Argument: We should not be borrowing to fund foreign aid

As a fiscal conservative, Governor Mitt Romney believes that Americans and the United States economy will be better off cutting foreign aid expenses. In an October 2011 Republican primary debate, Romney passionately defended the GOP stance of questioning humanitarian assistance and foreign aid. He said, “I happen to think it doesn’t make a lot of sense for us to borrow money from the Chinese to go give to another country for humanitarian aid . . . . We ought to get the Chinese to take care of the people that are taking that borrowed money.” [1] This was a reference to the size of the deficit; currently Obama’s projected deficit for 2012 is $1.33 trillion [2] and much of that is borrowed from other countries and China has most holding $1.164 trillion as of June. [3] Romney’s campaign often compares President Barack Obama’s policies to those of Europe. He criticizes the Obama administration’s foreign assistance efforts as largely squandered by a fragmented Washington bureaucracy.

[1] ‘Full Transcript CNN Western Republican Presidential Debate’, CNN, 18 October 2011.

[2] ‘ Budget Overview’, Office of Management and Budget, 2012.

[3] Capaccio, Tony, and Kruger, Daniel, ‘China’s U.S. Debt Holdings Aren’t Threat, Pentagon Says’, Bloomberg, 11 September 2012.

Candidate 1: "Yes trade can help lift people out of poverty. But in order to do so there needs to be the right conditions; there needs to be infrastructure, an educated and healthy population, and of course the country must be able to feed itself. No country is going to be able to trade its way to growth if its goods cannot reach international markets. Freer trade has not obviously been a driver of growth; poverty has fallen while the Doha round of trade liberalisation has got nowhere. [1] Instead the policies that have succeeded for China have been mercantilist policies, China may rely on trade to export its goods but it succeeded in creating its manufacturing capacity because of currency manipulation and government subsidies, things that anyone for free trade would be against. [2]

[1] Chandy, Laurence, and Gertz, Geoffrey, ‘With Little Notice, Globalization Reduced Poverty’, YaleGlobal, 5 July 2011.

[2] Prestowitz, Clyde, ‘China’s not breaking the rules. It’s playing a different game.’, Foreign Policy, 17 February 2012."
Candidate 2: "The Obama administration accepts the need to maintain these global public goods. Secretary of State Hillary Clinton has written “Strategically, maintaining peace and security across the Asia-Pacific is increasingly crucial to global progress, whether through defending freedom of navigation in the South China Sea, countering the proliferation efforts of North Korea, or ensuring transparency in the military activities of the region's key players.” [1] However it is wrong to maintain that this should be considered as a part of foreign aid instead the U.S. maintains the global commons because it gains most out of them, the U.S. military is the biggest beneficiary of freedom of navigation and of the maintenance of space as a global commons as they allow the military’s global reach to be maintained. [2]

The United States may not be legally obligated to provide foreign aid and international development efforts but there are moral obligations as President Kennedy recognised when creating USAID: "There is no escaping our obligations: our moral obligations as a wise leader and good neighbor in the interdependent community of free nations – our economic obligations as the wealthiest people in a world of largely poor people, as a nation no longer dependent upon the loans from abroad that once helped us develop our own economy – and our political obligations as the single largest counter to the adversaries of freedom." [3] Today this is just as true as it was then; the United States is still one of the richest states on earth. Moreover there is an international target of 0.7% of GDP being spent overseas development assistance which the United States has signed up to and has been repeatedly re-endorsed since it was first adopted in 1970. [4]

[1] Clinton, Hillary, ‘America’s Pacific Century’, Foreign Policy, November 2011.

[2] Denmark, Abraham M., ‘Managing the Global Commons’, Washington Quarterly, 30 June 2010.

[3] Kennedy, John F., ’90 – Special Message to the Congress on Foreign Aid.’, The American Presidency Project, 22 March 1961.

[4] ‘The 0.7% ODA/GNI target – a history’, OSCE."
Candidate 3: "Foreign aid is a minute part of the US budget as Obama has correctly argued “[it is wrong to] suggest that we can somehow close our entire deficit by eliminating things like foreign aid, even though foreign aid makes up about 1% of our entire budget.” [1] So very little of the money the US is borrowing is being spent on foreign aid.

It is also wrong to assert that the US government debt is borrowing money from China as most government borrowing comes from the US private sector. [2] China owns a mere 9.3% of US government debt with the majority being owed either to US individuals and institutions (41.7%) or to the Social Security Trust Fund (17.1%). [3]

[1] Geiger, Jacob, ‘Barak Obama says foreign aid makes up 1 percent of U.S. budget’, Tampa Bay Times, 13 April 2011.

[2] Krugman, Paul, ‘Fear-of-China Syndrome’, The New York Times, 30 August 2012.

[3] ‘Who Owns U.S. Debt’, RealClearPolicy, 2 April 2012."

Foreign aid is a minute part of the US budget as Obama has correctly argued “[it is wrong to] suggest that we can somehow close our entire deficit by eliminating things like foreign aid, even though foreign aid makes up about 1% of our entire budget.” [1] So very little of the money the US is borrowing is being spent on foreign aid.

It is also wrong to assert that the US government debt is borrowing money from China as most government borrowing comes from the US private sector. [2] China owns a mere 9.3% of US government debt with the majority being owed either to US individuals and institutions (41.7%) or to the Social Security Trust Fund (17.1%). [3]

[1] Geiger, Jacob, ‘Barak Obama says foreign aid makes up 1 percent of U.S. budget’, Tampa Bay Times, 13 April 2011.

[2] Krugman, Paul, ‘Fear-of-China Syndrome’, The New York Times, 30 August 2012.

[3] ‘Who Owns U.S. Debt’, RealClearPolicy, 2 April 2012.
