March 5, 2014

8 Ways the President’s Budget Might Impact the World

By Liz Schrayer

Yesterday the Administration announced its Fiscal Year 2015 Budget proposal, launching this season’s spending battles. All the big decisions are basically off the table thanks to the Murray-Ryan deal last year, yet there are important foreign policy items worth noting.

The Administration’s overall budget request is a solid statement of support for America’s global engagement. I agree with Secretary Kerry when he said “It’s not the budget that does what we need,” but after a few years of disproportionate cuts to International Affairs, I am actually pleased. The current spending deal left almost no room for growth, keeping the request on our issues basically flat, which is not a bad starting place.

So here are my top eight take-aways of how this budget will impact our ability to engage the world (at least for the moment). And if you want the full monte, you can read our detailed budget analysis.
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Learn how the President’s budget request impacts you and America’s role in the world.

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  1.  Turning the Tide with a Solid Request. After three years of fairly deep and certainly disproportionate cuts to the International Affairs Budget in comparison to other security related accounts – 19% since 2011 — the request for base funding is a strong statement of support for global engagement. Given the current budget deal in which virtually nothing could grow, flat funding (just .2% below current levels) is a pretty good deal, and I commend Secretary Kerry and OMB Director Burwell for helping to reverse this trend. Now I urge Congress to ensure that the resources are there given the challenges we face.
  2.  Expanding OCO was Smart, but was it Enough? Funding for base programs is key, but there are “temporary and extraordinary” needs on the civilian side, just like the military, and the OCO (Overseas Contingency Operations account) is necessary. The Administration has been hesitant to include OCO funding requests beyond the Frontline states, despite the numerous unexpected crises in the world. This year’s $5.9 billion OCO request expanded beyond just AfPak and Iraq, largely by including some funds for Syria. While I am pleased to see this added flexibility, it’s still 9% below current levels, and I am concerned that there are not sufficient funds for other hotspots.
  3. Syria Response and Peacekeeping are High Priorities. I was not surprised to see the budget request prioritize a response to the unrest throughout the Middle East and North Africa. The Administration included a significant boost  for peacekeeping efforts and significant funds for security programs in Syria, including $155 million for opposition groups, but I continue to be concerned about the growing humanitarian crisis. Many of our USGLC members are on the ground working to alleviate horrific suffering, and while there is additional humanitarian funding in the OCO request, this will be a challenge.
  4. Cuts to Global Health and 25% Decrease to Humanitarian Assistance Raise Concerns. Despite the positive overall funding number, I am concerned that a few accounts, most notably global health, refugee and disaster assistance, were scaled back. The Administration argues that carryover funds from prior years will cover most of these programs since there were robust increases to humanitarian aid over the past two years that can be used for this year, and other donors to the Global Fund for AIDS, TB and Malaria are not keeping up with their pledges to realize our matching contributions. Congress often pluses up these programs and may do so again this year, and the budget does increase the GAVI Alliance and malaria programs.
  5. More Money for Agencies that Prioritize Private Sector Partnerships. Over the years, both the Administration and Congress have prioritized agencies that are partnering with the private sector and driving results towards economic growth. So it’s good news that this budget request includes plus-ups for the MCC (+11.4%), USTDA (+22.9%), OPIC (+7.6%), Ex-Im Bank (+10.7), and USAID programs like Feed the Future and Power Africa. These agencies are leading the way in working with the private sector and trying to develop new models to leverage scarce government dollars to bring large scale impact and sustainable economic growth to the developing world.
  6. Continued Commitment to Accountability, Reforms and Capacity. One of the first things I always look for is whether or not a budget request includes a commitment to people and reforms. Since being decimated in the mid-90s, the State Department and USAID staff has slowly rebuilt their civilian capacity. This budget increases State Department and USAID operations 10% and 24%, respectively. While the new hires will only maintain for attrition, I was pleased that nearly half of the recommended State Department hires will bolster efforts to highlight the advantages America offers as a locale for business and investment. On the reform side, the budget provides funds to continue USAID Forward, and MCC has new models of innovations.
  7. Supporting IMF Reforms that Sustain U.S. Leadership. The IMF will certainly play a lead role in any international assistance package for Ukraine. Additionally, important reforms are underway to modernize the IMF for the 21st Century. The reforms were agreed to in 2010 but cannot be acted upon without Congressional authorization, and Treasury is requesting approval as well as a $16 million appropriation to protect our leadership and veto power within the IMF. The appropriation got hung up in the final omnibus appropriations last year, and I hope will quickly pass this year. All G20 countries except the United States have ratified the reforms, and the U.S. needs to step up and exert leadership if it’s to maintain its premier role in this important global financial institution.
  8. A New, But Uncertain Initiative. There is one new piece to the budget called the “Opportunity, Growth, and Security Initiative” that stretches across the government and includes funding for the Global Fund, MCC, Maternal and Child Health, food security, and the Broadcasting Board of Governors. The money for the Initiative goes over the agreed upon spending caps with an accompanying package of offsets coming from contentious revenue increases and mandatory spending reductions. So while it’s technically budget neutral, the Initiative is unlikely to go anywhere on Capitol Hill because of these controversial offsets.

Today, OMB Director Sylvia Burwell will testify before the House and Senate Budget Committees on the overall request, and Secretary Kerry is scheduled to testify next week. While the Senate will forgo action on an FY15 budget resolution, House Budget Committee Chairman Ryan will likely mark up his own budget resolution later in March.

This is a good start to the budget season for us, but do not be fooled. There is a small but vocal voice of isolationists out there. We all saw last year’s Pew poll that found for the first time in nearly 40 years, the majority of Americans want to “mind our own business internationally.” But I know Americans aren’t isolationists – we are just war weary. After all, why else would two thirds of Americans in that same poll strongly want the U.S. to remain part of the global economy?

So, John Kerry, I agree – it’s not a budget that does as much as we need. But it’s a very solid statement in a year with no room for spending growth. So I am hopeful that my USGLC colleagues will be by my side, fighting to ensure that we end up with a budget that protects our security and economic interests in the world in which we live. After all, budgets matter.