The White House delivered an FY2018 budget request, featuring deep spending reductions, to a less-than-receptive Congress early last week. In a series of blog posts, CGD experts sounded off on the proposed cuts to foreign aid and the philosophy that seems to guide them—including the administration’s misguided plans to shutter the Overseas Private Investment Corporation, continued support for the Millennium Challenge Corporation, and the merits and potential downsides of a proposal to shift some security assistance from grants to loans. Read a selection of budget-related analysis below.
And for greater context, dig into CGD’s newly-released US Foreign Assistance Agency Briefs, which outline the role and objectives of key agencies and departments responsible for delivering US foreign assistance. We hope these briefs will prove a particularly valuable resource as the budget and appropriations process on Capitol Hill kicks into full gear.
There Is an Emerging Trump Philosophy for Foreign Assistance
By Scott Morris
The Trump administration has had very little to say about foreign assistance, apparently preferring to let the budget knife do its talking. But if we want to discern some sort of guiding philosophy to aid coming from this White House, perhaps we should look no further than aid to Israel and Egypt, the number one and number two overall US foreign aid recipients. In a budget that imposes double-digit cuts to programs aimed at disease eradication and response to humanitarian crises, military aid to these two countries has been cut not even by a whisker.
President Trump’s First Budget Slashes Foreign Aid
Overshadowed by other headlines, President Trump’s first budget request to Congress arrived on Capitol Hill yesterday to relatively little fanfare. With the president overseas, OMB Director Mick Mulvaney was left behind to make the case for the deep cuts the administration is proposing in FY2018. It won’t be easy. For months, members of Congress on both sides of the aisle have dismissed—and even roundly rejected—the spending figures advanced by the new administration, including in the area of foreign aid spending. And they’ve had ample opportunity to do so, starting with the release of the ultra-thin skinny budget in March, followed by leaked documents that added detail to planned reductions. The full budget features a 32 percent cut to topline funding for the Department of State and Foreign Operations, leaving few programs that would completely escape the axe.
The Trump Budget Is Wrong to Axe OPIC: It Doesn’t Distort Markets, It Creates Them
By Joseph O'Keefe and Todd Moss
The Trump Administration is making a mistake, based on a flawed premise, by putting the Overseas Private Investment Corporation (OPIC) on the chopping block in its recently released budget request.
OPIC is a little-known agency that helps U.S. allies develop into more stable and prosperous partners by providing loans and risk insurance to crowd in—that is, to incentivize—American investors. As the sole development finance institution of the U.S. government, OPIC was built to support U.S. foreign policy objectives by creating economic opportunities in developing nations.
Amid a Dire Foreign Affairs Budget Request, A Quiet Vote of Confidence for MCC
By Sarah Rose
The Trump administration’s first budget deals a harsh blow to the international affairs budget. With a topline reduction of 32 percent, few programs avoid cuts. One that fares relatively well, however, is the Millennium Challenge Corporation (MCC). Though the $800 million request is the lowest in the agency’s 15-year history, and—if enacted—would be its lowest-ever appropriation, it represents a cut of just 12 percent over last year’s enacted level. Compared to the 25 percent (and greater) reductions to global health and other mainstay development-focused accounts, MCC’s 12-percent trim is about as good an outcome as can be expected.
Foreign Military Financing Program Loans: The Good, the Bad, and the Potentially Very Ugly
By John Hurley
As indicated in the Trump administration’s skinny budget released in March, the FY18 budget request incorporates the idea of transitioning the Foreign Military Financing (FMF) program from grants to loans. The stated intention is to “reduce costs for the US taxpayer, while potentially allowing recipients to purchase more American-made weaponry with US assistance, but on a repayable basis.” As with a consumer purchasing a new automobile, a loan is sometimes advantageous for the parties involved—but not always. And a transaction involving the US government incorporates additional elements. From a financial perspective, the end result could be good, bad, or very, very ugly.
Disclaimer
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
