March 5, 2012
By Brett D. Schaefer
One can forgive a liberal senator from Massachusetts for being unfamiliar with what it means to be conservative, but his mode of argumentation — cherry-picking statements by President Reagan on foreign aid — is most unfortunate. Invoking the Gipper won’t suffice to convince conservatives of the need to boost foreign aid during economic tough times. Nor should it protect foreign aid from scrutiny as we seek ways to trim the federal budget.
Kerry compares the relatively small international-affairs budget to that of the Pentagon and the federal budget as a whole, but such comparisons are meaningless. Government departments have different purposes and requirements and should be funded at different, appropriate levels. The State Department doesn’t have to fight wars and deploy hundreds of thousands of trained soldiers. Building embassies is expensive, but not nearly as expensive as developing, procuring, and maintaining fighter jets, drones, tanks, nuclear submarines, aircraft carriers, and so forth.
As for the overall budget, America’s entitlement programs (such as Social Security, Medicare, Medicaid, and Obamacare) comprise just under 60 percent of the budget. Since the 1960s, politicians and bureaucrats in Washington haven’t even attempted to constrain the costs of those entitlements. Absent reform, they are on track to consume all federal revenue by the year 2049. There will be nothing left over for “statecraft,” foreign aid, education, or defense.
The only relevant comparison for America’s international-affairs budget is previous appropriations for these functions. That apples-to-apples approach reveals substantial spending hikes over the last decade:
For fiscal year 2000, the International Affairs budget (also known as the 150 Account) was $23.5 billion. Three years later — after 9/11 — it reached $31.2 billion. In FY 2011, House conservatives pared the President’s request of $58.5 billion to $50.2 billion. Now, for FY 2013, President Obama seeks $56.2 billion.
In nominal terms, the FY 2013 request would be a 139 percent increase in the international-affairs budget since FY 2000 (according to the OMB, an increase in constant 2005 dollars of 83 percent).
Growth in the international-affairs budget is not bad per se. There could be good reasons to spend more on certain vital programs. But basic questions need to be answered: Has the spending growth been reasonable, deficient, or excessive? What was it spent on? Did it demonstrably advance U.S. interests? Did it achieve its objectives? Is the entire international-affairs budget vital to U.S. security, and should it thus arguably be immune from cuts? Could it be trimmed based on changes in the global environment?
Senator Kerry makes no attempt to address such issues. Instead, he mentions a few activities of the State Department and the U.S. Agency for International Development (USAID) that might appeal to conservatives, such as counter-terrorism programs and training for foreign law-enforcement and military officers. Such activities are useful, to be sure, but they hardly comprise the totality or even the majority of the 150 Account.
The central focus of Kerry’s piece, of course, is foreign assistance. He points out President Reagan’s support of security assistance as “an essential complement to our defense effort,” implying that President Reagan would similarly support President Obama’s international affairs budget, including economic development assistance.
But President Obama’s foreign assistance budget seriously dwarfs President Reagan’s. Based on USAID’s Greenbook, total U.S. assistance (economic and military) under President Reagan peaked at $32 billion (in constant 2010 dollars), compared with $52.7 billion under Obama in FY 2010. Most of that increase is in economic assistance, which is 70 percent higher in real terms (security assistance is 45 percent higher).
What is America getting in return?
Economic-assistance programs aim to improve agriculture, education, health, democratic institutions, etc., in order to encourage economic growth and reduce poverty. If economic assistance helped raise living standards in poor nations, one could argue that it advances U.S. interests because wealthier nations are generally more stable, more democratic, and more likely to become U.S. economic partners. Regrettably, the record for all of the economic assistance programs is inconclusive at best. At worst, it can be counterproductive and is often used by entrenched regimes to retain power.
It is safe to say that President Reagan as a conservative, would be far more skeptical than Senator Kerry suggests about such a large increase in economic assistance. After all, Reagan once argued, “Unless a nation puts its own financial and economic house in order, no amount of aid will produce progress.”
Reagan’s statement has been substantiated by a number of more recent economic studies by William Easterly, Raghuram G. Rajan and Arvind Subramanian, and other experts, who have found no relationship or a negative relationship between economic assistance and growth and development in recipient nations. As the Index of Economic Freedom shows, liberalizing markets and reducing government involvement is far more likely to boost lasting development and prosperity.
Evidence of the positive political effects of economic assistance, cited by Senator Kerry, are similarly weak. Does he really believe that productive U.S. relationships with South Korea and Vietnam today are driven by foreign assistance, rather than mutual security concerns and economic cooperation?
As for creating jobs, it is woefully inefficient to send billions abroad hoping that it will boomerang back here in job growth. Government export promotion is only part of the equation when it comes to increasing U.S. exports. Trade agreements, for one, are a far more effective path to market integration and trade expansion.
Senator Kerry also suggests that closing tax loopholes could sustain our international-assistance spending, but why use such reforms to funnel money to foreign aid, ostensibly in pursuit of American jobs? If we’re trying to reinvigorate private investment and generate jobs directly in America, shouldn’t we instead cut domestic taxes and reduce regulatory burdens?
Finally, as the State Department often points out, the world has changed dramatically over the last few decades. In just the past few years, America’s relationships with Egypt, Pakistan, Afghanistan, Iraq, and a host of other nations have shifted dramatically. Is it too hard to imagine that existing international-assistance programs may not be as effective or targeted as they should be or that American interests could be advanced more effectively by spending less money more wisely?
Congress and the Obama administration should ensure the 150 Account accurately reflects U.S. interests today, rather than defending it unflinchingly. Too often, the money allocated to the Department of State and USAID is determined by decisions made in a different world — a sentiment Senator Kerry seems eager to embrace. Our funding of diplomacy and assistance should be flexible, in order to reflect shifting needs. That flexibility should allow reductions and reallocations, rather than just an open spigot.
Brett D. Schaefer is the Jay Kingham Fellow in International Regulatory Affairs at the Heritage Foundation.
First appeared in National Review Online
Brett D. Schaefer
Jay Kingham Senior Research Fellow in International Regulatory Affairs
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