Bipartisan effort seeks end to budget gimmicks

It isn’t often that budget fights lead to good results for fiscal conservatives. For instance, last year, Congress engaged in a drawn-out battle over the FAST Act, a highway bill that was the first of its kind in years. It funded funding major infrastructure projects while also shoring up the Highway Trust Fund. The deal was supposed to be fully offset with spending reductions or changes in other federal programs that would theoretically result in lower spending, but things were not quite that clear.

One of the initially proposed “pay-fors” – which were to offset spending in the bill by nearly $1.8 billion – was a four-year delay in cuts to so-called “guarantee fees.” G-fees, for short, are fees charged by providers of mortgage-backed securities, such as Fannie Mae and Freddie Mac, that typically end up being passed on to homeowners.

{mosads}G-fees are essentially a form of risk management, used to protect against borrower defaults. After all, in the event of a large-scale default crisis, taxpayers could be left on the hook for even more spending. It’s no surprise that lawmakers have been concerned about using these fees for unrelated purposes before. Last year, Senators Mark Warner (D-VA) and Mike Crapo (R-ID) introduced a budget point of order that would prohibit the use of g-fees to offset unrelated spending.

Although using g-fees to offset the new spending was ultimately removed from the final legislation, the proposal ignited a new debate over the use of budget gimmicks. The final highway bill removed the g-fees offset, but it retained a similarly controversial offset, which took $59.3 billion from the Federal Reserve’s surplus account.

This budget gimmick discussion is being reintroduced with a new piece of bipartisan legislation, H.R. 4893, the Risk Management and Homeowner Stability Act. Congressman Mark Sanford (R-SC), joined by Congressmen Brad Sherman (D-CA) and Randy Neugebauer (R-TX), is seeking to amend the Budget Control Act of 1974 to ensure that these fees cannot be used as budgetary offsets for anything aside from their intended purpose – to provide stability to the mortgage market.

“Homeowners shouldn’t be used as a national piggy-bank,” said Congressman Sanford in a press release about the bill. “Using g-fees to fund unrelated programs weighs down future homeowners with an unnecessary long-term burden. Plus, using g-fees to offset spending creates an incentive to set the fees based on the need for new spending instead of the true cost of capital.”

Offsets are a great way to stem growth in government spending, but the cuts should be real. Too often, massive increases in spending are justified through questionable or phony offsets that are not much more than accounting tricks or veiled tax increases. Worse, dubious offsets can drive us even deeper into financial troubles by creating the perverse incentive for new spending to be based on how many offsets can be dug up, rather than on the merits of the legislation or necessity of the funding.

Too often, these kinds of budgetary gimmicks are used to avoid making real, sometimes difficult reforms to a program. With the highway bill, questionable offsets allowed Congress to avoid real reforms, and eschew addressing the root causes of the Highway Trust Fund’s depletion and continuing funding crises. When offsets are not really offsets, the status quo is protected and taxpayers lose.

Bydlak is the President of the Coalition to Reduce Spending, a non-partisan advocacy organization dedicated to limiting federal spending.