Budget cuts target development assistance, hint at organizational change

President Donald Trump’s 2018 fiscal year budget proposal would shift funds from the United States Agency for International Development to the State Department, hinting at potential changes in how development is carried out and shedding light on which parts of foreign aid could take the biggest hit.

The Trump administration proposes a 30.8 percent cut to the overall foreign aid budget, according to a State Department budget document obtained by Devex on Monday. That top line figure was already apparent in the administration’s so-called “skinny” budget released last month, but the latest document offers great detail.

The budget proposal eliminates essentially all funding through the development assistance account, which helps fund a host of programs from education to clean water. The spending in the account is designed based on country strategies and strategic policies at USAID and are evaluated closely. Aid channeled through the USAID Bureau of Food Security; Democracy, Conflict and Humanitarian Assistance, and the Global Development Lab would face steep cuts.

“What I see happening in this budget is elimination and draconian cuts to aspects of the foreign aid program critical for getting results,” said George Ingram, a senior fellow at the Brookings Institution. “You are removing the account and mechanisms that produce the greatest accountability.”

The president’s budget is a proposal to Congress and is likely to change considerably before coming into effect. The initial top line cuts have been met with criticism from Republicans and Democrats in the House and Senate. Observers and advocates believe that foreign aid and USAID have support on Capitol Hill.

Still, the proposal sends an ominous message on global development as legislators dive into the first of several contentious budget negotiations in the coming months. This week, Congress will try to hammer out a budget for the rest of 2017 before funding runs out at the end of the week. This could include foreign aid cuts, and analysts are watching it as a signal of what might follow. Debate on the 2018 budget is expected to pick up at the end of May or early June, when Trump’s full budget proposal is expected.

Aid experts reacted to the budget document with alarm. The proposal would take “aid back to the worst days of the 1950s” by ignoring the development lessons of the past half century, said John Norris, the executive director of the Sustainable Security and Peacebuilding Initiative at the Center for American Progress.

“This is a profoundly unserious budget document,” he said. “There is not any recognition that it’s in the national interest to have fewer people suffering and dying across the globe.”

The cuts

The budget document offers insight on the regions and programs most likely to face cuts. Some key details are still unclear, however, including how much money will go to PEPFAR, the U.S. President’s Emergency Plan for AIDS Relief, which Trump has indicated he will protect. Funds to humanitarian assistance accounts, the Millennium Challenge Corp. and aid channeled through the Treasury Department are also not included in the document.

Geographically, Europe and Eurasia as well as East Asia and the Pacific see the steepest cuts, at 57.4 percent and 41.1 percent, respectively. Africa would see its budget cut by a proposed 13 percent cut while Near East funds would drop about 7.2 percent.

Some countries would see dramatic increases in parts of their aid budgets and cuts in others.  Sometimes cuts will offset with new funds, sometimes they don’t. Countries including the Central African Republic, Niger, Sierra Leone, Laos, Thailand, Poland, Brazil, Cuba and Nicaragua would see all their aid for the U.S. government disappear.

That means closing missions — about 30 to 40 would likely close under the plan, according to Norris. That could translate into laying off about 20 percent of staff, according to Tom Hart, the North America Executive Director of the ONE Campaign.

Hart and other aid executives told Devex that such deep cuts would be short sighted and discount the role that development plays in creating global stability. The defense community has also emerged as a supporter of foreign aid, with a similar rationale.

“I think that the signal sent behind this budget and early indications of reform from the administration shows they don’t value development as one of the key pillars of our national security,” Hart said.

One example is Niger, where the proposal would see all U.S. aid come to an end. While that country has a stable government, Hart said, a loss of support could make it more vulnerable to security threats, famine or extremists.

The budget also outlines specific programs and offices slated for elimination, including the Famine Early Warning Systems Network — a particularly shocking cut to many practitioners, as one country is experiencing famine and three others are on the brink.

Save the Children relies on the FEWS Network, and the system has been successful, said Nora O’Connell, the associate vice president of public policy & advocacy at Save the Children. “It enables us to use private funding to be more effective in saving lives around the world,” she said. Acting too late in such situations can mean a greater cost both in the number of people affected and in the money required.

The Office of Women’s Issues is also slated for elimination. O’Connell described the office as a high leverage investment that enables the State Departments to more effectively reach women and girls.

“It really feels like someone went through with red pen and just cut things to zero if they saw a word they didn't like, like women, environment, climate, democracy," Norris said.

Beyond the early warning system, the Bureau of Food Security would see cuts of 67.8 percent, according to the budget proposal. USAID global health funds would also take a hit, reducing spending on health systems that Ingram said are critical to help prevent future pandemics.

The Bureau of Policy, Planning and Learning, set up in 2010 to boost USAID’s ability to plan, evaluate and adapt policy based on what works, would be cut by 45 percent in the budget. “That’s like cutting the brains out of an operation,” Ingram said.

A structural change?

The budget document also points to a shift in aid philosophy and perhaps in the way the government delivers assistance. The allocations of cuts have fueled rumors that the administration would like to merge USAID into the State Department.

The proposal would slash development assistance funds, which are managed by USAID and intended to boost development outcomes. In some cases, the budget would redirect spending through the Economic Support Fund, which is run through the State Department and intended to meet U.S. foreign policy objectives.

“What this would do is take everything we currently fund as a development objective and turn it into a politically driven program,” said Jeremy Konyndyk, a senior policy fellow at the Center for Global Development. “It would mean a lot less aid delivered a lot less well.”

Konyndyk told Devex that such a shift could see U.S. programs lose key aid expertise, developed at USAID over the past half century. “When we see State really driving foreign assistance spending, it generally is not as effective, rigorous, or results-driven,” he said.

Examples of ESF spending include stabilization assistance in Afghanistan and Iraq — programs that were often poorly conceived and unsuccessful, according to Konyndyk.

Several of the experts and advocates who spoke to Devex stressed that their resistance to the Trump proposals was not a resistance to change. In many areas, development is in need of reform, but through a different and more thoughtful process, they said.

What are the odds?

The proposed aid budget’s chances on Capitol Hill are unclear, particularly following bipartisan criticism of the initial outlined cuts. Konyndyk described the ongoing process as a “priority signaling exercise” by the Trump administration, with dramatic proposals aimed more at political messaging.

The proposed changes also contradict some previous Republican positions, for example the shift toward ESF funds, which are subject to less monitoring and regulation. Republicans have traditionally favored greater aid transparency and were key backers of the recent Foreign Aid Transparency and Accountability Act.

“This runs directly opposite to the precepts that representatives in the House and Senate really pushed hard on over the last decade,” Norris said. “I think this really is a gut check for them.”

On some matters, Congress may not have as much of a say. Legislators could approve a budget that maintained funding to USAID controlled accounts, for example, but the administration could make administrative changes, for example giving State Department bureaus more authority or eliminating the USAID budget office or policy shop.

Hart argued that the global development community should focus their advocacy on resisting some of these structural changes. “A fully funded but incapable institution doesn't make sense. We need to make sure the capacity is there,” he said.

While this act is playing out, USAID and the State Department will take guidance from the proposed budget, said Hart. Staff will start going through something of a contingency exercise planning to shut down bureaus and shut down programs.

Stay tuned to Devex for more news and analysis of what the Trump administration means for global development. Read more coverage here and subscribe to The Development Newswire.