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US Development Policy

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The Trump administration delivered its FY 2019 budget request to Capitol Hill this week. Containing deep cuts to the international affairs budget, it looks a lot like a repeat of the FY 2018 request. And with a 30 percent reduction in topline spending, few programs were spared. Meanwhile, buried among the rubble are smart reform ideas that run the risk of being overshadowed—or even undermined—by the depth of the proposed spending reductions.

International Affairs Topline

($000,000)

  FY17 Enacted FY18 Request FY18 House FY18 Senate FY19 Request
Base $38,332 $28,039 $36,900 $32,031 $41,659
OCO/GWOT $16,485 $12,017 $12,176 $20,785 $0
Supplemental $4,300 - - - -
Total $59,117 $40,056 $49,076 $52,816 $41,659

*At the time of posting, the federal government is still operating under a continuing resolution—so this post cites figures included in the draft appropriations produced by the House and Senate. These bills were crafted well in advance of the recent two-year budget deal, and in the case of the Senate have only made it as far as Committee approval.

Congress will need to complete work on appropriations for the current fiscal year before turning their attention to FY 2019. Last week’s two-year budget deal forestalls the immediate threat of sequestration, but the fight over how additional nondefense dollars are allocated could be bruising. Meanwhile an agreement to curb nondefense overseas contingency operations (OCO) spending—on which State and Foreign Operations appropriations have grown reliant—will limit the ability of appropriators to operate outside of imposed budget caps.

Rather than rehash all of the arguments from last year, here’s an update on a few select accounts.

International Financial Institutions

  FY17 Enacted FY18 Request FY18 House FY18 Senate FY19 Request
IFIs $1,771 $1,480 $876 $1,515 $1,416

If realized, the administration’s budget request would mark the lowest US contribution to the multilateral development banks in 30 years (after adjusting for inflation). My colleague Scott Morris provides context for this worrying trend and explains what’s at stake if the United States continues to turn away from multilateral engagement.

Bilateral Economic Assistance

  FY17 Enacted FY18 Request FY18 House FY18 Senate FY19 Request
Development Assistance $2,995 $0 $2,780 $2,890 $0
Economic Support Fund $4,682 $0 $3,400 $3,960 $0
Economic Support and Development Assistance Fund  - $4,938 $0 $0 $5,063

Despite a poor reception last year, the administration revived its proposal to merge the Economic Support Fund and Development Assistance accounts—a move some suggest exhibits the administration’s drive to prioritize diplomatic and political goals over development objectives. Even more concerning, the total provided for the new account, which is also intended to incorporate the smaller Democracy Fund and Assistance for Europe, Eurasia, and Central Asia, is nearly 43 percent lower than what was enacted in FY 2017.

Global Health Programs

  FY17 Enacted FY18 Request FY18 House FY18 Senate FY19 Request
Global Health Programs - USAID $3,055 $1,505 $2,973 $2,920 $1,928
Global Health Programs - State $5,670 $4,975 $5,348 $5,670 $4,775

The budget request again proposes cuts to ever-popular US global health programs. But after zeroing out funding for family planning and reproductive health in the FY 2018 request, the administration included $302 million this go around. For a second year, the administration also recommended using remaining emergency Ebola funding ($72.5 million) to invest in global health security.

Development Finance Institution

  FY17 Enacted FY18 Request FY18 House FY18 Senate FY19 Request
OPIC
Admin Expenses $70 $61 $61 $79 $0
Program Account $20 $0 $10 $20 $0
DCA
Admin Expenses $10 $9 $9 $10 $0
Transfer Authority [$50] [$60] [$50] [$60] $0
New DFI
Admin Expenses $96
Credit Subsidy $38
Complementary programs or transfers from ESDF [$56]

On a more positive note, the president’s budget request proposes creation of a development finance institution that would consolidate functions of the Overseas Private Investment Corporation (OPIC) and USAID’s Development Credit Authority. My colleagues Todd Moss and Ben Leo drew up a blueprint for just such an institution—and their ambitious plans for strengthening US development finance tools date back further.

The DFI proposal is an about-face from last year, when the president’s request included plans to wind down OPIC’s operations. To see the administration chart a more productive course is a promising evolution. We’re looking forward to the introduction of forthcoming legislation that may give this smart reform idea real legs.

International Disaster Assistance

  FY17 Enacted FY18 Request FY18 House FY18 Senate FY19 Request
International Disaster Assistance $4,428 $2,508 $2,821 $3,133 $3,557
  FY17 Enacted FY18 Request FY18 House FY18 Senate FY19 Request
Food for Peace II $1,600 $0 $1,400 $1,600 $0

The request would eliminate funding for the Food for Peace program in favor of more flexible food aid supported through International Disaster Assistance (IDA), which could yield gains in efficiency. But—in another aggravating rerun—the administration suggests this change without providing sufficient resources to meet growing global need. The US system for delivering international food aid is in desperate need of an overhaul, but the solution is to work with long-time reform champions in Congress to provide a permanent fix, not to toss a half-hearted proposal into the annual budget request.

Want to read up on the Trump administration’s FY 2019 budget? You can find all the primary budget request documents here. But for greater detail on what it could mean for foreign aid—and an easier read—check out the congressional budget justifications (CBJs): State & Foreign Operations, MCC, Treasury International Programs. The administration also released an addendum, drafted following the two-year budget deal reached by Congress last Friday, which includes $1.5 billion in additional spending and uses the remainder of an increased allocation to shift funding designated as OCO to the base budget. (This updated table reflects the changes included in the addendum.)

Reforms at Risk?

The State and Foreign Operations CBJ—which accompanied the president’s request—includes six pages outlining USAID’s internal efforts to improve the effectiveness and efficiency of the agency in delivering its mission. CGD experts have weighed in on several aspects of USAID’s “redesign,” starting with a policy brief full of practical recommendations authored by Jeremy Konyndyk and Cindy Huang.

The latest details suggest the agency is moving in some encouraging directions—advancing a plan to merge the Office of Food for Peace and the Office of US Foreign Disaster Assistance, and demonstrating a willingness to tackle procurement reform. The document also highlights USAID’s renewed emphasis on supporting a country’s “journey to self-reliance” with the ultimate goal of transitioning countries, as they demonstrate sufficient commitment and capacity, away from traditional aid to new forms of partnership. To the extent this endeavor encourages greater country ownership and better use of an array of US government tools and approaches—development finance and technical assistance aimed at domestic resource mobilization look to be favorites—it could be a good move. But while OMB clearly gave the greenlight to include the agency’s redesign objectives in the materials submitted to Congress, the budget request itself threatens to undermine even USAID’s best efforts to pursue reform.

That’s not just because sufficient resources will be important to carrying out reforms. There is also a real risk (as Scott Morris warned last year) that large—and seemingly indiscriminate—budget cuts provoke skepticism that any proposed reforms are anything more than budget driven. It can be hard to reconcile such a de-prioritization of foreign assistance with honest attempts to make it more efficient and effective.

Demonstrating an understanding of the value proposition that underpins US development and humanitarian assistance would go a long way to securing needed support from Capitol Hill. Instead, this budget request suggests the administration remains out of step with Congress, which has typically lent bipartisan backing to a wide range of development and humanitarian objectives.

This could make USAID’s job particularly challenging as the agency seeks to reorient country partnerships. Among the lessons learned from past country transitions, chronicled in a CGD policy paper published late last year, is that successful transitions require support from Congress and other stakeholders. If the Hill is left questioning the administration’s commitment to foreign assistance writ large, members may also question the motives behind transition. What’s more, where supporting countries on their “journey to self-reliance” requires USAID to respond more flexibly to country needs, demands, and opportunities, the agency may find limited receptivity. A complex web of congressional spending directives currently leaves precious little flexibility in US foreign aid spending—limiting opportunities to respond to evidence of demonstrated program success or to vest increased decision-making authority in partner country governments. In the wake of a second budget request that leaves stakeholders reeling, appropriators would seem unlikely to loosen the reins.

Disclaimer

CGD blog posts reflect the views of the authors drawing on prior research and experience in their areas of expertise. CGD does not take institutional positions.