Garrett Delivers Speech on House Floor in Support of Budget and Accounting Transparency Act

WASHINGTON, DC – Rep. Scott Garrett (R-NJ), Vice Chairman of the House Budget Committee, delivered the following speech on the House floor today in support of H.R. 3581, the Budget and Accounting Transparency Act, which he introduced in December as part of a comprehensive set of reforms to fix Washington, DC’s broken budget process:

“I would first like to thank Chairman Ryan and the Budget Committee staff for their hard work on H.R. 3581, the Budget and Accounting Transparency Act.

“Unless you’ve been living on Mars the last year, it should not come as a surprise to hear that our country is broke.  However, what should surprise you is that the true extent of our country’s debt crisis is a lot worse than anyone in Washington is letting on.  

“How much worse?  That’s the thing, nobody knows; and we won’t ever know until we reform the broken budget process in Washington, DC. 

“As many have talked about before, our budget process is broken.  Simply put, we need to make the budget process more transparent.

“Fortunately, today we are taking a step in the right direction with H.R. 3581, the Budget and Accounting Transparency Act of 2011. I introduced this bill in December, along with Chairman Ryan, as part of a comprehensive set of reforms to overhaul Washington’s broken budget process. 

“The bill before the House today—the Budget and Accounting Transparency Act—is a common-sense attempt to introduce more ‘sunshine’ and ‘common sense’ into our budget process.

“What would this legislation do?

“Specifically, this bill recognizes the budgetary impact of government-sponsored enterprises Fannie Mae and Freddie Mac by bringing these black holes of debt out from the shadows into the sunshine and on-budget.

“This bill also requires that the federal government apply the same credit accounting standards as the private sector when making or guaranteeing loans.

“In September 2008, as the country was reeling from the fallout from the financial collapse, Fannie and Freddie were placed into conservatorship by the Federal Housing Finance Agency (FHFA). 

“Under this agreement, FHFA took control of the two companies and the Treasury Department risked hundreds of billions of taxpayer dollars to bail out the government-backed mortgage twins. 

“To date, the American taxpayers have sunk over $183 billion and counting into these failed institutions.  As if this weren’t enough, Fannie and Freddie have also issued more than $1.2 trillion in debt and hold or guarantee about $5.3 trillion in mortgage-backed securities (MBS)

“Because Fannie and Freddie have become the explicit financial responsibility of the federal government, it only makes sense that we treat them the same as we would any other obligation of the federal government by formally bringing them on-budget.  

“The non-partisan Congressional Budget Office took this step several years ago, but the Office of Management and Budget has resisted the change preferring to obscure the total federal exposure to Fannie Mae and Freddie Mac.

“It’s time the Obama administration did the same.

“Bringing Fannie and Freddie on-budget exposes some ugly and inconvenient truths.  But I know the American people did not send us here to play a shell game with taxpayer dollars.

“The combined debt obligation of Fannie and Freddie isn’t the only black cloud hanging over us; inaccuracies and a lack of transparency in budgeting for federal credit programs also loom large.

“Take the case of Solyndra, for example—the poster child of government loans gone bad.  As we saw with the Obama administration’s $527 million ‘investment’ into the solar energy company, when Washington makes a bad bet, it’s the American taxpayers left holding the bag.

“Federal loan guarantees are contractual obligations between the taxpayer, private creditors and a borrower such as Solyndra.

“Loan guarantees are a promise by the American taxpayer that they will cover the borrower’s loan in the event that the borrower defaults.  If the American taxpayer is on the hook for default, shouldn’t we have a better idea of the cost of the loan in the first place?

“Unfortunately, under current law, when the government issues a loan or loan guarantee, the inherent riskiness of that loan is not reflected in the loan or loan guarantee’s cost. 

“In fact, the non-partisan Congressional Budget Office estimates that our current federal accounting rules understate the cost of credit programs by some $55 billion a year, because the rules do not account for market risk.

“Why shouldn’t Washington play by the same rules that every American family and business must play by when taking out a loan?

“The Budget and Accounting Transparency Act fixes this shortcoming by requiring market risk to be explicitly included in estimates of federal credit programs, bringing federal budgeting practices in line with what’s long been standard practice in the private sector. 

“Specifically, it requires the executive branch and Congress 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.

“Accounting for market risk is the key—your local banker does it every time you apply for a home or auto loan.  The federal government should be doing the same. 

“In fact, during the House Budget Committee’s consideration of this legislation, the director of the non-partisan Congressional Budget Office stated: ‘We believe that the fair-value method of accounting for federal credit transactions provides a more comprehensive measure of a [program’s] true cost.’

“While the Budget and Accounting Transparency Act won’t prevent future presidents from making similarly risky bets, at least it will force them to be honest with the American people about the true upfront cost of their boondoggles. 

“Lastly, the legislation before us today increases the amount and timeliness of information on agency budget requests, requiring that these budget justifications be provided to the public when they are sent to Congress. 

“It’s the people’s money and they ought to know what agencies are planning to do with it.

“These provisions would go a long way to fixing our broken budget process and bring much-needed transparency to the way Congress functions.

“For too many years, Washington has played by a ‘special’ set of rules.

“With mounting debt and lackluster job growth, it’s time to force government to play by the same economic rules as every American family and business.

“For too long, we have not been honest with the American people about the cost of government.  If we truly are committed to reversing our country’s race towards bankruptcy, as we say we are, we need to be honest with ourselves and the American people about the true cost of government.

“Today, I say we put our words to action by bringing sunlight and transparency back into our budgeting process.”

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