John Griffith, a Research Associate with the Doing What Works project at the Center for American Progress Action Fund, co-wrote this post. Seth Hanlon, Director of Fiscal Reform for Doing What Works, contributed to the graphic.

In a hearing this morning, the House Ways and Means Committee examined “improper payments” made in the Earned Income Tax Credit program, which distributed $64 billion in refundable tax credits last year to low-income families during the worst recession in 70 years. “Refundable tax credits not only reduce an individual’s tax liability, they can also result in payments from the government when the credits exceed one’s tax liability; meaning that millions of Americans have been able to eliminate any income tax liability and even get a check back from the government via refundable credits,” said oversight subcommittee chairman Charles Boustany (R-LA).

So instead of going after tax scofflaws that effectively rob the national treasury of hundreds of billions a year, House Republicans have decided to target one of the country’s largest anti-poverty programs, one that Ronald Reagan called “the best antipoverty, the best pro-family, the best job creation measure to come out of Congress.”

Of course, the IRS and Congress must be vigilant about all errors — and some overpayments undeniably occur with the EITC — but policymakers who are serious about reducing the deficit could focus on far larger examples of waste in our federal tax system. For example, the government loses $100 billion every year in revenue to offshore tax havens. It loses another $90 billion when multinational corporations shift their profits out of the country. While low- and middle-income families sacrifice to pay their share, dozens of profitable U.S. corporations like Exxon Mobil and Boeing manipulate loopholes to dodge federal taxes altogether.

As the Center on Budget and Policy Priorities noted, charges of overpayments in the EITC are likely overblown anyway:

First, the commonly cited EITC error rate — 23 to 28 percent of EITC payments are said to represent overpayments — is likely to overstate the actual level of overpayments (although the overpayment level is clearly substantial). This is true for several reasons. First, as explained below, the 23 percent to 28 percent figure is based on IRS studies of tax data from 2001 and 2006 that suffer from some significant methodological problems. (The IRS is scheduled to complete and issue a new study of EITC overpayments in 2012, although the key methodological problem will remain.) Second, as also described below, the IRS has instituted various new enforcement actions and error-reduction techniques in the last several years that may be helping to reduce overpayments.

House Republicans — who have voted time and again to both protect tax loopholes for companies that ship jobs offshore and to preserve billions in federal payments to, among others, Big Oil companies — seem to only find it worrisome when a poor family has no federal tax bill (while, of course, paying their fair share of state and local taxes). Multinational corporations, meanwhile, can pay as little as they please, free from criticism.

For weeks now, Republicans have been claiming that they will refuse to raise the nation’s debt ceiling — thus forcing the U.S. to default on some of its obligations — unless Democrats agree to various policies on the conservative wish-list, including a balanced budget amendment, cuts to Social Security, or corporate tax reductions. To justify this blatant hostage-taking, Republicans have been claiming that having the U.S. default on some of its payments wouldn’t necessarily be a bad thing.

For instance, Sen. Pat Toomey (R-PA) said, “I don’t think it’s going to have an adverse impact on the economy for the days or weeks or perhaps even months that this would continue.” “The case has not been made that this is an absolute necessity,” said Rep. Bill Huizenga (R-MI). Rep. Devin Nunes (R-CA) even said that “by defaulting on the debt, in the short and long term, it could benefit us to go through a period of crisis that forces politicians to make decisions.”

This is, of course, nonsense, as failing to raise the debt ceiling would have several adverse consequences on both the U.S. and global economy. In fact, the spending cuts that would have to occur under such a scenario would wipe out all of the estimated 2011 economic growth in just 95 days. Bank of America analysts wrote that failing to raise the debt ceiling would likely tip the U.S. back into a recession. And as CAP’s Christian Weller noted, it would be terrible for the still-struggling housing market:

If Congress fails to raise that ceiling then the U.S. housing market would most likely experience a severe double-dip contraction marked by much lower home sales and depressed house prices. That in turn would spark a return of the economic pain of the past few years for many families as foreclosures would remain at or near record highs, and jobs in key sectors, such as construction, would disappear again.

Weller laid out several consequences for the housing sector if the ceiling isn’t raised, including:

– Mortgage interest rates will rise more than U.S. Treasury rates. An increase in the 10-year Treasury rate by half a percentage point — which is likely if the debt limit isn’t raised — could translate into a jump in the mortgage rate equal to 0.66 percentage points, increasing mortgage rates by close to 14 percent from their current levels to their highest levels since 2008.

– Mortgage rates will remain high for some time. Shocks to Treasury rates typically translate into mortgage rates rising and staying high. The housing market consequently would not get a reprieve once the federal government has to delay debt payments — even if the debt ceiling is eventually raised.

– New home sales could drop to new record lows. The relationship between mortgage rates and new home sales over the past decade suggests that between 27,300 and 31,600 fewer new homes will be sold in 2011 because of the increase in mortgage rates.

– The economy will suffer. Count on a repeat of the recent housing market-led downturn of the economy. The housing market’s decline during the Great Recession of 2007-2009 dragged down the economy for long afterwards. The economy would have been $222 billion larger (in 2011 dollars) than it was in March 2011without the decline in new home sales and home extensions alone from December 2007 to March 2011.

– Construction jobs would disappear again. Residential construction jobs fell by 1.1 million from December 2007 to December 2010, accounting for 13.9 percent of the job losses during this period. Residential construction employment has only started to level off in the spring of 2011, putting an end to more than three years of massive job losses.

House Republicans have already scheduled a vote to raise the debt ceiling for next week that is designed explicitly to fail.