Heritage Expert: Take CBO 2014 Budget Projection with “Heap of Salt”
Today, the Congressional Budget Office (CBO) released its updated budget projections for 2014 to 2024, which contains some seemingly good news about the deficit — it’s smaller than it was in 2013. But Heritage Foundation analyst Romina Boccia cautions the CBO analysis “should be taken with a heap of salt.”
According to the CBO, the 2014 budget deficit will be $492 billion. “Relative to the size of the economy, that deficit—at 2.8 percent of gross domestic product (GDP)—will be nearly a third less than the $680 billion shortfall in fiscal year 2013, which was equal to 4.1 percent of GDP,” the report states.
Where did the CBO go wrong? Boccia explains:
the operations of mortgage giants, Fannie Mae and Freddie Mac (GSEs), are improperly accounted for in the budget. Without that distortion, both spending and the deficit in 2014 would be higher by about $85 billion.
This distortion should be alarming for all taxpayers, because we are not being made aware of the “real and costly risk for the budget” posed by these GSEs. “Treasury’s cash-flow method currently employed to account for GSE operations keeps trillions in potential taxpayer liabilities off the books,” Boccia explains.
Honest accounting of Fannie and Freddie should be a “bipartisan priority,” and perhaps more importantly, Fannie and Freddie should be eliminated, removing the taxpayer risk entirely.
The Protecting American Taxpayers and Homeowners (PATH) Act of 2013, introduced by Rep. Scott Garrett (R-NJ) 81% and Rep. Jeb Hensarling (R-TX) 83%, would create a sustainable housing finance system and eliminate Fannie Mae and Freddie Mac.
Has your member of Congress co-sponsored this bill yet?