Deficit Talks Not Good for Housing

Sen. Tom Coburn’s decision to withdraw from talks by the “Gang of Six” does not bode well for advocates hoping to stall cuts to federal housing programs. Coburn was part of a group of senators hoping to reach bipartisan agreement on a deficit reduction plan that could win broad congressional approval. Coburn’s decision to remove himself from those discussions makes reaching an agreement harder. As a result, the politics of deficit reduction will overshadow any substantive discussion that could occur.

President Barack Obama’s decision not to accept the recommendations of the deficit commission he empaneled as the starting point for these discussions has led to a more complicated, highly political process leaving Federal programs ripe for attacks. The deficit commission recommendations were easily approved in a bipartisan fashion after sparing no program from assuming a portion of the responsibility to reduce the federal deficit. This gave every politician in Washington the political version of a flak jacket when approaching sensitive issues like tax increases, cuts to entitlement programs and the defense budget. The commission members understood the need for broad action to reign in Federal spending. Their support for a series of hard choices demonstrated a bipartisan consensus on difficult issues could be reached.

Obama unwisely went in a different direction. The result was a contentious debate on the FY 2011 budget that went down to the wire and a more difficult set of negotiations with catastrophic consequences if an agreement is not reached. The more contentious these discussions the more likely “poorly administered” agencies will bear the brunt of cuts.

Anticipating cuts to its programs as a result of the discussions, the Department of Housing and Urban Development (HUD) is beginning to distance itself from some of the local decision-making within local agencies. First, it is going make the salaries of housing agency directors more accessible to the public. These records are already a matter of public record but highlighting these salaries only adds fuel to the public’s discontent with government workers. It will lead to calls to reduce spending and salaries for public officials.

Second, HUD’s response to a series of articles in The Washington Post which questioned the management of funds administered through the HOME Investment Partnership program was to blame local decision-making. HUD said it has no control over how funds are administered. Mercedes Marquez, HUD’s assistant secretary for community planning and development, told The Washington Post, “this is what comes with having the flexibility of a block grant, where you respect local decisions.”

Now Members of Congress are calling for a review of HUD’s program. It does not come at a good time. The House Appropriations Committee releases its funding parameters for FY 2012 and housing programs are facing an overall reduction of 14 percent. Denial is the safest card for the department to play. If Republicans target HUD for deeper cuts, department officials can point to poor programmatic local decision-making as the culprit.

Republicans have aggressively argued additional cuts must accompany any increase to the nation’s debt limit. While no one truly expects Congress to allow the U.S. government to default on its obligations, the hard-line tactics worked effectively before an agreement on a FY 2011 budget was reached and a government shutdown was averted. The stakes are much greater now and the consequences too catastrophic for some to contemplate; however, there is a segment within congressional Republicans who would be happy to allow the deadline to pass without an agreement.

The seriousness posed by defaulting gives the president the slight edge in these negotiations. As long as he submits modest cuts during these negotiations, he places the burden on Republicans to move from their hardline stance or cause calamity. The increased scrutiny of HUD and the local officials will continue to put housing agencies on the defensive.

Interesting Read

Members of Congress call for probe of HUD’s HOME affordable-housing program
By Debbie Cenziper
The Washington Post

A trail of stalled or abandoned HUD projects
By Debbie Cenziper and Jonathan Mummolo
The Washington Post

Speculators score, District loses in affordable-housing deal
By Debbie Cenziper
The Washington Post

US: Philly housing agency overpaid for shoddy work; audit questions $127M in stimulus spending
By Associated Press
The Washington Post

Budget surplus to deficit: How we got here
By David Rogers
Politico

Can loan modification fix housing?
By Christipher Papagianis
Politico

Neo-Voodoo Economics
By Jim Tankersley and Michael Hirsh
The National Journal

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