Debt crisis a lot worse than Washington will admit

Have you ever received a bill in the mail only to find it chock-full of hidden costs and fees? Few things frustrate consumers more than a lack of transparency in their transactions and purchases.

Why, then, is it acceptable for the federal government to pull the same veil of deception over the heads of the American taxpayers?

Unless you've been living on Mars, it shouldn't surprise you to hear 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 is letting on.

How much worse? That's the thing, nobody knows; and we won't know until we reform our budget and accounting standards.

Fortunately, House Republicans took a step in the right direction yesterday when we passed H.R. 3581, the Budget and Accounting Transparency Act of 2011, a bill I introduced in December as part of a comprehensive set of reforms to fix Washington's broken budget process.

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 and on-budget, and requires that the federal government apply the same credit accounting standards as the private sector when making or guaranteeing loans.

Why are these reforms important? Let's take a trip down memory lane.

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.

Under this agreement, FHFA took control of the two companies and the Treasury Department risked hundreds of billions of taxpayer dollars to bail them out.

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.

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 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 California-based solar energy company, when Washington makes a bad bet, it's the American taxpayers left holding the bag.

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.

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 cost of their boondoggles.

If we truly are committed to reversing our country's race toward bankruptcy, we need to be honest with ourselves and the American people by bringing all of our existing liabilities into the light of day.

Rep. Scott Garrett is a New Jersey Republican who is vice chairman of the House Budget Committee and Chairman of the Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises.