Debt, Deficit Reduction and International Affairs Spending

Yesterday, following months of negotiations, proposals that blew apart, and mounting anxiety over the state of the U.S. economy, lawmakers and the White House finally came together on a deal.  The budget package signed by President Obama allows the U.S. debt ceiling to rise, permits borrowing to meet the nation's obligations, places a down-payment of $917 billion on deficit reduction over ten years, creates a new Congressional Committee that is tasked with the job of proposing by November 23, 2011 additional deficit savings, and sets a deadline of December 23 for Congress to pass a reduction package of at least $1.2 trillion.

The challenges for maintaining progress, especially over the past decade, on saving lives, helping grow the economies of developing nations and lifting millions of people out of poverty, efforts that promote American values and national security, are daunting.  After facing a nearly 10% cut in FY2011, the non-war portion of the International Affairs budget would fall by another 12% if levels proposed by the House Appropriations Committee are adopted for FY2012.  The budget deal signed yesterday makes the latter more probable and may even result in further cuts below the House plan.

What does this mean for International Affairs spending and resources for global poverty programs?  The deficit reduction legislation establishes discretionary spending caps (the amount appropriated by Congress) for each year through FY2021.  In FY2012 and FY2013, there are separate caps for Security and non-Security programs.  International Affairs falls within the $684 billion Security cap along with Defense, Homeland Security, and Veterans Affairs.  The cap for FY2012 is about $4.5 billion less than current spending for these agencies.  More problematic, however, is that the House, to varying degrees, has already acted on appropriation bills for all funding included in the Security cap, action that sets spending at about $694 billion, or $10 billion more than permitted under the cap. 

Now, the House Appropriations Committee will need to go back and revise its earlier allocations.  While there is no certainty how the reductions will be distributed, there has already been strong concern voiced by a number of lawmakers about not jeopardizing defense resources.  That's not good news for International Affairs, an account that has already been slashed by the House Subcommittee by 12% (for non-war programs) with disproportional cuts applied to global development activities.  Another disproportional reduction to International Affairs within the Security cap would be crippling to many poverty fighting priority programs, including global health and Feed the Future.

The Senate, which has barely started the appropriation process, will also divide up the $684 billion Security cap and negotiate with the House this fall over final funding levels for FY2012.  The resource constraints are enormous and going head-to-head with Defense spending is not position that favors International Affairs. 

And the situation could get worse in FY2013.  The Security cap grows by only $2 billion (0.3%) so that whatever the outcome in FY2012, there is virtually no opportunity for gaining back any of the losses.  Beyond FY2013, the Security/non-Security caps are removed with a single discretionary spending cap for all Federal activities, broadening the competition within a shrinking budget.

What happens if Congress does not enact the additional $1.2 trillion reduction package in December?  If lawmakers and the President are unable to agree on further spending cuts and/or revenue enhancements that total $1.2 trillion, it will trigger a sequestration, or an across-the-board cut in spending of whatever amount less than $1.2 trillion has been achieved in this second stage.  Consequently, International Affairs and all other budget elements, with a few exceptions, will face another round of cuts with caps reduced further over the next nine years.  Defense resources will absorb 50% of the across-the-board cuts, a strong incentive for Congress to reach agreement in December.