The annual federal budget is a whopping $3.6 trillion, but that figure fails to capture the true burden of government on taxpayers.
There are a number of GSEs (government sponsored enterprises) that are considered off budget. Politicians use off-budget entities like Fannie Mae, Freddie Mac, and the Postal Service to obfuscate the true cost of government. Additionally, the government runs a number of credit programs, in which taxpayers are on the hook for loan guarantees. These guarantees include loans for college students and for energy programs, such as the one that purveyed failed green energy programs like Solyndra.
Under current law, Congress only factors in the cost of the loan itself when formulating the annual budget. Perforce, if the money is paid back with interest, there is no cost to the government. However, as we have learned so painfully, the loans are, all too often, never paid back. Taxpayers have been called on to bailout a modicum of failed loan guarantees. In the private sector, they use “fair value” accounting in calculating the costs of credit programs. Fair value accounts for the costs of the market risk the lender incurs by issuing a loan, in addition to the actual borrowing costs.
Yesterday, the House passed H.R. 3581 – The Budget and Accounting Transparency Act (Scott Garrett). This legislation brings Freddie and Fannie back on budget so taxpayers can see the true cost of these officious and destructive enterprises. In addition, the bill will subject all loan guarantees to the “fair value” accounting method that is used in the private sector.
Astoundingly, almost every Democrat voted no on this commonsense bill. Remember that this bill doesn’t mandate any changes to these programs or enterprises; it is not an ideologically charged bill. This legislation merely forces Congress to reflect the true cost of government in the annual budget, not unlike what every family does with their household budget. Sadly, even this moderate reform was too bold for Democrats.
We will be forced to clash with members of the House leadership over the next few weeks, but we should commend them when they bring legislation from conservatives, such as this budget reform bill, to the floor. As for the Senate, we need to get them to agree to pass any budget, much less use prudent accounting methods.