April 18, 2011

US Foreign Aid

A high school friend has started a spirited conversation on his Facebook wall with the following statement:

Before our "leaders" in Washington (and I use that term loosely) raise the debt ceiling, here's a thought: Let's stop all the aid money to foreign countries. It's time we kept it for ourselves, at least for awhile.

My response (slightly modified from the original):

I understand [this] sentiment over foreign aid; what he's saying is nothing new. I remember people making the same argument when I first went to college in the early 80s. So I went to the university library to look up the numbers and realized then that the occasional furor over foreign aid was never going to resolve issues with the federal budget. For example, in FY2009 (the last year for numbers that I've seen) total US foreign aid was just under $45 billion. Sounds like a lot. But out of the entire FY 2009 US budget ($3.1 trillion), it makes up only 1.45%. Foreign aid is really the proverbial drop in the bucket, and always has been.

The problem with trying to remove foreign aid is that it magnifies certain problems in other countries and limits the US government's ability to influence foreign policy. Foreign aid is split into two basic categories, military and economic assistance. Remove military assistance, for example, and all those "lily pads" the US military has set up in other countries will be closed by the local governments. Military assistance is often viewed by other countries as a form of rent for the US's military presence in that country. Remove economic assistance and you've begun to destabilize other countries,' economically and socially, often to the US's detriment (e.g., narcotics control and anti-terrorism efforts are classified under foreign aid). Remove any foreign aid, and you've lost a political poker chip, perhaps permanently. Countries won't necessarily do the US's bidding, especially if foreign aid has been removed. (The presence of foreign aid at least acts as a "leash" to help regulate what other countries do.)

Personally, I would prefer to look elsewhere for solutions to solving the budget. For example, the US spent $687 billion on the US military in 2010. The second ranked country, for military expenditure, was China at $114 billion. In fact, the US outspent countries 2 through 21 combined. Secondly, Americans are going to have to realize that US tax rates are low compared to other countries; Americans are under-taxed. According to one economic study, as a percentage of GDP, the US pulled in 25.6% of tax revenues (in 2003), whereas the G7 countries other than the US pulled in 33.9% and the OECD countries other than the G7 countries pulled in 34.7%. If you want the federal government to get its fiscal house in order, you're going to need to pay higher taxes.

[I want to add that I do understand that cutting the US military budget will bring about its own set of consequences, just as cutting the US foreign aid budget would. However, given the size of the military budget's bloat, it's an obvious place to start cutting back. When even the Teabaggers recognize the need to cut back on military spending...]