as this suggests that such debt is guaranteed by the government.

How to obtain this publication                                                                                      

The Policy Brief (pdf format) can be downloaded. It contains the OECD assessment and recommendations but not all of the charts included on the above pages.

The complete edition of the Economic survey of the United States 2007 is available from:

• SourceOECD  for subscribing institutions and many libraries
• OECD Online Bookshop for non-subscribers
• OLISnet, under "Publication Locator", for government officials with accounts (subscribe)
• Accredited journalists (password required)

Additional information                                                                                                  

• Economic Surveys and Country Surveillance
• List of recent US surveys
• Timetable of planned EDRC Meetings
• OECD United States website
• OECD Economics Department homepage

For further information please contact the US Desk at the OECD Economics Department at eco.survey@oecd.org.  The OECD Secretariat's report was prepared by Hannes Suppanz and Peter Tulip under the supervision of Patrick Lenain.