June 26, 2017

Analysis of the Administration’s FY18 International Affairs Budget Request

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Top takeaways from the Administration’s FY18 request for international affairs:

  • Total International Affairs Budget: Cut is Deep and Disproportionate

As foreshadowed in the “skinny” budget, the International Affairs Budget takes the largest and most disproportionate cuts in the Non-Defense Discretionary budget in the Administration’s proposal. With a $54 billion cut to Non-Defense Discretionary spending compared to FY17, the budget proposes to cut all discretionary agencies except Defense, Veterans Affairs, and Homeland Security; however, the International Affairs Budget receives a devastating 32% cut, taking funding back to levels not seen since 9/11 (inflation adjusted).

Additionally, as a percentage of GDP, funding for the International Affairs Budget would drop to its lowest level since World War II. Under President Ronald Reagan’s “peace through strength” policy, funding for these programs reached nearly 0.6% of GDP and has since fluctuated depending on the global security environment. If enacted, this budget request would cut the International Affairs Budget to approximately 0.2% of GDP while America faces growing and complex challenges overseas.

  • Administration Priorities: Protecting National Security and Asserting U.S. Leadership

In rolling out the detailed budget, the Administration notes its priority is to “bolster national security, assert U.S. leadership and influence, and advance our economic interests across the globe” by prioritizing programs that defeat ISIS and counter other global threats.

While the budget proposes cuts to almost every program in the International Affairs Budget compared to current levels, there are a few notable protected exceptions: assistance to key allies like Israel and Jordan is maintained, and Foreign Military Financing assistance to Egypt is also maintained. Additionally, the Administration provides Gavi, the Vaccine Alliance, with $290 million, fulfilling the U.S. commitment of $1 billion over four years.

  • Development Assistance: Shifted, Consolidated, or Slashed?

The changes made to the Development Assistance (DA) account are certain to attract significant attention on Capitol Hill. The Administration’s request consolidates this account with the Economic Support Fund (ESF) account, which is overseen by the State Department and is traditionally focused on providing assistance to strategic partners. The DA account, currently overseen by USAID, has traditionally focused on long-term development efforts such as water and sanitation, and agricultural development for low-income countries.  In its proposal, the Administration zeroes out DA, renames the new account the Economic Support and Development Fund (ESDF), and identifies the State Department as the lead. The Administration argues this consolidation increases efficiency since the two accounts are often considered as one when determining funding levels for certain programs in countries around the world.

In addition to the consolidation of these two accounts, the new Economic Support and Development Fund is cut by a staggering 44% compared to FY17 and assistance to 37 countries under this account is zeroed out. Cuts of this severity could mark a significant downgrading of development assistance as a tool for facilitating economic growth in low-income countries and advancing U.S. interests and goals around the world. With such strong support for the Development Assistance account on Capitol Hill this proposal will certain draw pushback from both sides of the aisle.

  • Humanitarian Assistance Slashed As Crises Grow and Needs Multiply

The Administration’s FY18 request proposes to cut overall funding for humanitarian assistance by $4.2 billion (44%). Despite growing humanitarian challenges around the world—including looming famines in four countries and 65 million displaced people around the world, the Administration believes this level of funding (and the significant carryover of funds from previous years) will allow the U.S. to maintain its leadership role in addressing humanitarian emergencies while also pushing other donors to do more to assist in response efforts.

Additionally, the Title II, PL 480 Food for Peace program is zeroed out and shifted into the International Disaster Assistance (IDA) account. The Administration argues this will allow for more flexibility in the U.S. response to food emergencies and provide $100-$150 million in cost efficiencies.

  • Global Health Funding, Long a Bipartisan Priority, Cut by Over a Quarter 

The budget proposes to cut overall Global Health funding by $2.2 billion (-26%), despite broad support for the account from both Republican and Democratic Administrations and Members of Congress. With a cut of this magnitude, almost every global health program sees at least a small cut in funding compared to current levels, with some programs taking enormous cuts or eliminated completely. Interestingly, the Administration seeks to redirect approximately $323 million in Ebola funding to malaria and global health security. See below for additional details on global health funding.

  • Account Reorganization Could Foreshadow Executive Order Reorganization Effort

With the internal review process outlined in the Executive Order on Reorganization well under way at the State Department and USAID, the Administration does not presuppose any reorganization as part of the budget proposal. However, the consolidation of certain accounts could foreshadow some of the proposals to emerge as part of this process. The FY18 request includes four major consolidations that may be met with skepticism on Capitol Hill:

  1. Development Assistance and the Economic Support Funds are consolidated and renamed the Economic Support and Development Fund;
  2. The Emergency Refugee and Migration Account (ERMA) is zeroed out and shifted into the Migration and Refugee Account (MRA);
  3. Title II, Food for Peace is zeroed out and shifted into the International Disaster Assistance Account (IDA); and
  4. USAID HIV/AIDS is zeroed out and shifted into State HIV/AIDS.
  • Lowering the Flag: Many Missions and In-Country Programs Zeroed Out

In addition to the 37 countries that will lose economic and development assistance, the budget proposes closing USAID missions in nine countries. While the nine missions zeroed out in the budget are not scheduled for imminent closure due to the availability of current and previous years funding, severely cutting back on programs in countries could hobble our ability to coordinate international development efforts on the ground and provide an opening for other countries like China and Russia to exert additional influence.

  • Promoting Economic Interests in Asia a Priority, but Several Programs on the Chopping Block

In addition to bolstering security interests in the region, the Administration’s budget request places a priority on promoting U.S. economic interests in Asia through engagement with APEC, ASEAN, and trading partners to reduce barriers to trade and markets in the region. However, several agencies and programs within the International Affairs Budget that promote economic development take a steep cut in the proposal, including the Overseas Private Investment Corporation (OPIC) and the U.S. Trade and Development Agency (USTDA), both of which the Administration has identified for elimination. 

  • Operating Budgets for the State Department and USAID on the Chopping Block

America’s diplomatic presence around the world would shrink by at least 8% under the budget proposal. The request includes $8.3 billion to cover State Department personnel and related costs and $1.1 billion for the construction and maintenance of diplomatic facilities, both priorities for the Administration. However, USAID’s operating expenses are funded at $1.2 billion, a 13% cut from current levels. According to the Administration, this cut reflects the assumption that with the proposed major decreases to international development across-the-board costs to implement programs would also be reduced. It could, however, also have a negative impact on the agency’s internal capacity for monitoring and evaluation of foreign assistance programs.

Download the full analysis here.