The Budget Committee of the U.S. House of Representatives approved legislation on Tuesday that supporters say could "fix the broken budget process in Washington," but a policy group that analyzed the bill said it could increase the likelihood of budget cuts for several federal programs, including student financial aid.
The Budget and Accounting Transparency Act (HR 1872), sponsored by Rep. Scott Garrett, Republican of New Jersey, aims to bring federal budgeting in line with private-sector cost-estimating practices. When estimating the cost of federal credit programs, the legislation would require the executive branch and Congress to use "fair value" accounting, which measures assets and liabilities at estimates of their current value to make accounting information more relevant.
It would also require the federal government to consider borrowing costs and potential default risks for programs offering loans or loan guarantees.
"Right now, there’s simply too much waste and too little accountability," the committee’s chairman, Rep. Paul D. Ryan, Republican of Wisconsin, said in a news release.
The bill would force Washington "to be honest about the costs of its decisions," he said, "and Congress will be able to set priorities."
The Center on Budget and Policy Priorities, however, said that the legislation would make loan and loan-guarantee programs—including student loans—look more expensive than they actually are.
Policy makers reacting to that inflated cost could "put upward pressure on taxes and downward pressure on all programs," the center said in a news release, "not just credit programs."
If enacted, the proposal would raise the reported cost of the affected programs by $55-billion each year, according to the Congressional Budget Office, with $24-billion occurring in discretionary programs. Because they receive origination fees and interest payments that cover defaults, the CBO said, 44 of the 100-plus federal credit programs do not cost the government money. The proposal, however, would make 33 of those 44 programs appear to cost money.
"Budgets should record actual costs, and budget proposals should be estimated the same way," said the Center on Budget and Policy Priorities. "Advocates of the proposed accounting change call it ‘fair-value accounting,’ but in reality, the proposal would put loan programs at an unfair disadvantage."