Garrett Applauds Passage of Budget and Accounting Transparency Act

WASHINGTON, DC – Rep. Scott Garrett (R-NJ), Vice Chairman of the House Budget Committee, today applauded passage by the House Budget Committee of H.R. 3581, the Budget and Accounting Transparency Act of 2011.  In December, Rep. Garrett introduced H.R. 3581 as part of a comprehensive set of ten reforms to enforce spending controls, enhance oversight of federal spending and restore honest accounting standards to Washington’s broken budget process.  

“It’s fitting that today marks the 1,000th day since Senate Democrats passed a budget to fund the federal government.  If that isn’t reason enough to support wholesale reforms to our broken budget process I don’t know what is,” said Garrett after the vote.  “Under President Obama’s watch, Washington has racked up the three largest deficits in U.S. history and the national debt has surpassed the size of our entire economy.  As scary a picture as this may paint, it grossly distorts and misrepresents the full scale of our fiscal crisis.  Off-budget liabilities such as government-sponsored enterprises Fannie Mae and Freddie Mac threaten any progress we make towards deficit and debt reduction.  It’s time we bring these black holes of debt out of the shadows and onto the books.”

“The Budget and Accounting Transparency Act would formally bring Fannie Mae and Freddie Mac on-budget and require their debt issuance be accounted for in the calculation of the federal debt; and would require fair value accounting for federal credit programs to appropriately evaluate the level of risk being absorbed by the taxpayers,” added Garrett.  “This bill not only gets us to a point where we can fully understand the severity of our country’s financial troubles, but provides the transparency we so desperately need to prevent runaway spending in the future.  I was encouraged to see so many of my colleagues recognize the need for these reforms and look forward to voting for this important bill when it reaches the House floor.”

The Budget and Accounting Transparency Act would do the following:

• Require fair value accounting for federal credit programs.  The executive branch and Congress would be required to use “fair value” accounting in calculating the costs of federal credit programs that consider not only the borrowing costs of the Federal government, but also the costs of the market risk the Federal government is incurring by issuing a loan or loan guarantee. This reform would bring federal budgeting in line with private sector cost-estimating practices.
• Requires the Congressional Budget Office (CBO) and Office of Management and Budget (OMB) to conduct a study on extending this fair value methodology to federal insurance programs, which are currently accounted for on a cash-flow basis.
• Brings government-sponsored enterprises Fannie Mae and Freddie Mac on-budget to recognize the budgetary impact of these housing-related government-sponsored enterprises (GSEs).  Since the financial crisis, these enterprises have become the explicit financial responsibility of the federal government and these reforms would ensure that the budgetary implications of that fact are reflected in the federal budget.
• Requires OMB to conduct a study on the use of budgetary terms related to money collected by the Federal government, which have become jumbled and inconsistent over the decades.
• Requires that agencies make public the budgetary justification materials prepared in support of their request for use of taxpayer dollars.

Background

Building on the reforms included in the House-passed Path to Prosperity budget blueprint, House Republicans unveiled 10 bills in December to reform Washington’s broken budget process.  The comprehensive set of reforms represents the latest effort by behalf of House Republicans to reduce spending and bring accountability and transparency back to the federal government’s broken budget process.