Time is quickly running out on the first-time homebuyer tax credit, due to expire December 1 and despite an all-out lobbying campaign, the housing Industry faces a battle to extend and expand it.

Senate Majority Leader Harry Reid endorsed the idea of extending the credit and President Obama is expected to endorse a simple six month extension. The credit is popular with consumers, and for good reason. The Internal Revenue Service reports that at least 1.1 million buyers have applied for tax credits through amended returns and the credit played a key factor in motivating some 350,000 first-time buyers this year.

But opposition to the credit is also on the rise, especially over the annual $5 billion price tag of expanding the credit to cover all buyers, and the coming debate could sway many Members of Congress concerned with the ballooning cost of stimulus programs despite the housing industry’s political clout.

Mark Zandi, the well-known chief economist of Moody’s Economy.com, is one of the few economists who publicly favors expanding the credit to all home buyers, even investors, into next summer. “The risks of not doing something like this are too great,” he said. “I don’t think the coast is clear.”

A number of other economists, both liberals and conservatives, are lining up on the other side. The Tax Policy Center, a joint venture of the Bookings Institution and the liberal Urban Institute, labeled the original credit as one of the worst provisions of the stimulus package, on the grounds that the money is a bonus for people who would buy a house anyway. The center has an even dimmer view of extending the credit to all buyers and it vehemently opposes continuing it.

“As a long-term measure the proposal would increase the tilt in the tax code in favor of owner-occupied housing. Owner-occupied housing is very heavily subsidized, resulting in too much investment in homes and not enough in other productive assets. This is both inefficient and inequitable,” said a recent post on the Center’s site.

On the far right, the CATO Institute is also an outspoken opponent. “If it were only a matter of prolonging the adjustment, then the huge cost of the tax credit might be easier to justify. Yet by encouraging increased housing production, the tax credit will increase supply when we already have a huge glut of housing. Despite housing starts being near 50-year lows, there is still too much construction going on. The way to spur demand in housing is the same way you spur demand in any market: you cut prices,” wrote CATO’s Mark Calabria in a recent Web posting.

Dean Baker, co-director of the Center for Economic and Policy Research, argues the money behind the tax credit could be used for more pressing matters – like unemployment insurance, food stamps and aid to state and local governments.

“It’s really bad policy. You’re throwing a lot of money, in my mind, in the garbage,” Baker recently told the Associated Press.

Another vocal opponent is Bill McBride, whose Calculated Risk Web site is one of the most widely read blogs in the field of housing economics.

“The evidence suggests that interest (in the credit) is already waning (although there will be a flurry of activity at the end just like Cash-for-clunkers). My estimate is the program will cost taxpayers $100,000 per additional home sold. Not very efficient or effective,” he recently wrote.

Timothy Duy, director of the Oregon Economic Forum, argues the credit masks deeper problems. “Leaving aside the issue of whether or not it is wise to create a fresh entitlement for housing purchases (not), the likely all-out push for an extension points to the current vulnerability of the recovery,” he wrote recently.

Not only economists question the wisdom of the credit. In Flathead County, Montana-about as far from the machinations of Washington as one can get-the housing market is still far below previous years. Residential sales decreased by 56 percent from 2008 to July 2009, according to data from local appraiser Jim Kelley. Kelley is concerned that the end of the tax credit could mean an end to even the modest increase that has occurred.

“There’s a danger in that, because it creates kind of a boom-and-bust cycle,” Kelley said. Kelley said it might help his market if the government phased the program out instead of a flat termination.

Realtor Paul S. Henderson of Olympia, Wash. has a similar view. “All this talk about extending the $8000 tax credit makes my skin crawl. Extending does take the urgency out of the program which will make the true fence sitters extremely happy. Why make a decision today, when you can wait 6 months?

“Let this program expire! Bring me something new to excite house buyers. Don’t restrict it to first time buyers, they’ve had their chance. Let’s develop a program that expands the pool. If housing can spur the recovery why should we limit the fuel to ignite the recovery? Remember, cash for clunkers was extended 2 weeks, did that make it a great program?” he wrote recently in the ActiveRain real estate blog.