Having a Different Conversation about the FY18 Budget Foreign Aid Cuts

Photo By: IOM/J. Lowry

The recent Trump Administration budget proposal hits U.S. foreign assistance hard. This Devex article highlights well the nature of the cuts, including a $10.1 billion reduction to funding for the Department of State and USAID (bringing total funding down to $25.6 billion) and a 35% reduction in funding for multilateral institutions and international funds.

Most of the headlines spotlight the size of the cuts. The U.S. Global Leadership Coalition (USGLC), for example, released letters signed by over 120 retired generals and admirals and over 100 conservative faith leaders stating that slashing funding for development and diplomacy to approximately 0.2% of GDP at a time when global challenges are on the rise is wrong. A fairly broad swath of Congressional leadership across the aisle has also been vocal in their rejection of these drastic cuts.

Lost in the discourse on the level of aid has been a needed conversation about how foreign aid spending is deployed and leveraged – and what this means in terms of spending priorities. Consider a recent publication which notes that 2015 Official Development Assistance (ODA) — of which the U.S. government’s foreign aid account is a part — represented less than 15% of total resource flows to developing countries. Remittances, foreign direct investment, private debt, and portfolio equity are far more important than ODA. In addition, private donor giving from individuals in the U.S. is over $260 billion a year, and growing at 4%. Giving to international causes represents about 4% of that total figure and grew by 17% last year. When you consider the size and growth of all these other flows you realize that the importance of USG funding is not so much in its size but in its catalytic nature.

In this context, a budget that zeroes out the Overseas Private Investment Corporation and the U.S. Trade and Development Agency, as noted in a recent USGLC analysis, strikes me as counterproductive. The ability to leverage private sector funding is among the most effective things the 150 Account — as the USG International Affairs budget is also known — has done for decades. The USG has shown the world how to effectively leverage private dollars to support foreign assistance objectives.

USAID’s Power Africa projects are a case in point. A number of USG entities, including the ones targeted for elimination, are mobilizing more than $40 billion from private sector partners to deliver power to six million people. Consider as well the case of El Salvador, where a USAID investment of just $5.8 million to support local government efforts to address fiscal reform and improve public financial management has yielded a $350 million increase in annual revenue, including a $160 million increase in annual social spending. This is why Republicans Sen. Isakson (GA) and Rep. Yoho (FL) recently introduced a new bill calling for more private sector involvement in aid catalyzed by the USG.

Charitable contributions overseas, mobilized through organizations like the one I represent, Plan International — where private giving accounts for 70% of the $1 billion a year we use to program in over 50 countries — are generated in part by offering our donors opportunities to leverage their dollars with USG and other government dollars. Cutting drastically the 150 Account or seeking to entirely eliminate a line item like Development Assistance robs us of dollars that both attract and leverage private funding to support our global security and our values overseas. Depending on where the cuts occur, a decrease in a dollar of USG foreign aid spending ends up costing us much more than that by way of reduced impact.

Plan International’s programming in Central America is a good example of how financing from various sources is used and leveraged to address a major issue affecting the countries in the region, and keeps our country secure. Gang violence in the Northern Triangle countries of Honduras, Guatemala, and El Salvador is literally destroying lives, tearing families in the region apart, robbing youth of their future, and leading to an increase in illegal immigration of unaccompanied children and youth, many of them to the U.S. Of the population of the Northern Triangle, 9% has migrated. Plan’s programming in these three countries addresses the close link between violence, lack of economic opportunities, and negative family dynamics which leads to increased migration and more adolescents in youth gangs.

With funding from USAID, Plan conducted a Participatory Youth Assessment with 640 young people in the Guatemalan Western Highlands to understand the barriers youth face accessing education and work opportunities. We found when youth do consider migrating to the U.S., by far they do so for economic reasons. For the most part, when they have good opportunities and job options in their communities, they would rather stay home.

Consider this statement from a young man in rural Chiantla, Guatemala: “I’ve considered going to the United States many times…It is easier to get work there than in other countries. So when people think of looking for work outside the country, they think of the United States. But I haven’t joined my family there, because I have a job and an opportunity to support myself here. I have livestock. Most of those who are there, leave because they do not have work, they do not have animals. They have nowhere to work. So they leave.”

Our programs are mainly preventive, designed from and with the communities, and are long-term in nature. U.S. and other bilateral government grants and contracts are used to help scale up interventions that address the lack of economic opportunities and enhance community-based efforts to improve local services. These programs are then complemented by corporate donations from Accenture, HSBC, and others that seek to improve the links between training and market opportunities in specific industries. Tackling issues of violence and migration are complex and require a blend of approaches and financing options. USG funding has been especially effective in catalyzing such blended financing.

Finally, equally lost has been a debate on how foreign aid is designed and delivered to minimize and mitigate the risk of creating long-term dependency. Cutting Development Assistance, as the current budget seems to do, means cutting investments in building resiliency abroad. It means reducing or zeroing out needed efforts to mobilize domestic resources in countries receiving our aid so they can continue to support development programming. The USGLC’s budget analysis notes that the FY18 budget “would ‘provide sufficient resources’ to fulfill the U.S. commitment to Gavi, the Vaccine Alliance, ‘maintain current commitments and all current patient levels on HIV/AIDS treatment’ under PEPFAR…” This is welcomed news. But we cannot at the same time eliminate funding necessary to ensure recipient governments are strengthening their own health care systems and their own capacity to take care of their populations, lest we create more dependency.

We need to look beyond volume and engage in thoughtful debate about how we most effectively deploy U.S. taxpayer dollars overseas to achieve development impact, keep our country safe, and promote our values. We need to acknowledge that what matters in terms of USG funding is less about the size of the aid and much more about how this aid is deployed and leveraged.

To do so, we must look beyond ideology and engage in a constructive and fact-based debate about what foreign aid effectiveness means. The bi-cameral and bi-partisan Congressional Caucus on Effective Foreign Assistance (CCEFA), are among the important bipartisan efforts to create a space for that discussion.


This post was written by Dr. Tessie San Martin, President/CEO of Plan International, and was originally published on The Huffington Post.