Foreign Policy Budget for FY2002
Released: 2001-04-12T00:00:00

Foreign Policy Budget for FY2002

RS20855 -- Foreign Policy Budget for FY2002

Updated April 12, 2001

Budget Overview

President Bush seeks $23.85 billion in discretionary budget authority for U.S. foreign policy activities in FY2002,representing a nominal increase of 5.3% over levels enacted for FY2001. Administration officials, includingSecretaryPowell, have characterized the proposal as a "responsible increase" for international affairs programs within thecontext ofoverall budget constraints in which discretionary budget authority for all federal programs will rise by just 4% underthePresident's plan. They further emphasize that their highest priorities - State Department personnel, security, andtechnology needs - would grow by 18.6% above current spending.

The proposal has met with a largely favorable reception in Congress. In the FY2002 budget resolution ( H.Con.Res. 83 ), the House approved the full $23.9 billion for international affairs. The Senate added $200million for HIV/AIDS and $50 million for global climate change programs beyond what President Bush requested. Callsfor higher international affairs spending have been fueled in recent years not only by appeals from theAdministration, butalso by the recommendations of numerous "expert" commissions that have cited inadequate resources anddysfunctionalorganizational structures as major impediments to the conduct of U.S. foreign policy. (1)

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In real terms, taking into account the effects of inflation, international affairs resources proposed for next year are2.6%more than for FY2001 (Figure 1). While higher than any year between FY1995 and FY1998, the FY2002 proposalwouldfall 4.8% and 2.8% short of FYs1999 and 2000, respectively. (2)

Although the overall size of foreign policy resources would grow in FY2002, most of the increase is concentrated in thearea of State Department operations, with much smaller growth projected for foreign assistance programs andreductionssought for export promotion activities. Congress approves the bulk of international affairs resources in twoappropriationbills: Foreign Operations, which includes foreign aid and export programs, and Commerce, Justice, StateDepartments,which finances diplomatic, international organization payments, and educational exchange activities. (3) As seen in Table 1,Foreign

Operations would receive an increase of 1.9%, in nominal terms, while State Department programs, funded intheDepartments of Commerce, Justice, and State appropriations, would grow by about 14%.

Table 1. Foreign Policy Budget by Major Appropriation Components (discretionary budget authority in millions of dollars)

a FY2000 includes $1 billion for Plan Colombia counternarcotics initiative.

Source: Department of State.

Export Promotion Funding Issues

Two trade promotion programs - the Export-Import Bank and the Overseas Private Investment Corporation (OPIC) - arescheduled for reductions in FY2002, representing the only policy-based budget cut within the International Affairsaccount. The 25% reduced appropriation for the Export-Import Bank is the result of lower lending risks assumed for FY2002plus aneffort to concentrate Bank support on American exporters who cannot access private financing. OPIC, accordingtoAdministration estimates, will have sufficient unspent resources from prior years to continue operations at currentlevelswithout the need for new appropriations in FY2002. Both Eximbank and OPIC have been the target in recent yearsof somecongressional critics who believe that these export promotion activities generally benefit only a few, wealthybusinessesand represent the equivalent of "corporate welfare." Pro-business activists, however, are likely to challenge thebudgetrecommendation, arguing that export subsidies are necessary for American firms to compete with foreign-backedtradesubsidies. (4)

Foreign Aid Funding Issues

Funding for nearly all foreign aid programs are included in annual Foreign Operations spending bills for which the BushAdministration seeks a 4% nominal increase (after adjusting for export promotion programs). Major programs andpotential issues for Congress contained in this sector of the foreign policy budget include:

Multilateral Development Bank (MDB) contributions. The FY2002 budget proposes $1.21 billionfor U.S. payments to the World Bank and other regional MDBs, a 5.8% increase over current levels. This amountwill fullyfund all U.S. scheduled contributions for next year, but it will not include resources to clear any of the approximate$450million American arrears owed to the Global Environment Fund, the Inter-American Development Bank'sMultilateralInvestment Fund, the Asian Development Fund, and other institutions.

Bilateral development assistance. Congress funds development aid activities, aimed at reducingpoverty, improving health care and education, protecting the environment, and promoting good governance indevelopingnations, through two primary Foreign Operations accounts: Child Survival and Diseases and DevelopmentAssistance. Combined, these accounts would grow by $73 million, or 3.2% in nominal terms. But over two-thirds of theincrease willfund two priorities: HIV/AIDS (+$30 million) and basic education (+$20 million) The request for HIV/AIDS, anareawhere resources doubled in FY2001, increases resources by 10% to $330 million in FY2002. Most otherdevelopment aidprogram sectors will remain at approximate current levels. Population aid will receive the same $425 millionallocation asin FY2001, but remains a highly controversial issue due to President Bush's decision to re-impose restrictions oninternational family planning. (5) The Bush Administration is also proposingto reorient U.S. development aid strategiesaround three "spheres of emphasis" - Global Health, Economic Growth and Agriculture, and Conflict PreventionandDevelopment Relief. USAID will also introduce a Global Development Alliance, an initiative designed to forgeapublic/private partnership, with about $160 million in USAID resources, to promote a leverage sound developmentprograms.

Debt reduction and the Heavily Indebted Poor Country (HIPC) initiative. Although the FY2002request cuts by nearly half - to $224 million - FY2001 spending on HIPC debt reduction, the proposal will fulfillallcurrent U.S. commitments to the multi-year HIPC initiative. Nevertheless, some debt relief proponents continueto pressthe United States and other major creditors to enhance and accelerate HIPC terms, actions which would requireadditionalresources.

Counternarcotics activities. The largest foreign aid increase sought by the Bush Administrationwould supplement and broaden the $1 billion Colombia counternarcotics program funded in FY2000 with a new$731million Andean regional initiative. The objective is to address drug production and trafficking problems that may havemigrated from Colombia to surrounding states. It further differs from the FY2000 initiative by providing morefunding foralternative development programs.

Security assistance. Strategic-oriented economic assistance, provided through the Economic SupportFund (ESF), non-proliferation, and military assistance accounts are heavily concentrated in the Middle East, asituation thatwill continue in FY2002. Military aid for Israel will grow by $60 million, but overall security assistance to Egyptand Israelwill decline by $100 million as part of a ten-year plan to reduce aid to these two countries. Nevertheless, Israel andEgyptwill remain the largest recipients of American aid, with amounts totaling about $2.76 billion and $1.96 billion,respectively. Due to the net aid cuts for Israel and Egypt, plus a small increase overall for security assistance, ESF and militaryaid wouldgain about $230 million in FY2002 that could be allocated for new members of NATO and selected recipients inLatinAmerica and Asia.

State Department Funding Issues

Secretary of State Colin Powell told the House International Relations Committee on March 15, "If we think it's importantfor our fighting men in the Pentagon to go into battle with the best weapons and equipment and tools we can givethem,then we owe the same thing to the wonderful men and women of the Foreign Service, the Civil Service, and theForeignService Nationals, who are in the front line of combat in this new world." The FY2002 budget places specialemphasis onfour aspects of State Department operations.

Personnel. The FY2002 budget request would provide a 17% increase in State'sDiplomatic andConsular Affairs account which provides for salaries and expenses of the Department's personnel. This increaseisintended to"reinvigorate" a Foreign and Civil Service that has failed to attract or retain the "best and the brightest"in recentyears. State Department officials assert that the agency currently has a shortfall of about 1,100 people. TheAdministrationis proposing a multi-year program (for which the FY2002 budget request would provide an initial tranche) to fillthe currentgap in personnel, enhance retention and training, and provide for a float allowing personnel to take leaves of absencefortraining, without leaving a position empty. Initially, the State Department seeks to hire 360 personnel (both inForeign andCivil Service), 186 security professionals, and some FSN replacements. This hiring, according to State Departmentbudgetofficials, would be separate from filling positions due to attrition.

Information technology. In recent years, State Department technology acquisition has not kept pacewith its needs and with technology advancements. This condition was exacerbated by the October 1999 merger ofthe U.S.Information Agency (USIA)-an agency whose mission includes providing information and outreach to foreignpublics-intothe Department of State where classified communication and information is required. The Capital Investment Fund(CIF),established by the Foreign Relations Authorization Act of FY1994/95 ( P.L. 103-236 ), provides funding for theDepartment's information technology and capital equipment. As recently as FY1997 the CIF appropriation was$24.6million but grew by FY2000 to $96 million. The Bush Administration is requesting $250 million to connect StateDepartment offices worldwide with classified local area network (LAN) capabilities as well as providing everydesktopwith unclassified internet capabilities.

Security. Since the August 1998 bombing of two U.S. embassies in Africa, State has made personneland information security a top priority. The Administration is requesting $1.3 billion, an increase of 22% over theFY2001enacted $1.07 billion. Of the total security request, $665 million would be for construction of secure embassies,$211million for the continuation of perimeter security program, and $424 million for an ongoing security readinessprogram. State is requesting security funding within the Diplomatic and Consular Programs account, as well as the EmbassySecurityConstruction and Maintenance account.

Embassy Infrastructure. The Bush Administration's FY2002 budget includes $60 million foroverseas infrastructure needs, such as replacing obsolete equipment, aging motor vehicles, and improvingmaintenancearound the embassies. State Department officials say these needs have been underfunded and have accumulatedover theyears.