The economy, Congress and mortgage deductions
The old adage about seeing the glass half-full or half-empty couldn’t be more applicable than it is today. I hope you’re like me and focus on it being half-full.
The news came out Wednesday that the economy grew at an annual rate of 1.7 percent in the second quarter. It’s sluggish growth, yes, but it’s very important to also recognize it’s up from the first quarter’s 1.1 percent. Moreover, this pickup is generating forecasts that the economy will pick up speed in the latter part of the year and that’s good news when we realize the industry’s important fall boat show circuit begins in just a few weeks.
Briefly, economists now think businesses will step up investment. In fact, it began in the second quarter (up 4.6 percent) and it offset a surprising reduction in consumer spending. The latter isn’t expected to last, however, as economists predict steady job growth (average 202,000 per month from January through June) will trigger more spending and the economy will expand at an annual rate of 2.5 percent in the third and fourth quarters.
Add in other facts that indicate growth will pick up more such as: Home construction (newly built homes sold in June at fastest pace in five years) has been on a roll for more than a year now, leading to expectations of even more construction and related jobs — spending on home construction has been up 13.4 percent so far this year; Auto sales have also been rolling, topping 7.8 million vehicles in the first six months this year (the best first-half total since 2007) and all lights are green that strong auto sales will continue through the third and fourth quarters; and a significant damper on the economy — major cuts in federal government spending — is now mostly behind us with only 1.5 percent in cuts during the second quarter after a big 8.4 percent hit in the first quarter.
Finally, if we ignore the political rhetoric from those who espouse the sky is falling, we can head into our fall selling season clearly expecting to see more success than a year ago.
You would think Reps. Mike Quigley, D-Ill., and Tim Walz, D-Minn., would have learned last year that the elimination of the second mortgage interest deduction on boats would have a negative impact on sales, production and jobs. But they’ve reintroduced their “Ending Taxpayer Subsidies for Yachts Act” anyway. Again, they single out just boats (while continuing to allow such deductions on RVs and vacation cottages, etc.) in what is clearly political posturing by two representatives who could readily serve as icons for shortsighted thinking. Is it any wonder Congress has a lower rating in the eyes of the public than rodents.
Says Quigley: “As we work to get our fiscal house in order, we have to reform our tax code and put an end to frivolous tax loopholes like these.” Seriously, did he really say “as we work to get our fiscal house in order?” Oh, surely this will do it — because in Quigley’s thinking luxury yachts qualify for the interest deduction if they’re equipped with bedding, toilet and a kitchen — the types of boats only the super-rich can afford.
Walz, on the other hand, is a real trip. “The Mortgage Interest Deduction was made to help middle class families own a home . . . not to subsidize yachts for the super-rich.” Apparently, Walz can’t grasp that those of us who deduct the interest on a second mortgage loan for our boats are the middle class. It’s well known that the “super rich” already use up their limited allowable interest deduction for other things, not boats. Even worse, one must ask how Walz can blatantly fail to see that in his own state many middle-class workers have jobs in boat manufacturing plants, dealerships and marinas that he will hurt through this legislation.
So it’s time once again, especially of you’re a dealer, manufacturer and boating industry employee in Illinois or Minnesota, to email or call these congressmen and say their bill is not only discriminatory, but could cost the jobs of hard-working citizen in their states.