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Debt Ceiling 2013: Foreign Aid Will Be the First Casualty of American Austerity

With the debt ceiling debate looming over the horizon, Congress is looking to make major spending cuts to the federal budget.

Many Republicans and Democrats believe that spending cuts are necessary to bring the national debt under control, given the grand bargain struck on the fiscal cliff, as shown by the Gallup poll.

       

For congressional fiscal conservatives, U.S. foreign aid is an easy target for making debt ceiling cuts given that most Americans favor making these painful cuts from our foreign aid programs and the fact that there are legitimate doubts about whether or not the costs of these programs are worth the cost in terms of national interests.

Entitlement programs and social spending will likely be targeted for cuts as well, but there will be considerable hurdles and political backlash to these forms of austerity. The U.S. foreign aid programs will be tempting because they will be seen as relatively easy to cut, even though it only accounts for $8 billion of the federal budget.

The argument is not decided as there are credible reasons to preserve the overall funding levels of U.S. foreign aid, during the debt ceiling debate, as many boosters of the aid program argue that reforming the system can improve what they perceive to be a sound government enterprise in forging good will in the developing world.

Ultimately, the question is whether or not these points of contention can convince Congress to cut or preserve U.S. foreign aid programs, or even some combination of these alternative courses.

Why Foreign Aid is an Easy Target

When you hear the words "foreign aid," what does this conjure in your mind?

The OECD defines foreign aid as "financial flows, technical assistance, and commodities that are (1) designed to promote economic development and welfare as their main objective (thus excluding aid for military or other non-development purposes); and (2) are provided as either grants or subsidized loans."

It is important to note the perimeters of this definition, because "aid for military or other non-development purposes" as such programs are not categorized as foreign aid spending. These aid programs are also not the subjects of this article.

According to a Congressional Research Service (CRS) report, published last November, the primary function of foreign aid is for less developed countries to use the financial and technical assistance and commodities to improve the living conditions of its people and give the recipient society and the government the tools to provide for their economic well-being and development.

The goal of donor states, like the U.S., is to build friendship and political capital among developing nations in order to further donor state interests to create a win-win relationship. The U.S. agency mainly conducts the execution of these programs for International Development (USAID) and the Millennium Challenge Corporation (MCC).

To some, however, "foreign aid" simply means giving taxpayer money to less developed countries to feed their people and build their economies in an generally inefficient manner or, at worse, for corrupt local officials and politicians to pocket most of the money and sell the aid supplies for their Swiss bank accounts.

Perhaps this is why nearly 60% of the people polled by Gallup, in January 2011, said they were in favor of "cutting government spending" in the foreign aid area, versus 37% who were against the idea.

                   

In contrast, spending cuts for the arts and sciences, farm subsidies and national security were toss-ups. Whereas cuts in Medicare, Social Security, and education were highly unpopular targets among the respondents, with up to 67% opposing such cuts.

Similar results were found in a Pew Research Center Poll several months later with 76% of independents and 72% overall supporting cutting foreign aid.

                              

This is perhaps the strongest arguments for why Congressional fiscal conservatives think foreign aid is an easy target for debt ceiling cuts: An evident majority of the American people support making cuts in this area.

Foreign aid has been previously targeted for cuts in debates over the 2012 Federal Budget, but it was spared at President Obama's insistence in 2011, according to the Global Leadership Coalition.

In consideration of the ideological and political strife, President Obama and the Democrats may very well sacrifice cuts to foreign aid to save entitlement spending and social spending on things like education. The Republicans will target foreign aid, because it's easier to argue for making cuts here and they can add it to their talking points come 2014.

The question comes down to how one interprets the progress made by the various aid agencies in their mission to create good will for America through foreign aid.

Like any other enterprise, if foreign aid programs cannot show results or worse, be a burden for donor states, for the investment made by U.S. taxpayers, there is a strong probability that such spending will be on the chopping block. Most Americans don't understand why they are paying for foreign aid, especially when the recipient states are often in turmoil before and after such spending is doled out.

That's why the evaluation process for U.S. foreign aid is so important in the upcoming debt ceiling debate.

The Future of U.S. Foreign Aid

The method for evaluating development-focused aid programs has been an evolutionary process that has been undergoing changes since the Bush administration by streamlining the process and updating the methodology for reviewing and improving how foreign aid is implemented.

The CRS report from November identifies the evaluation process as being critical. There are two primary means of evaluation. First, performance evaluation functions as a project management mechanism to make sure that the specific projects are executed according the plan and measuring the efficiency of aid projects. Second, impact evaluation seeks to measure the effectiveness of aid projects by, for example, observing the impact on AIDS/HIV reduction programs in Africa.

USAID, according to the report, has long been dogged by its less than consistent and stringent methodology for both performance and impact evaluation since its creation by President Kennedy. The MCC has had more success as a newcomer in U.S. foreign aid, but with more strict evaluation and supported by independent evaluation.

The CRS report's conclusion is that:

The primary U.S. agencies charged with implementing foreign assistance have made significant steps in the last two years to address ongoing deficiencies in evaluation practices that make it difficult to judge whether foreign assistance is achieving its various objectives. There is widespread agreement, reflected in new policies, on the need for consistent performance evaluation of aid programs. The value of rigorous impact evaluation is broadly recognized as well, though the agencies differ in their capabilities and aspirations in this respect.

In short, the aid agencies have tried to improve their methods for setting objectives, evaluation, accountability, and local ownership, the process is still riddled with the basic problem of having an inability to produce concise and coherent evaluations that show results for the investment.

There is some hope, according to aid advocates, because reform is possible to untangle the mess of foreign aid.

The Modernization Foreign Assistance Network (MFAN) has been working to put forward a proposal on how we can fix most of the problems that ail the aid programs by streamlining the aid process to work in tandem within recipient states and push for a efficient use of resources by a single aid agency that has a table at the National Security Council. Technology and leadership by an updated Foreign Aid Act is emphasized as being key in revamping the aid process to make sure that future evaluations will be more definitive in their results.

This way the aid efforts will be more incisive and can push foreign aid into the 21st century by keeping aid in line with our national security strategy and simplified and technology enabled evaluation process that makes it easy to produce coherent evaluations.

In the end, foreign aid may be cut to some degree, but fiscal conservatives in Congress may be persuaded by the fact that there should be fewer cuts. The other factor is the politics of the debt ceiling debate, during which horse-trading may reduce foreign aid spending.

Whatever the result, U.S. soft power will undoubtedly be affected for better or for worse.

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