This is the Cato Daily Podcast for Thursday, August 18th, 2011.

I'm Caleb Brown.

The Mortgage Interest Deduction distorts housing markets, distorts other markets,

and contributed to the housing bubble,

and it spurs families to take on far more debt than they otherwise would.

Mark Calabria, director of the Cato Institute's financial regulation studies, says it's time for that particular subsidy to go away.

From the most basic economic perspective, the mortgage interest deduction changes people's behaviors and it changes people's behaviors in ways that are

imperceptible and changes markets in ways that even they probably don't perceive.

And that's fair to say. I mean, certainly depending on the housing market itself,

one needs to always be aware that the impact of the mortgage

introduction are really any other demand side incentive to buy

housing is going to differ depending on how easy it is to bring supply

onto the market.

For instance, you would look in some place like San Francisco where it's very difficult to build,

and in place like that the value with the mortgage introduction would be almost completely

capitalized into the price of the house and is almost a complete win for the

seller and of course that's a one-off now in a market like say Las Vegas or

Phoenix it's going to be more evenly divided between the buyer and the seller, but the impact is going to be

to raise house prices.

And that's an important consideration to keep in mind, which is, and even the largest proponents

of the mortgage

introduction usually bring the claim that if you get rid of it,

...