Trump budget proposes more US aid cuts, but backs new DFI

WASHINGTON — President Donald Trump’s 2019 budget request included all of the expected proposals to cut United States global development spending, but it also endorsed one of the most significant aid reform ideas to gain serious traction in years: Creating a new development finance institution.

Just as it did last year, the Trump administration proposed to slash U.S. foreign affairs spending by roughly a third. The White House called for the elimination of entire accounts such as “food for peace” and “development assistance,” and pushed highly-consequential reductions in programs including the President’s Emergency Plan for AIDS Relief and contributions to United Nations peacekeeping.

Within minutes of the White House releasing its budget blueprint, the condemnation from aid groups began to pour in. In a statement, the ONE Campaign described the White House budget as “not a serious proposal.” Save the Children lamented the administration’s “utter disregard for vulnerable children.” Michelle Nunn, chief executive officer of CARE, called the budget “dangerous.”

Rep. Ed Royce, the Republican chairman of the House Foreign Affairs Committee, made it clear Trump’s budget request will run up against Congress’ authority to decide the U.S. budget — and against both parties’ general support for U.S. global development programs.

“A strong, bipartisan coalition in Congress has already acted once to stop deep cuts to the State Department and Agency for International Development that would have undermined our national security. This year, we will act again,” Royce said in a statement.

Congress has already brokered a two-year budget agreement that bears little resemblance to Trump’s proposal, rendering it more a statement of the administration’s values than a real spending plan. Lawmakers still have to decide how to divvy up a pot of $63 billion they agreed to provide nondefense programs, including for U.S. foreign affairs agencies.

Even as U.S. aid groups greeted the White House budget with dismissal and derision, some members of the development community found reason to celebrate an achievement that has been a long time in the making. Tucked between the calls for cuts and reductions that pepper Trump’s second budget request, was a proposal to create something new, a U.S. development finance institution.

Anticipating parallel efforts in Congress, the White House called for the creation of “a new, enhanced U.S. development finance institution that will build the capacity and capability of developing countries and the private sector to drive sustainable change and economic growth, and thereby reduce the need for traditional development assistance, and reduce risks and costs to the American taxpayer.”

As Devex reported last week, a bipartisan group of lawmakers are currently hashing out the details of what this new institution might look like, and what its specific authorities will be. While Trump previously voiced his support for the idea in a speech in Southeast Asia, including the new institution in his budget request represents a concrete step toward creating something that has eluded U.S. development finance advocates for years.

With bills expected to arrive in the House and Senate as soon as this week, the U.S. development community is on the verge of a bipartisan legislative and executive movement to create a development finance institution. Even those groups that slammed the administration’s budget request celebrated the White House’s embrace of a proposal that has floated between think tanks and advisory committees, before finding enough support to emerge as a concrete policy proposal.

“We plan to aggressively campaign to help this good idea become law,” the ONE Campaign said in a second statement, released an hour after the group’s first condemnation of the budget.