Economy forces Obama to rein in foreign-aid goals

The Obama administration is hinting that the economic downturn means the president is unlikely to reach his goal of doubling foreign aid by the end of his four-year term.

The retreat from the ambitious pledge is raising concerns both about the perception of the United States abroad as well as the potential adverse effect on development and global health. The US has increased funding in recent years for international campaigns targeting HIV/AIDS, malaria, and other diseases – part of a broader increase in global health spending that has brought impressive results, particularly in some African countries. The worry is that the upward trend may now be reversed.

Some development experts note that the president's 2010 budget includes an almost 10 percent jump in foreign aid – an increase they consider positive given the economic circumstances. Yet with a significantly worse economic and budgetary picture than anticipated, the White House Office of Management and Budget speaks of "extending out" the goal of doubling foreign aid – presumably into what officials envision as a second term for the president.

Though the development community reacted "pretty positively," says Steve Radelet of the Center for Global Development in Washington, "there's still a wait-and-see attitude."

The idea of doubling foreign aid to $50 billion a year by 2012 was a key element of President Obama's campaign pledge both to revamp the way America works with the world – particularly with developing countries – and to improve America's image abroad.

Critics often note that America spends relatively little of its gross national income (GNI) on foreign aid: 0.16 percent. Norway, by contrast, spends 0.95 percent of its GNI on foreign aid, according to the Organization for Economic Cooperation and Development in Paris.

Some in the development community say the recession presents the right moment to reform the US foreign-assistance system into something more up-to-date and efficient. But questions remain about whether Congress will go for what the president is proposing and where any additional money will be spent.

The Congress question may have got murkier Friday when the Congressional Budget Office (CBO) released figures forecasting a record $1.8 trillion budget deficit in 2009 and an only slightly lower deficit of $1.4 trillion in 2010. The CBO's figures are sure to embolden Republicans and Democrats who have criticized increases in Mr. Obama's proposed budget.

Congress did recently approve a record $900 million for the Global Fund to Fight AIDS, Tuberculosis, and Malaria, the highest annual US contribution since the international fund was established in 2002. But Global Fund officials say they will watch the 2010 contributions closely for signs of any affect on donations.

"We are all aware of the severity of the global economic crisis and the strain it is putting on budgets and economies," says Christoph Benn of the Global Fund in Geneva.

He remains hopeful. When they were senators, the current president, vice president, and secretary of State all signed letters supporting a significant increase in the American contribution to the Global Fund.

The current global environment would be a particularly bad time for the US to scale back foreign assistance, says Mr. Radelet.

"Whether it's justified or not, whether we like it or not, people believe the US caused this economic crisis," he says. "If poor people around the world believe they are suffering because of the US, and then we cut back our aid, it would really weaken our image and hurt our leadership position globally."

Yet Radelet and others say this moment calls for more than just more spending. This is a good time to overhaul America's foreign-aid program and to deliver more bang for the buck. "There's also a growing view that we can do better and spend the money we do have much more efficiently," says Radelet, who is also co-chair of the Modernizing Foreign Assistance Network, or MFAN.

The coalition of more than 150 development experts, military officers, nonprofit organizations, and business leaders is calling for a major overhaul of the US foreign-aid system to meet 21st century needs.

"The approach we use today comes out of the Foreign Assistance Act of 1961, which was a very different time presenting us with a very different set of issues," Radelet says.

Even the Pentagon under Defense Secretary Robert Gates' guidance is calling on the State Department and other civilian powers to take back the foreign-policy and development functions that over the years have been ceded to the Defense Department. Obama is signaling his support for this notion with a hefty increase in his proposed State Department budget.

Reorganizing, streamlining, and even eliminating some of the 21 agencies involved in foreign assistance will be part of any reform. But finding agencies willing to give up their piece of foreign-aid turf is likely to be the hard part.