A report released Thursday by the Congressional Budget Office showed that trimming federal subsidies to Fannie Mae and Freddie Mac would reduce the federal budget deficit by $8.4 billion over 10 years. As the soon-to-be Republican Congress looks to pass legislation that will further a limited-government agenda or force President Obama to veto popular legislation, reducing subsidies for these outdated government-sponsored enterprises presents a viable option.
The GOP’s main goal in the coming session of Congress is to prove it can govern competently before the 2016 elections. To do so, the party must identify limited-government policy reforms that are effective and popular. Obama will not sign overly ambitious policy proposals, which will only provide fodder for Democrats when they court independent voters in 2016. Republicans will be on record voting for legislation, but because the legislation won’t go into effect, there won’t be an opportunity for Americans to experience real world benefits of any policies, making them more susceptible to Democratic scare tactics.
Reform proposals that fight unpopular special interests and cut government spending would make it clear the GOP can still defend its ideology against powerful lobbyists.
Fannie Mae and Freddie Mac remain unpopular among the public, largely because of their role in exacerbating the 2008 financial crisis. Legislation to increase guarantee fees on loans assessed by Fannie Mae and Freddie Mac would save an average $840 million a year over the next 10 years, according to CBO estimates.
Unfortunately, the annual savings would amount to less than 1 percent of the $536 billion projected deficit in 2016. Without power over the executive branch, the GOP won’t be able to pass the significant reforms necessary to balance the federal budget. But passing legislation to reduce federal subsidies for Fannie and Freddie would show that the GOP is serious about standing up to special interests and can govern competently with unified control of the government.
If Obama signs the bill, the GOP will achieve a policy victory that makes them look capable of finding bipartisan areas of agreement. If Obama vetoes the bill, he will make the Democrats look like the party of Wall Street-supported corporate welfare and make Republicans look like populists. Cutting subsidies to Fannie Mae and Freddie Mac is a win-win proposition for the GOP.
