Ramesh, I know the work of Hotz-Eakin and Bruce, and it is important to note, as you say, that they say you can eliminate the mortgage deduction only in the context of a gigantic restructuring of the entire tax system of the United States. But what is being proposed by this moronic commission is not a comprehensive tax reform, to put it mildly. It’s just a trade — mortgage-interest deduction in exchange for getting rid of the Alternative Minimum Tax.
In any case, how well I remember the promises of macroeconomists in 1985 and 1986 that tax reform would have no deleterious effects on the economy because they had done some really really good models! And they were stunningly wrong. Elements of tax reform had a stunningly deleterious effect on the economy — especially real estate. Maybe it all balanced out in the long run. But again we see the curse of looking at things from the perspective of the economy as a whole rather than the effect of policies on individual Americans.