Devex Pro Insider: How Trump broke the foreign aid budget process

This is a free version of Devex Pro Insider from Senior Reporter Michael Igoe. Usually reserved for Pro members, we’re opening it up to all readers this week as a preview of what you’re missing. Over the next few months, this special Saturday newsletter will tackle some of the biggest questions about the future of U.S. foreign aid. Not yet a Devex Pro member? Get full access to all exclusive newsletters, insider insights, events, and expert analysis with a 15-day free trial of Devex Pro. It used to be that covering the U.S. foreign aid budget process was one of those things our news team could plan for months in advance — even a source of some reliable structure in an otherwise unpredictable information environment. We’d start with the president’s budget request sometime in early spring, then congressional budget hearings with their predictable blend of decorum and scripted indignation, then House and Senate appropriations bills that mostly ignored the White House’s whims, often followed by the threat of an impasse — maybe even a government shutdown — before finally, usually, some begrudging agreement to keep everything pretty much the same as it was before. That pattern mostly survived Trump’s first administration, despite his team’s proposals to slash foreign aid spending, and threats to use budget tricks such as rescissions — which few had heard of at the time — to circumvent the normal process. But since the start of Trump’s second term, the standard foreign aid budget playbook has gone out the window. In its place, the White House has used a combination of heavy-handed reviews, delay tactics, and controversial procedures to overrule Congress and force its own spending plans — or nonspending plans — onto U.S. foreign aid agencies. The implications of this break from business as usual are obviously a lot bigger than Devex editorial planning. There are billions of dollars in foreign aid funding at stake that were intended to pay for everything from HIV prevention to United Nations agency budgets. Beyond those dollar amounts is another historic struggle over who has the power to decide how U.S. government policy gets translated — or not — into real programs that affect people’s lives around the world. U.S. foreign aid spending has emerged as one of the front lines of that battle — and we’re speeding toward another series of confrontations. Rescission: Round 2 In the past eight months, the Trump administration has dismantled the U.S. Agency for International Development, canceled the majority of its projects, eliminated most of the U.S. foreign aid workforce, destabilized the broader aid industry, and rescinded $8 billion in foreign assistance funding that Congress already approved. Mission accomplished? It appears not. On the last Friday of August, the White House welcomed U.S. lawmakers back from their recess with another foreign aid rescissions proposal — this one for about $5 billion, and timed to create a showdown over constitutional authority at the end of the current fiscal year. Just to recap, the U.S. Constitution puts Congress in charge of the federal budget. A rescissions proposal is a legal process that allows the White House to request Congressional approval to cancel funds that lawmakers had previously approved. The Trump administration has taken that process to another — divisive and controversial — level. First, by using the rescissions process to fundamentally deconstruct an entire segment of U.S. foreign policy. And now, by submitting a rescissions proposal so close to the end of the fiscal year that the funds in question will likely expire whether Congress agrees to cancel them or not. This latter move is known as a “pocket rescission.” The Government Accountability Office — an independent agency that reports to Congress — has determined that it is illegal, but Trump’s budget director — the fervent aid critic Russell Vought — has been spoiling to hash out that question in the courts. That legal battle is already underway. On Wednesday night, a federal district court in Washington, D.C., ruled that the government is legally required to spend funds that were appropriated by Congress — and rejected the Trump administration’s argument that a pocket rescission would relieve them of that obligation. That ruling is headed for appeal and further litigation, though. It’s an issue many expect to make its way to the U.S. Supreme Court. The other unknown variable is Congress, and there are early signs that some lawmakers might draw a line in the sand at the White House’s pocket rescission gambit. The Republican chair of the Senate Appropriations Committee, Sen. Susan Collins of Maine, described the proposal as an “attempt to undermine the law.” In addition to challenging the legality of this pocket rescission, it is possible that lawmakers could look for ways to extend the period of availability of funds that are due to expire at the end of this month, when the 2025 fiscal year draws to a close. Either way, this looks like another instance where the Trump administration is using foreign aid to test the limits of executive authority. (See also: The unilateral dismantling of USAID). The question, now and always, is whether the U.S. Congress will push back in a meaningful way. “I think maybe in some ways people are still reeling, and they don't know that we are at that point in a normal fiscal year where you should start seeing these awards,” says Kate Eltrich, a U.S. budget expert and former Office of Management and Budget official. Read: Trump’s $5B ‘pocket rescission’ escalates foreign aid funding fight Background reading: US Congress clears Trump's $9 billion rescissions package Time is money The foreign aid budget process is way off course. With one hand, the Trump administration is trying to rescind foreign assistance funds, a few billion dollars at a time. With the other hand, at least so far, they are not spending much of what still remains. When a federal agency — in this case, the Department of State — plans to spend a chunk of money on a particular program, it usually sends a Congressional notification to Capitol Hill to give lawmakers a heads up and a chance to weigh in. At this point in the year, committees would have typically received about 300 congressional notifications for foreign aid spending, according to a Hill staffer I recently spoke with. So far this year, they have yet to hit the 100 mark. That suggests that in the wake of USAID’s hostile takeover, the State Department — which controls its remaining programs and directs foreign aid policy — is simply not getting money out the door at the pace that would be expected if it actually intended to spend all of it. The Hill staffer told me that they have not received any explanation from OMB or other parts of the Trump administration about what their spending strategy is. Communication, they said, has been “challenging at best,” without the usual back-and-forth between branches of government. The administration’s approach, they said, has been “to guard information jealously and zealously.” The upshot is that unless the State Department suddenly starts cranking out spending announcements, billions of dollars in foreign aid funding are slated to expire when the fiscal year ends this month. In a court filing late last month, a lawyer for the Trump administration revealed that the number is around $12 billion. The latest rescission proposal would eliminate about $5 billion of that, leaving what the Hill staffer termed a “mystery $7 billion that’s still hanging out there.” Of that at-risk funding, the same person believed about $3 billion was meant to fund PEPFAR, the global HIV/AIDS initiative. “We have long been concerned about huge amounts of money expiring at the end of this fiscal year,” they said. It’s possible the State Department will scramble to obligate large amounts of money before the Sept. 30 deadline. A buildup of funds at the end of the fiscal year is not, in itself, unusual. But it’s hard to do that without issuing huge awards to big aid contractors, NGOs, and U.N. agencies — the very organizations that Trump’s team has sought to discredit and diminish. In an ironic twist, the same Hill staffer told me that one of their concerns now is the potential for remaining foreign aid funds to become even more concentrated among a smaller group of surviving implementers. ICYMI: State Dept takeover of USAID is an ‘impending train wreck,’ experts say (Pro) Power play There is more at stake in this showdown than the billions of dollars in foreign aid funding that is currently in doubt. Foreign aid funding is now the front line of a power struggle over who controls the U.S. federal budget — and how much authority the White House has to reshape spending in its own image. The central player in that drama is Vought’s Office of Management and Budget, which is undertaking a multipronged effort to centralize budget authority and test the willingness of lawmakers, the courts, and aid advocates to push back. At nearly every turn, OMB has inserted itself into the budget process in ways that have curtailed foreign aid spending, says Eltrich, who directed OMB’s office of legislative affairs during the Obama administration. Under Vought’s direction, the administration has either slow-walked or ignored the steps that would usually follow to turn that congressionally approved budget into actual spending plans and programs, Eltrich says. “They don’t think any of this is valuable. They want it to be a smaller number,” she says. While it is typical that OMB would be involved in putting together the spending plans that outline how federal agencies plan to use their appropriated funds, the office has now also inserted itself into the congressional notifications process, taking a “second bite” at the apple of federal spending, Eltrich says. Some aid experts wonder why Secretary of State Marco Rubio is tolerating that level of oversight and interference in his own department’s operations. As a former senior State Department official puts it to me: “Rubio is fourth in line to the presidency. Why’s he having to ask Vought how to spend his money?” At some point, Eltrich believes, the tension between the White House’s budget power grab and Congress’ constitutional authority will lead to a “reckoning,” in which the courts force the Trump administration to take action or face consequences. “Or we have capitulation, and the entire process as we’ve known it changes,” she says. Either way, Eltrich predicts we are only at the midway point of that process. “My hope is that a year from now, we look back and we say, ‘OK, here’s where there was this course correction,’” she said. The Trump effect: Explore our dedicated page to catch up on all the latest news, in-depth analysis, and exclusive insights on how the Trump administration’s policies are reshaping U.S. aid and global development.