Does the United States Spend Too Much On Foreign Aid?

	Foreign Aid
	Myth:	The United States spends way too much on foreign aid.
	Realty:	The United States spends only a minuscule amount on foreign aid.
	Foreign Aid is a category of development aid whose main objective is the economic development and welfare of developing countries. It is formally known as Official Development Assistance (ODA).
	How Large Do People Think the ODA Budget Is
	In a recent poll (Table 1), people were asked to name the two largest areas of federal government spending. In the poll people said the “Foreign Aid” budget was larger than either “Medicare” or “Social Security.”[1]     Quantity of Foreign Aid     Question: Which of the items on this list would you say are the two largest areas of spending by the federal government? …Defense and military spending, food stamps, foreign aid, Medicare, Social Security       Defense and military spending 73         Food stamps 10         Foreign aid 49         Medicare 20         Social Security 26         Don’t know 2       Note: Percentages may not add to 100 percent because of rounding. Sample size: 1,236 adults. Methodology: Telephone interview conducted Feb. 3-6, 2005. Survey Organization: The Washington Post and the Henry J. Kaiser Family Foundation.[1]     Table 1. The Quantity of ODA.[1] Another poll (Graph 1), done by the Chicago Council on Foreign Relations and German Marshall Fund of the United States, asked the question what percentage of the federal budget goes to foreign aid.[2] Only two percent responded with the correct answer (less than one percent of the federal budget goes to foreign aid). The median answer was 25 percent.   Graph 1. The Amount of Dollars that People Think is Spent on the ODA Budget.[2] Determining the Size of the Foreign Aid Budget In examining the U.S. federal budget (Table 2) for 2007[3], budget item 150 International Affairs (IA), makes up about 1.2 percent or $33.27 billion.   Graph 2. The United States Federal Budget.[3] Photo Credit: Mia Farrow’s Photo Essay, November 2006: Crisis in Sudan and Eastern Chad.[4] The IA budget not only includes aid for various purposes — develop/humanitarian/emergency food, military, economic, multilateral and international organizations — but also money for operation and administration of embassies and consulates and various State Department programs such as the drug “war.”   The portion of the IA’s budget that constitutes develop/humanitarian/emergency food aid, the portion many think of when they hear the term “foreign aid,” is approximately 38 percent (Graph 3). Graph 3. The Budget of the U.S. Department of State.[10] This reduces the de facto foreign aid component of the federal budget to 0.44 percent or $12.72 billion (Graph 4).   Graph 4. The relative size of the development/humanitarian/emergency food aid portion and the other parts of the U.S. federal budget.[3 and 10] U.S. Sources verses non-U.S. Sources The portion of the foreign aid that is spent on non-U.S. sources needs to be determined. The need arises out of inefficiencies of the U.S. system.   The distribution of aid through social marketing[Note 1] that the Clinton and Bush administrations have favored[5] adds to the costs of the aid. One example is the sale of mosquito nets, a necessity in malaria-infested areas, that have a base-cost of about $2.40 each.[Note 2]   “With consultant fees, transportation, advertising and shipping, social marketing added about $10 to the cost of each net,” said Dr. Peter Olumese, a medical officer in the World Health Organization’s malaria program.[5]   The cost of delivering a $2.40 mosquito net through the U.S. is $12.40, an overhead of 81 percent.   U.S. agribusiness views foreign aid as key to its success. The industry believes in the long run it boosts agricultural exports, opens the door to trade, creates new business opportunities e.g., Brazil, Korea, Taiwan, and Turkey.[6]   “If we’re serious about finding new markets, about creating new business opportunities for American companies in this competitive environment, we must recognize that we have a vested interest in helping the developing world especially in agriculture,” writes Perry Letson Assistant Vice President of Communications for ACDI/VOCA.[6]   Buying food from U.S. sources is seen as a way of disposing of surplus food and is thus a subsidy to U.S. agribusiness. For this and the reasons above, most U.S. food aid should be seen as agribusiness promotion and subsidies, rather than freely given humanitarian aid.   Furthermore, when foreign assistance dollars are used to purchase available food in a nearby country, more food can be purchased and be delivered more quickly to the people who need it.[7]   Most of the aid coming from the U.S is wasted. It was revealed in 2005 that the agency responsible for distributing most of the U.S. aid, United States Agency for International Development (USAID)[Note 3] was spending only five percent on goods and services and wasting the other 95 percent on consultants.[5]   “Aid is larded with back-door kickbacks supporting U.S. exports and overseas military bases,” writes Alan F. Kay, economist.[8]   With the above justification, the develop/humanitarian/emergency food aid from only non-U.S. sources needs to be determined.   A 2005 CRS Report [9] made an rough estimate that for food assistance commodities, “more than 90% — at least $1 billion in FY2004 — of food aid expenditures were spent in the United States.”   The report went on to say of the total procurement of bilateral development assistance between October 2002 and September 2003 made by USAID, 81 percent came from U.S. sources.   Doing the calculations (Graph 5) needed to determine the amount of aid spent on non-U.S. sources shows roughly 18 percent of the development/humanitarian/emergency food aid comes from non-U.S. sources and 82 percent comes from U.S. sources.   Graph 5. The proportion of non-U.S. source develop/humanitarian/emergency food aid and other parts of the International Affair s budget.[3, 9, and 10] This reduces the amount of foreign aid that doesn’t come back to the U.S. to be 0.080 percent of the federal budget or $2.28 billion (Graph 6).   Graph 6. The proportion of non-U.S. source develop/humanitarian/emergency food aid and other parts of the U.S. federal budget.[3, 9, and 10] Comparisons with Other Countries Not wanting to judge the U.S. foreign aid contributions in isolation: How does the U.S. compare to other countries?   Using data from Organization for Economic Co-operation and Development (OECD)[11], the United States’ 0.16 percent of Gross National Income (GNI) contribution is lower than the other member nations of the G-7 (Graph 7). Comparing the U.S. with all the OECD countries, the U.S. again has the lowest percent of GNI with the exceptions of Greece (0.16 percent) and South Korea (0.07 percent).   Graph 7. Comparison of the United States ODA budget to other modern industrialized countries as ODA percent of GNI.[11] Comparing countries by the raw amount of aid given, the U.S. gives the largest amount of aid at $21.75 billion (Graph 8). This is much greater than any other country. The next best country is Germany that gives $12.27 billion. However Germany is a much smaller country with a GNI of $3,349 billion compared with the U.S.’ GNI of $13,843 billion. This is over four time the size of Germany’s GNI.   Graph 8. Comparison of the United States ODA budget to other modern industrialized countries as raw dollar amount.[11] Thus it is fairer to compare the amount of aid given by the U.S. to the European Union (EU) member nations of the Development Assistance Committee (DAC) as a whole to account for the size difference between the U.S. and the other countries.   There are 15 countries[12] that are both EU and DAC members: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, and the United Kingdom. (Ignoring the Eastern bloc countries of the Czech Republic, Hungary, Poland, and Slovakia.) These countries have a combined GNI of $15,579 billion compared to the U.S.’ $13,844 billion (Table 2).   The comparison between the ODA percentages and ODA’s of the DAC EU group and the U.S., shows the DAC EU group has a larger ODA percentage than the U.S. (0.40 verses 0.16 percent) and also contributes more dollars ($62.10 verses $21.75 billion).   GNI, ODA, ODA Percentage, and Population of DAC EU Member Countries and the United States 2007 DAC EU Members[12] GNI[11] ODA[11] ODA % GNI[11] Population[12]   Billion of Dollars Percent July 2007 est. Germany 3,349 12.27 0.37 82,400,996 France 2,573 9.94 0.39 64,057,790 United Kingdom 2,755 9.92 0.36 60,776,230 Netherlands 770 6.22 0.81 16,570,613 Spain 1,401 5.74 0.41 40,448,191 Sweden 464 4.33 0.93 9,031,088 Italy 2,091 3.93 0.19 58,147,733 Denmark 317 2.56 0.81 5,468,120 Belguim 458 1.95 0.43 10,392,226 Austria 369 1.80 0.49 8,199,783 Ireland 220 1.19 0.54 4,109,086 Finland 246 0.97 0.40 5,238,460 Greece 308 0.50 0.16 10,706,290 Portugal 214 0.40 0.19 10,642,836 Luxembourg 41 0.36 090 480,222   Totals or Avg. 15,579 61.10 .0.40 386,669,672 United States 13,844 21.75 0.16 301,139,947 Table 2. Comparison of the United States ODA budget to DAC EU group countries as ODA percent of GNI and as raw dollar amount. Data for calculation are from sources.[11 and 12] Even with normalizing for either the higher GNI or the larger population of the DAC EU group, the U.S. still isn’t able to catch up with the DAC EU group. As Table 3A shows when normalized to GNI, DAC EU still out spends the U.S by almost 2.5 times ($62.10 verses $21.71 billions for the ODA) and their ODA percent is more than double the U.S.’s (0.40 verses 0.18 percent).   Normalizing for population yields very similar results. For the ODA (Table 3B) the outcome is $62.10 verses $27.93 billion and for the ODA percent the outcome is 0.40 verses 0.20 percent; for both the first figure in the comparisons is for the DAC EU group and the second belongs to the U.S.   A B   ODA and ODA Percentage Normalized to GNI ODA and ODA Percentage Normalized to Population Country ODA ODA % GNI Country ODA ODA % GNI DAC EU 62.10 0.40 DAC EU 62.10 0.40 U.S. 24.48 0.18 U.S. 27.93 0.20 1.125 Normalization Factor 1.284 Normalization Factor Table 3. Comparison of the United States ODA budget to DAC EU group countries as ODA percent of GNI Table A and as raw dollar amount Table B. Both Tables A and B are normalized to GNI and to population. Data for calculation are from sources.[11 and 12] Concluding Thoughts The United States spends only 0.080 percent of the federal budget or $2.28 billion on the altruism of foreign aid. Compared to other modern industrialized countries, the sacrifice the United States makes in disbursement of foreign aid is small.   How does the actual amount of foreign aid equate to what people believes should be allocated to foreign aid?   The median amount found in one poll indicate people believe 10 percent should be spent on foreign aid. That is more than 100 times the amount the united States spends and almost 10 times the entire Federal International Affairs Budget.   Graph 9. What people believe the ODA budget should be.[2] By most measures, the United States does not spend too much on the altruism of foreign aid.   — Truthmonk

 

Notes
1		Social marketing is where donors underwrite subsidizes to allow aid products sold to be sold at low prices through local shops.
2		Curtis, etc.[13] found the distribution-costs composed of wages, allowances, administration, and transport by four-wheel-drive vehicle were about $1 per net…Added to the current UNICEF bulk purchase price for nets of $1á40 each gives a base-cost of about $2.40 each.
3		The United States Agency for International Development (or USAID) is the section of the United States federal government responsible for most ODA. An independent federal agency, it is under the control of the U.S. Department of State. With the disbursement of aid, USAID advances U.S. foreign policy objectives by giving humanitarian assistance, guidance on health and agriculture issues, democracy development, conflict prevention, and supporting economic growth and trade.

How the Aid Industry Works: An Introduction to International Development International development is big business. Official global aid flows from North to South are over $100 billion annually. China and India, former aid recipients, have entered the field as aid providers. The resources of private donors like the Gates Foundation have redefined international charity, for example, outstripping the annual budget of long-time donors like the UK, Canada or the World Health Organization. The book provides a basic description of what aid practices are and how they evolved. The arguments of both proponents and opponents of aid are presented and analyzed, along with real-life examples of projects and programs in context. The book serves as an overview for development practitioners who want a handy reference covering the universe they inhabit.

Foreign Aid: Diplomacy, Development, Domestic Politics A twentieth-century innovation, foreign aid has become a familiar and even expected element in international relations. But scholars and government officials continue to debate why countries provide it: some claim that it is primarily a tool of diplomacy, some argue that it is largely intended to support development in poor countries, and still others point out its myriad newer uses. Carol Lancaster effectively puts this dispute to rest here by providing the most comprehensive answer yet to the question of why governments give foreign aid. She argues that because of domestic politics in aid-giving countries, it has always been—and will continue to be—used to achieve a mixture of different goals.

References
1		The Washington Post and the Henry J. Kaiser Family Foundation; Quantity of Foreign Aid; The Washington Post, Henry J. Kaiser Family Foundation and Harvard University; February 3-6, 2005; Accessed April 14, 2008. http://www.publicagenda.org/issues/red_flags_detail2.cfm
2		Chicago Council on Foreign Relations and German Marshall Fund of the United States;Worldviews: American Public Opinion & Foreign Policy; Chicago Council on Foreign Relations and German Marshall Fund of the United States; Conducted June 2002, released October 2002. http://www.thechicagocouncil.org/past_pos.php   Note: The Chicago Council on Foreign Relations was renamed The Chicago Council on Global Affairs on September 1, 2006.
3		U.S. Office of Management and Budget; Historical Tables, Budget of the United States Government, Fiscal Year 2007: Table 3.2—Outlays by Function and Subfunction: 1962–2011; U.S. Office of Management and Budget; Pages 55-72; 2007. http://www.gpoaccess.gov/usbudget/fy07/hist.html
4		Farrow, Mia; Photo Essay, November 2006: Crisis in Sudan and Eastern Chad; Mia Farrow’s Writings, Photos and Information on the Growing Crisis in Darfur (Sudan), Chad and Central African Republic (CAR); November 2006; Accessed April 14, 2008. http://www.miafarrow.org/photo_01.html
5		Kyama, Reuben and Mcneil Jr., Donald G.; Distribution of nets splits malaria fighters; International Herald Tribune; Webpage; October 9, 2007; Accessed April 14. 2008. http://www.iht.com/articles/2007/10/09/healthscience/09nets.php or http://www.iht.com/bin/printfriendly.php?id=7810984
6		Letson, Perry; Why U.S. agriculture should support foreign aid; Rural Cooperative Magazine; Webpage; March/April 2000; Accessed April 14, 2008. http://www.rurdev.usda.gov/rbs/pub/mar00/aid.htm
7		ActionAid; Demand Changes in US Food Aid Policies; ActionAid; Webpage; Accessed April 17, 2008. http://www.actionaidusa.org/what/climate_change/foodaid_policies/index.html
8		Kay, Alan F.; Economic Aid, Military Aid, or Neither ~ #5; The Polling Critic; Webpage; July 17, 2002; Accessed April 17, 2008. http://www.cdi.org/polling/5-foreign-aid.cfm
9		Tarnoff, Curt and Nowels, Larry; Foreign Aid: An Introductory Overview of U.S. Programs and Policy; CRS Report for Congress; 98-916, Page CRS-21; Updated January 19, 2005.
10		U.S. Department of State; Summary and Highlights, International Affairs Function 150, Fiscal Year 2008 Budget Request; U.S. Department of State; Pages 1-3; February 5, 2007. http://www.state.gov/s/d/rm/c21071.htm
11		Organization for Economic Co-operation and Development http://www.oecd.org/
12		Central Intelligence Agency; The World Factbook; Central Intelligence Agency; 2008. https://www.cia.gov/library/publications/the-world-factbook/index.html
13		Curtis, Christopher | Maxwell, Caroline | Lemnge, Martha | Kilama, WL | Steketee, Richard W | Hawley, William A | Bergevin, Yves | Campbell, Carlos C | Sachs, Jeffrey | Teklehaimanot, Awash | Ochola, Sam | Guyatt, Helen | and Snow, Robert W; Scaling-up coverage with insecticide-treated nets against malaria in Africa: who should pay?; THE LANCET Infectious Diseases; Volume 3, Issue 5, Pages 304-307; May 2003.