It was not until the 1920's and the spread of the automobile that home mortgages outnumbered farm mortgages. In the 1930's, the mortgage industry got a huge assist from the feds -- not from the tax deduction, but from agencies like the Federal Housing Administration, which insured 30-year loans, and, over time, the newly created Federal National Mortgage Association, or Fannie Mae. Before then, the corner bank would issue a mortgage and wait for the homeowner to pay them back; now savings and loans could replenish their capital by selling their mortgages to Fannie Mae -- meaning they could turn around and issue a new mortgage to someone else.

By the time the G.I.'s returned from World War II, bursting with dreams of homeownership, the mortgage industry was ready for them. It wasn't until after 1950 that the majority of homeowners had mortgages. And thanks to this ready financing, renters suddenly became owners. After hovering around 45 percent for the first half of the 20th century, the proportion of owner-occupied homes soared. By 1960, 62 percent of Americans owned their homes. (Today, the figure is only slightly higher: 69 percent.)

Of course, it was in those postwar years, when people were getting their first mortgages and also their first homes, that Americans discovered the joy of the interest deduction. Over time, it evolved into a birthright -- almost like owning a home itself. Perhaps it was that confluence of trends that led people to suppose, as Daniel Gross did last year in the online journal Slate, that the U.S.'s "enviably high rate of homeownership" is a product of the deduction. But the existence of credit was a much greater catalyst than the longstanding ability to deduct it. Homeowners who genuflect to the deduction should probably be giving their thanks to mortgage bankers instead.

In any case, the growth of credit cards in the 70's began to turn the interest deduction into a serious loophole. People were becoming plastic junkies; if you paid for a washing machine on credit, the I.R.S. would give you a subsidy. By the 1980's, this threatened the entire system of revenue collection. There was some talk that the Treasury was looking at eliminating deductions, including, possibly, the interest deduction. Economists thought it was a good idea. "Tax economists tend to be skeptical about preferences in the tax," says Joseph Thorndike, the director of the Tax History Project at the nonpartisan Tax Analysts. "Are they targeted to the right people? We give tax breaks for college; do we send more kids to college or help middle-class kids who are going to college anyway?" Fine and well, but was an elected official really going to risk fooling with the mortgage deduction?

President Reagan was not. Addressing the National Association of Realtors in 1984, he said, "I want you to know that we will preserve the part of the American dream which the home-mortgage-interest deduction symbolizes." He didn't mention that it also symbolized the American love affair with debt; after all, it encourages people to pay for their homes with a mortgage instead of with equity. Two years later, in the tax-reform act of 1986, Congress ended the deductibility of interest on credit-card and other consumer loans; it left the mortgage deduction in place.

But Congress did set a cap. Today, a taxpayer can deduct the interest on mortgages worth up to a total of $1 million on his or her first or second homes. Also, you can deduct up to $100,000 on a home-equity loan. (And what prevents you from using a home-equity line to buy a flat-screen TV and then deducting the interest? Absolutely nothing; go for it.)

At the beginning of 2005, flush from his election victory, President Bush envisioned another major tax reform, somewhat similar to that of 1986. Simplifying the tax code was a major goal, as was winnowing out the tax breaks that were again eating a hole through the Treasury. Bush appointed a nine-member, bipartisan panel to drum up a proposal. The president ordered the panel to "recognize the importance of homeownership." People figured the interest deduction was off limits.