A Refresher Course on How U.S. Foreign Aid Works

Apparently a refresher course on how U.S. foreign aid actually works is in order because this convenient scapegoat has been thrown out once again, this time by President Trump as he sought to derail talks over government spending and coronavirus relief.

That, in fact, is the first thing to point out: The coronavirus relief bill is separate from the omnibus government spending bill, so why the president kept conflating the two was somewhat confusing.

It’s equally confusing that one of the reasons he gave for upending the hard-fought compromise struck by Democrats and Republicans to avert economic catastrophe for millions of unemployed Americans is foreign aid — considering that this aid is exactly in line with what his own White House requested.

That’s right, the spending is what he asked for. So the question becomes: Is the president not aware of what his own administration is doing, or is he aware but he’s just raising the issue of foreign aid because it’s always served as a convenient sideshow to get people emotionally riled up?

Regardless of the president’s awareness, the fact is that many Americans are very much unaware of how foreign aid actually works — and thus prey to the hyperbole and inflammatory rhetoric that far-right media and commentators often employ — to great effect.

This lack of awareness reveals a much deeper problem: Many Americans don’t know where their tax dollars actually go because they don’t have a basic understanding of the federal budget. While they’re quick to complain about waste, they often don’t bother to figure out where the real waste lies.

Far-right and fiscally hawkish Republicans (not establishment Republicans — a key distinction because they generally support robust foreign aid spending) often feign outrage about giving other countries tons of free money. This of course is much easier than having an honest, tough debate on the many nuances of government spending, but again, it serves its purpose by distracting Americans from the real issues at hand.

So here’s a primer on foreign aid (also known as the international affairs portion of the budget). First, the biggest misconception: Many Americans think foreign aid accounts for roughly 10% of government spending. Nope. It accounts for less than 1%.

To put that into perspective, the international affairs budget generally comes to about $50 billion a year, while the current omnibus spending bill totals $1.4 trillion.

So yes, we’re essentially talking about pennies or, in some cases, fractions of a penny.

But isn’t $50 billion a lot? Sure. But you get a lot of bang for your buck. This funds all of American diplomacy. Much of that diplomacy goes toward preventing the kind of costly conflicts that Americans don’t want to become entangled in. That’s why the Pentagon — whose budget, by comparison, is now nearing the $750 billion mark — is usually among the first to push back on efforts to cut the State Department’s budget (the agency responsible for most of the international affairs budget).

That’s because military brass know that an ounce of prevention is worth a pound of cure — both in the blood of American soldiers and the treasure of American taxpayers.

Let’s take a look at where else some of that money goes. Israel has long been the top recipient of U.S. foreign aid. That’s generally a bipartisan tradition because America is generally a pro-Israel nation. You can debate the merits of a developed nation like Israel receiving American assistance, but that’s been consistent since about the mid-1980s. (For fiscal 2021, Israel is set to receive $3.3 billion in foreign military financing and $500 million for missile defense.)

After Israel, Egypt and Jordan receive the most U.S. assistance. Both countries have signed peace treaties with Israel and are considered moderate Arab allies (Egypt is also considered an authoritarian regime by its critics, but again, that’s a debate for another day).

After that, the money goes to a hodgepodge of countries, regions and programs. Is there some waste? Sure. There are inefficiencies in every enterprise — public or private. A slew of experts and NGOs have in fact for years debated ways to cut red tape and make foreign aid more efficient and effective. It’s actually an obsession within the aid community.

But many of these programs are mutually beneficial. Some, for example, work to build and open up economies in Africa so that American businesses can enter those potentially lucrative markets. Some are geopolitically strategic: countering Chinese influence, for instance, in Southeast Asia. Others are altruistic, such as reducing the number of children who needlessly die because of a mosquito bite.

Again, these individual programs represent fractions of fractions of a penny, and many help both others and us. They work to reduce extremism (so countries don’t breed terrorists who want to attack us), or alleviate the very poverty and violence that drives people in Central America to try to cross the U.S. border.

Plus, spending a penny to build up goodwill among thousands, if not millions, of people around the world can come in handy if we ever need their help one day.

Now, if you’re serious about tackling waste, then follow the real money trail. To do that, you need a basic grasp of the federal budget.

Discretionary spending makes up a little less than 35% of total government spending. This includes diplomacy, the FBI, Homeland Security, NASA, education, housing, transportation and most of the things we typically associate with government services.

But roughly HALF of that actually goes toward defense, so the real slice for everything else is in fact pretty small. It’s also the part that fiscally hawkish Republicans (who have long been accused of rediscovering that hawkishness whenever a Democrat is in office) often try to wring every last dime out of, even though cutting domestic programs like education doesn’t make any real dent in the debt. It just makes for handy talking points and anti-government memes on social media.

You want to cut the debt? You’ve got to go to the popular stuff.

That includes defense, which for fiscal 2021 is set to reach $740 billion — a figure that consistently rises practically every year (even when we’re not at actual war with anyone).

The Pentagon is rife with waste — and its leaders know it. One reason for this is that defense contractors are very shrewd. They’ve purposely spread out the production of military equipment and parts in districts and states all across the country.

As a result, members of Congress are beholden to these companies because that production creates jobs in their districts, so they will naturally try to block any cuts to that production. But this in turn prevents the Pentagon from getting rid of costly, useless or redundant projects and redirecting that money where it’s better served.

But if we really want to know where our taxpayer money goes, you have to look at the biggest slice of the pie — nondiscretionary (i.e. mandatory) spending. This mainly consists of Social Security, Medicare and Medicaid and comes to nearly $3 TRILLION for fiscal 2021. (The omnibus package of $1.4 trillion covers the discretionary part of the budget).

So we’re talking roughly 70% of total government spending.

If you want to cut spending, the ugly truth is that you eventually have to look at where most of it goes: the nondiscretionary side. But this is what’s known as the “third rail” of politics because neither party wants to get electrocuted by it. AARP is one of the most powerful — if not the most powerful — lobby groups in the country.

After all, no politician wants to be blamed for taking away grandma’s Social Security check. But that’s not what most fiscal moderates (on both sides of the aisle) want. No society should let its elderly fall through the cracks. And there’s absolutely no excuse for that happening in the world’s wealthiest nation.

Nor is there any excuse for millions of hard-working Americans to go broke because they broke an ankle and didn’t have health insurance. So many reformists are not suggesting eliminating discretionary entitlement programs. (Incidentally, Social Security is actually in better fiscal shape than many people give it credit for.)

But some reforms are still needed because the system is on an unsustainable trajectory and may not be around for younger people decades from now. Another key piece of the puzzle is reining in health care spending — something Obamacare tried to do — although here you run up against more lobby heavyweights: namely, the pharmaceuticals industry, hospital associations and insurance companies.

But the biggest roadblock to entitlement reform is public opinion. Any changes to nondiscretionary spending requires an act of Congress, and again, the issue is so toxic that most politicians don’t have the nerve to go near it.

So every time an older person laments that we spend taxpayer money on folks in other countries, sadly, they need to take a long, hard look in the mirror — because the interest payments on their entitlement spending alone are going to cripple their grandchildren. Or direct your ire to the for-profit health care boondoggle to which we’ve become hostage.

Now, one way to avoid having to slash critical government programs is to NOT cut taxes for the wealthy. While the highest income brackets do contribute huge amounts in tax revenue, they still enjoy perks that allow them to preserve most of their wealth — or even generate more of it. Look no further than the steadily expanding inequality gap that has exploded over the last two decades as proof that the tax system still overwhelmingly benefits the top 20%.

Here, we get to the often-overlooked GOP tax cuts of 2017. Ample evidence has now shown they didn’t do anything other than make the rich richer, while exacerbating the federal deficit and the social divide between the have and have-nots.

Income brackets in the top 20% received 60% of the tax cuts. The other large chunk went to slashing the corporate tax rate, to the tune of $2.3 trillion. But while some of that windfall was reinvested into capital and R&D to create jobs — as Republicans had pledged — corporations mostly used the money to issue stock buybacks that made their wealthy shareholders wealthier. And these tax cuts are permanent — as opposed to those for individuals.

Yes it’s true that America has (or, rather, had) the highest corporate tax rate in the world. But it’s also true that corporations almost never paid anywhere remotely close to that rate thanks to loopholes and offshoring (we’re talking to you Apple). Some even got money back from the government. Just ask President Trump how this works.

Plus, reducing the corporate tax rate from, say, 38% to 11% still isn’t enough to induce corporations to bring their money back to the U.S. when they can enjoy tax rates of 4% or less in countries like Ireland. The math just doesn’t add up in terms of the bottom line.

It’s little surprise then that the 45 largest companies in America have turned a profit during the pandemic, as reported by The Washington Post. How? Largely by laying people off and giving the bulk of the profits to shareholders.

So you want to be outraged? Be outraged by massive corporate handouts, not the pennies we give to stave off famine in Yemen or keep the Kennedy Center from shutting its doors (and remember, President Trump actually wanted to increase aid to the Kennedy Center).

Also ask yourself why certain news outlets always play up and distort foreign aid? Could it be that it’s an easy way to gin up anger — and ratings — while diverting attention from the messy, uncomfortable realities of corporate tax evasion, entitlement spending and a bloated military?

The debate over the budget — particularly the international part of it — has for years been rife with hyperbole and misconception. But it’s become flagrantly distorted under this administration, which has capitalized on the raw nerve that foreign aid seems to strike among many Americans. That’s because President Trump is a master at distraction and deflection, lobbing emotionally resonant but substantially empty bombs to blow up any sort of bipartisanship and further tear this already-polarized country apart. It’s a lot easier to destroy than to build.

Did the president just suddenly wake up to the stimulus negotiations after fixating on countless baseless allegations of election fraud for weeks? Was he simply trying to sabotage the spending package as payback for Republicans who aren’t backing him in his quixotic quest to overturn the election? Would he really let millions of unemployed Americans suffer because of a bruised ego? (Fortunately, as of this writing, the answer appears to be no.) Does he genuinely not comprehend that stimulus checks have nothing to do with Israeli missile defense? Or does he want to go out with a bang by giving each American a lot of money, in the form of checks specially imprinted with signature (a taxpayer waste by the way).

Anyone who claims to have insights into the mind of this president should probably have their own checked.

Truth is, many of us are spectators to this nuttiness, but what we can control is our understanding of how government really works so that we’re not duped by those who have their own agendas and their own motivations for peddling half-truths and outright lies.