Is Foreign Aid Actually Effective?

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Foreign aid has lifted millions of people out of poverty and tremendously improved diplomatic relations around the world.

There seems to be a constant debate in the United States over our federal budget and what our leaders are doing to “fix it.” This polemic has only intensified during the Trump presidency, as he vehemently promises to cut government spending with his proposed budget. This marks what will be a defining moment in history, and it is important to understand where our tax dollars are really being used.

Aside from defense, healthcare, and education, one of the most talked-about spending areas is foreign aid. Right after World War II, the Marshall Plan and President Harry Truman’s Point Four Program kick-started the United States’ commitment to foreign aid and laid the foundation for our modern foreign assistance system. Foreign aid spending is a highly divisive issue that has continued to cut across party lines since these beginnings in the mid-1940s.

Proponents of U.S. aid spending argue that as a world leader, we have a responsibility to share our prosperity with countries still in the process of development. They claim that development, stimulated by foreign aid, will eventually benefit the entire world and therefore it is necessary to invest in foreign infrastructure, healthcare, and education. Those against foreign aid spending argue that it is ineffective – it causes these countries to become dependent on our money, and in turn, hinders development.

While both camps have their merits, the bottom line is that our actual spending on foreign aid is an extremely small part of our overall budget. This is part of a huge misconception among Americans today—a 2015 Kaiser Family Foundation poll found that the amount spent on foreign aid is grossly overestimated. On average, Americans think that foreign aid spending makes up 31%, or almost one-third, of our total federal budget. In reality, the United States spends a mere 1.3% of its budget on foreign aid – about $50 billion in 2015. Furthermore, this sum is not just given out in hard cash to foreign governments and NGOs. U.S. aid is doled out in numerous different forms:

• Cash transfers: grants used to balance budgets or ease debt to help re-direct domestic revenues
• Equipment and commodities: various goods from farm machines and weapons to food and medicine
• Economic infrastructure: help with public works projects such as roads, irrigation systems, and electric power facilities
• Training: instruction in domains including military know-how, technical skills, and the English language
• Expertise: expert advice given to governments and the private sector on policy reform
• Small grants: given to American or indigenous organizations to help further their own developmental missions

American foreign assistance is funded and executed by over 20 government agencies, with the majority of money used by the U.S. Agency for International Development (USAID) and the U.S. Department of State. While each government agency focuses on some specific aspect of international aid, trends point to four major categories of assistance in recent years. According to the Congressional Research Service, 38% of foreign aid spending in the 2015 fiscal year was dedicated to long-term development, 35% to military and security, 16% to humanitarian aid, and 11% to political aid. These four broad areas are officially divided into nine classifications and 52 precise sectors after that.