Earlier this week, Foreign Policy published a leaked 15-page State Department internal document detailing the fiscal year 2018 budget numbers for five categories of foreign assistance.
The article, breathlessly titled “The End of Foreign Aid as We Know It,” asserted that the document portended the imminent incorporation of the U.S. Agency for International Development, or USAID, into the State Department and quoted numerous defenders of the status quo detailing how the proposed budget would harm U.S. interests. All of this could benefit from some perspective.
First of all, the leaked document was dated April 6. Thus, even if it is authentic, the document reflects a proposal that is at least three weeks old and could easily be out of date and overtaken by more recent plans. It is also unknown whether it was one of multiple options or a consensus document. In short, reactions to it are half-baked, at best, at this point.
Second, the article asserts that the budget would “fold USAID into State.” In support of this assertion, the article states that acting USAID Administrator Wade Warren told staff the administration was considering this possibility and quotes the skinny budget statement on “the need for State and USAID to pursue greater efficiencies through reorganization and consolidation in order to enable effective diplomacy and development.”
By contrast, the leaked document that inspired the story is entirely silent on consolidation of State and USAID. The Trump administration may decide to pursue such a strategy, which The Heritage Foundation has recommended, but the budget document does not provide explicit evidence that it intends to do so.
Third, the document covers only a portion of the U.S. assistance budget. Specifically, it addresses Assistance for Europe, Eurasia, and Central Asia, development assistance, the Economic Support Fund, Global Health Programs for State, and Global Health Programs for USAID.
Significant aid programs such as foreign military financing, food aid, and independent aid agencies like the Millennium Challenge Corporation are not included. Thus, the leaked document is at best an incomplete picture of how the Trump administration would adjust U.S. assistance regionally and on a country level.
Finally, the reaction to President Donald Trump’s budget cuts as listed in the article is overblown for several reasons.
The leaked document outlines a 30.8 percent reduction in the five assistance programs, which is consistent with the budget framework for the State Department and USAID released last month.
This decrease has elicited alarmed reactions from the aid professionals who are quoted in the Foreign Policy article. But it is important to put this in perspective—the foreign assistance budget nearly tripled under the George W. Bush administration from $9.1 billion in 1999 to $26 billion in 2008, according to USAID. Spending on foreign assistance increased even further under the Obama administration to $42.4 billion.
Thus, a 31 percent cut in foreign aid would return the assistance budget to where it was at the end of the Bush presidency, which had been expanded enormously under that administration.
A cut of this size would be less disruptive and less likely to inadvertently harm U.S. interests if implemented over two or three years rather than one. In any case, it is hardly an “unmitigated disaster.” Instead, it is a reversion to levels enacted by Congress under the Bush administration.
That said, the focus of the cuts is informative. A big target is development assistance, which has a questionable record of catalyzing economic growth and development in recipient nations. In the past, this ineffectiveness could be partially excused because development assistance was one of the primary sources of financial investment going to the developing world, but it is no longer.
According to the 2016 Index of Global Philanthropy and Remittances, private financial flows (capital investment, remittances, and philanthropy) to developing countries totaled $801 billion in 2014 versus $147 billion in government assistance. This is a good thing.
As The Heritage Foundation’s own Index of Economic Freedom indicates, countries that adopt freer economic policies—the types of policies that are most likely to attract private investment—are pursuing the best path toward improved economic growth and development in the long run. Developing countries will be encouraged to adopt positive policies to lure private capital, which was not always a priority with development assistance.
Perhaps in acknowledgment of the dubious record of development assistance and the evolving composition of international financial flows, the leaked budget document sharply reduces development assistance for many countries while increasing Economic Support Fund allocations.
While ESF funds can be used for development and are often administered by USAID, they are controlled by the State Department “in cooperation” with USAID. ESF funds can also be used for other purposes to respond more flexibly and innovatively in support of evolving U.S. security and political priorities.
If authentic, the leaked document signals that the Trump administration values flexibility in U.S. assistance and an intent to use it to support a broader array of U.S. foreign policy priorities with State exerting greater influence over allocations of U.S. assistance.
The document also outlines very large reductions to assistance dedicated to climate and environmental concerns, which is consistent with earlier press reports that the Trump administration will not continue the previous administration’s extensive financial support for those causes.
Congress, of course, has a great deal to say in this process through the legislative and budgetary process. We don’t yet know the specifics, but it is clear that the Trump administration wants to pursue substantial reform of the State Department and America’s foreign assistance programs. Instead of rejecting it out of hand, Congress should embrace the chance before it.
Although there is disagreement on how to reform America’s assistance programs, there has been a general consensus for years that changes are necessary to address ineffectiveness, duplication, fragmentation, and lack of focus.
Efforts should be made to update and overhaul legislation such as the 1961 Foreign Assistance Act, which has become burdened with a multitude of amendments and earmarks over the years, and to reshape U.S. foreign assistance to respond to the new challenges that have preoccupied multiple congresses and administrations since 9/11—including both the Bush and Obama administrations. However, genuine reform has been elusive.
Supporters of U.S. assistance should also recognize this for the opportunity it presents. The Trump administration’s budget could induce a long overdue collaborative effort between Congress and the executive to evaluate and fundamentally reform America’s foreign assistance programs in a way that maximizes impact, ensures American taxpayer dollars are well used, and supports American interests.
