What a Deal! Cut Foreign Aid

THE GLOBAL ECONOMY

FOREIGN aid may be the most unpopular item in the United States budget. Of Washington's trillion-plus dollars of expenditures each year, none seems to provoke more grumbling than the $15 billion spent on overseas aid programs. It may be too late to improve or streamline these programs; Americans may prefer to do away with them altogether. They have some good arguments on their side.Our political and military rivalry with the Soviet Union is over at last. We no longer have to defend third-world allies against Soviet-inspired subversion, nor do we need any more to purchase or rent their allegiance. And the hard fact is that the money is now badly needed at home. Although we are easily the richest nation in the history of the planet, the US economy is on the skids. Federal, state, and local budgets are hemorrhaging red ink. It may be true that foreign aid accounts for only one-third of 1 percent of US national output, but every dime counts when times are tough. We should understand as well that our aid dollars no longer matter all that much. Once the source of some 60 percent of the world's economic assistance to poor countries, the US now provides only a fraction - about 15 percent - of the total. So even if all our aid dollars were being put to good use - and many surely are not - our cutting back will not make that much of a difference. But kicking the foreign aid habit will not be easy. Every major aid program has strong advocates. The US farm lobby will resist cuts in the $1 billion annual allocation for "Food for Peace." Former volunteers are united against decreases in the Peace Corps budget. US arms exporters will oppose reductions in foreign military financing. The hardest item to cut may be the annual $5 billion the US provides to Israel and Egypt. With this support - about one-third of the entire US aid budget - the US continues to reward these countries for agreeing to peace at Camp David. But after 15 years, the time has come for Israel and Egypt to start covering their own defense and economic needs, and the Middle East may be settling down in any event. Cutting this aid would avoid any inflated expectations about new US aid flows to the Middle East if cur rent peace talks succeed. Unfortunately, terminating US support for the United Nations and other international institutions would come at an inopportune time: These organizations have recently gained new effectiveness and are contributing significantly to world peace and economic advance. Washington could pledge to restore assistance just as soon as our own economy revives. Meanwhile, we should do all we can to encourage better-off countries to take up the slack. CLOSING down the US Export-Import Bank, which extends trade credits to foreign purchasers of US products, will cost American sales and profits in the short run. But robust and entrepreneurial, US banks can be counted on quickly to fill the gap. Halting US assistance for refugees - Kurds, Salvadorans, Ethiopians, Palestinians, and Vietnamese, for instance - may seem mean-spirited. But it is at least consoling that the amounts we provide are not very large to begin with, less than $25 per refugee per year. A cutback in aid to countries in Latin America, Africa, and Eastern Europe may risk frustrating their aspirations to build democratic rule and market economies. However, free markets and democracy may now be solid enough in most places to stand on their own. If not, history suggests these countries will almost surely get another shot at freedom and growth sometime. Cutting foreign aid would also seem to limit our ability to confront the dangers of economic, political, and social collapse in the formerly Soviet republics, and with it the perils of nuclear proliferation. But surely the almost $300 billion we spend each year on defense should better protect us against that threat than $1 to 3 billion of economic aid. When it comes down to it, Americans - by nature generous - will find it difficult to cut out economic aid to poor countries and poor people. But the rewards would be substantial. Our federal deficit would decline by as much as 5 percent. Or alternatively, the savings could be returned to the taxpayers. Each American would get $60 in exchange for abdicating world leadership.

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