For much of the 20^th century U.S. foreign policy aimed, in the words of George Kennan, “to protect the security of the nation, by which is meant the continued ability of this country to pursue the development of its internal life without serious interference, or threat of interference, from foreign powers.” This approach continues to evolve as globalization increasingly ties the fate of the United States to the fates of other nations, and particularly those in the developing world. Engagement beyond our borders is now more critical than ever. The Foreign Assistance Act of 1961 aimed to solidify the idea that the impetus behind foreign assistance, beyond any duty to help fellow human beings, is that a fairer and more prosperous world is in the interest of the U.S. and its citizens.  Over a half century later, the Foreign Assistance Act is unwieldy, out of touch with many of today’s realities, and badly in need of an update.

President John F Kennedy signing the Foreign Assistance Act with Senators and Congressman looking on

Despite broad recognition that foreign assistance serves as a valuable and strategic foreign policy tool, its budget allocation remains small and disjointed.  Resources are divided among many agencies operating independently in the international development sphere and there is a lack of data-driven analysis on how assistance dollars can best be spent.  There have been a number of efforts to update the Foreign Assistance Act, including a high profile bill introduced by Representative Howard Berman in 2012.  Unfortunately, these attempts have been unsuccessful, and core U.S. foreign assistance policy is still badly in need of a top to bottom review.

How is foreign assistance money allocated and spent? Does it align with stated foreign policy goals?

The federal budget is divided into twenty budget functions, and each function contains the budget for a given issue area, independent of which federal agency oversees the specific federal programs that will receive the money. Function 150, widely known as the ‘150 account,’ represents non-defense international affairs spending. The majority of foreign assistance comes through this budget function, and is divided amongst the Department of State, U.S. Agency for International Development (USAID), the Millennium Challenge Corporation (MCC), and other agencies, including the overseas operations of the Departments of Agriculture (USDA), Labor, and the Treasury. Each government agency has distinct priorities and programming, and though they often work on overlapping issues, coordination can be minimal.

The Obama Administration released its budget request for Fiscal Year 2016 in February, and the $54.8 billion International Affairs request is 7.7 percent greater than current spending, in line with the percent increase for the rest of the discretionary budget request. Yet, it remains at about 1 percent of the overall budget, in comparison to the $585.3 billion defense budget request. Effective foreign assistance can serve as a preventative foreign policy measure, mitigating conflict and instability before it occurs.  In this regard, foreign assistance spending should be seen as an efficient complement to U.S. defense spending worthy of increased budgetary attention.

It is also important to note that the earmarking process—which directs funds to politically favored countries, projects, and implementers— significantly impedes the ability of US aid agencies to deliver effective and efficient foreign assistance. Governance, for example, is an area in which increased investment would have strong developmental impact, but no constituency exists to push for this change.  Entrenched interest groups are holding back US development effectiveness, and preventing a necessary evolution of development spending towards advancing new development priorities.  Initiatives that support stronger governance, trade policy, and public administration have the support of aid officials and analysts.  It’s time that the aid budgeting process reflected strategic priorities, not the interests of a select few constituencies.

How is U.S. foreign assistance policy changing?

The introduction of the FY2016 budget proposal notes that, “In an increasingly globalized world, foreign policy and economic policy are two sides of the same coin: foreign policy is economic policy.” The FY2016 budget request prioritizes programs that promote global economic growth through expanded trade and private investment, building economic capacity, and facilitating opportunities for American businesses. This means budget increases for the Export-Import Bank, Overseas Private Investment Corporation (OPIC), the Trade and Development Agency (USTDA), and the MCC. Expanded budget requests will be useful for these agencies, but more critical is a rethink of U.S. foreign assistance policy and legislation.

The future of U.S. Foreign Assistance remains uncertain, but many development experts fear that the current approach is increasingly ineffective. Challenges including globalization, urbanization, food security, and youth unemployment are pressing issues in the developing world, and solutions will require a more flexible, cooperative, and innovative foreign assistance strategy and budget.

On April 23, 2015 CSIS will host its first ever Global Development Forum, a full day conference featuring leading global experts and practitioners who will discuss the world’s most critical development challenges and opportunities.  See the full agenda, including a discussion on the 150 account, and register here.

Photo courtesy of Abbie Rowe, White House Photographs, under a public domain license.