January 27, 2012

International Affairs Budget Update, 1-25-12

1.    Administration Delays Release of FY13 Budget Request

Administration officials announced Monday that the Office of Management and Budget (OMB) will release the FY13 budget request on Monday, February 13, one week later than the February 6th deadline.  The one week delay is needed to finalize some aspects of the budget.  Congressional Republicans, including House Budget Committee Chairman Paul Ryan (R-WI), quickly criticized President Obama for “missing another budget deadline.”  USGLC will provide a comprehensive analysis of the President’s FY13 request the afternoon of February 13th.

2.    Revised FY13 Spending Caps

As a result of the Super Committee’s failure to agree on a plan for $1.2 trillion in spending reductions late last year, a little known provision in August’s Budget Control Act triggered an adjustment last week to the discretionary spending caps for FY13 and beyond.  While the top line discretionary level for FY13, $1.047 trillion, which is $4 trillion above FY12 levels, does not change, the configuration of the caps was adjusted.

Had the deficit reduction committee produced a plan, discretionary spending caps for FY13 would have remained separated into two buckets — security programs (Defense, International Affairs, Homeland Security, Veterans, and Intelligence) and non-security programs.  Under the revised caps, FY13 discretionary spending is separated into two slightly different buckets — Defense and non-Defense programs.  This means that starting in FY13, the International Affairs Budget, along with Homeland and Security, Veterans, and Intelligence, will reside under the “non-Defense” caps along with all other domestic programs.

Neither OMB nor the Congressional Budget Office (CBO) have released official figures that enable precise calculations of how the FY13 funding caps under the new designations compare to enacted FY12 levels.  CBO is expected to publish these numbers next week.  Based on very tentative estimates, however, it appears that the $501 billion FY13 non-Defense cap (of which the International Affairs Budget is part) is about 2.4% above FY12, whereas the new $546 billion Defense cap is roughly 1.4% below FY12.

3.    Trade Reorganization Proposal Impacts International Affairs Agencies

On January 13, President Obama announced plans to reorganize and consolidate the federal government’s trade-related agencies through a series of streamlining proposals, including several funded by the International Affairs Budget.  If granted the authority to do so by Congress, the proposal would consolidate six business and trade-related agencies into a reconfigured Commerce Department.  The agencies affected include the Small Business Administration, the Office of the U.S. Trade Representative (USTR), and the three that are currently funded by the International Affairs Budget — the Export-Import Bank (Ex-Im Bank), the Overseas Private Investment Corporation (OPIC), and the U.S. Trade and Development Agency (USTDA).

The proposal faces considerable opposition on Capitol Hill and within the business community.  Senate Finance Chairman Max Baucus (D-MT) and House Ways and Means Chairman Dave Camp (R-MI) released a joint statement opposing the plan’s inclusion of USTR, over which their committee has jurisdiction.  Representative Sandy Levin (D-MI), the Ranking Member of the House Ways and Means Committee, said Congress should consider the President’s proposal but noted the importance of an independent, stand-alone USTR.  In addition, 86 businesses released a letter to the President expressing deep concerns about the proposal timed to coincide with his State of the Union.

Administration officials have been briefing congressional staff this week on the reorganization proposal.  It is expected that the proposal to the Hill will come in two stages.  The first will be a measure to reauthorize an authority in effect until 1984 that gave the President fast-track authority to reorganize government agencies.  It allows expedited treatment of Presidential proposals to reorganize with an up or down vote by Congress.  The second submission, which would not come until Congress approves the “fast track” authority, would contain the details of the reconfiguration of trade-related agencies in a revamped Commerce Department.

Implications for International Affairs Programs

Making the Federal Government more efficient and streamlining agency operations is vital at a time of intense budget pressure.  At the same time, any merger of assorted agencies and offices needs to make sense in terms of integrating units with similar mission to ensure that well-functioning, high-performing agencies are not consolidated in a way that will undermine their success and hinder their ability to achieve goals.

The proposed reorganization raises several issues beyond the USTR issue that we will be monitoring:

  • Shift of mission: Two International Affairs agencies that would be consolidated under the Commerce Department reconfiguration – OPIC and USTDA – have their missions firmly in promoting economic development in developing countries and emerging markets.  Both agencies are frequently central to America’s response to global opportunities and challenges, such as the fall of the Berlin wall in 1989 and more recently the political upheaval in Arab world.
  • Risks losing flexibility: A comparative advantage of OPIC and USTDA is that they are small agencies, with a staff of 250 and 50, respectively.  As such, they are agile and can respond quickly to unanticipated global events.  Subsuming them into a large bureaucracy with layers of restrictions and regulations could hinder this degree of flexibility and minimize their utility in contributing to emerging foreign policy contingencies.
  • Shifts funds away from International Affairs Budget: OPIC and the Ex-Im Bank are part of the International Affairs Budget and funded within the State-Foreign Operations appropriations bill.  Under the Administration’s proposal, resources for these agencies would likely move to a different appropriations bill.  Ex-Im and OPIC are self-financing institutions, expected to return more than $450 million to the U.S. Treasury this year.  As a result, the State-Foreign Operations account would no longer receive nearly half a billion dollars annually in OPIC and Ex-Im revenues, which is used to fund other programs in the State-Foreign Operations bill.

When considering any reform, reorganization or realignment of International Affairs Budget tools or program, it will be important to consider the foreign policy and development implications, along with the trade questions:

  • Does the proposal add value to the overall functioning of American foreign policy and what are the implications for America’s economic development goals?
  • Will it negatively affect any of the functions that are currently operating well?
  • How does it address a documented problem or does it merely move structures around in an effort to create change?

4.    State Department Announces Changes to F Bureau

Last Friday, the State Department announced that the Office of the Director of Foreign Assistance, the bureau that manages foreign assistance (known as the F Bureau), has been renamed the Office of U.S. Foreign Assistance Resources.  This announcement essentially makes official how the bureau has been operating for the last year and a half.

This office will be headed by a director who will report to the Deputy Secretary for Management and Budget.  Rob Goldberg, previously Deputy Director of the F Bureau, now serves as the Director of the Office of Foreign Assistance Resources.  While the State Department remains the lead agency for overall State and USAID budget development and coordination, USAID retains its budget and policy capacity within the broader foreign assistance process.  This framework builds on USAID’s initiatives to reform its own policies and procedures, including a new monitoring and evaluation policy, initial steps toward procurement reform and a program cycle for next year that will be based on Country Development Cooperation Strategies.  Among other responsibilities, the office will:

  • Work with the Bureau of Resource Management and USAID to implement multiyear strategic planning and budgeting, a direction from the Quadrennial Diplomacy and Development Review (QDDR);
  • Develop best practices for effective management of foreign assistance funding;
  • Oversee operational planning, performance management and accountability of foreign assistance funds; and
  • Exercise the authority delegated by the Secretary to provide for continuous supervision and general direction of foreign assistance and approving the programming of foreign assistance as necessary to ensure a coordinated U.S. foreign assistance strategy.