US Foreign Aid Faces the Axe – What's at Stake for Microfinance?

> Posted by Jennifer Maurer, RESULTS
How much of the US federal budget do you think goes to foreign aid, including microfinance and microenterprise? If you think around 25 percent, you wouldn’t be alone — that’s the median estimate from the most recent poll. The poll also asked how much Americans thought would be “appropriate” to spend on foreign aid; the median response was 10 percent. But how much do we actually spend? Just 1 percent. This is consistent with numerous polls over the years. Americans grossly overestimate what we spend overseas on development and diplomacy.
Yet the House of Representatives continues to attack the foreign aid budget in an attempt to cut the national deficit. Michael Gerson — Washington Post columnist and former policy advisor to President George W. Bush — called the attacks on the international affairs budgets “both irrelevant and destructive.” It’s irrelevant because cutting funding from less than 1 percent of the budget is not going to make a dent in our national deficit. Instead, the attempt creates a distraction from the real, difficult decisions that have to be made.”
These cuts would be destructive because the programs are saving lives and building stable countries.
It’s rare that one agency will call for increased funding for another, but that’s exactly what Defense Secretary Robert Gates has repeatedly done. “Development is a lot cheaper than sending soldiers,” he said to the US Global Leadership Council. “Having invested an enormous amount of money, we are now arguing about a tiny amount of money to build the peace.” In a letter to the Senate, Gates explained why we should invest in development even where there isn’t conflict: “In other parts of the world, the work performed by diplomatic and development professionals helps build the foundation for more stable, democratic and prosperous societies. These are places where the potential for conflict can be minimized, if not completely avoided, by State and USAID programs – thereby lowering the likely need for deployment of US military assets.” Some Members of Congress also remind their colleagues why cuts to foreign aid are penny wise and pound foolish. Sen. Lindsey Graham (R-SC) recently said, “Stay ahead of them (Al Qaeda and other terrorists), not with 100,000 troops all the time, but by partnering with people who will live in peace with us. The worst nightmare for Al Qaeda is to come into a community that feels supported and has hope.”
Nevertheless, the threat of draconian cuts to foreign assistance looms. The United States is now operating under a continuing resolution that funds the government through April 8. There are no cuts to foreign aid — yet. It’s very likely that we will see attempts to slash foreign aid during the next round of negotiations to finalize the FY 2011 budget. Simultaneously, Congress is also starting to negotiate the FY 2012 budget, where we can probably expect more attempts to cut foreign aid.
Cuts to the foreign aid budget in FY 2011 and FY 2012 may very well include cuts to microfinance and microenterprise funding. In his FY 2012 budget request to Congress, the president requested $155.5 million for microenterprise.  Both the Obama and Bush administrations typically request substantially less for microenterprise than Congress appropriates. The final FY 2010 budget included $265 million. Although Congress has protected microfinance and microenterprise in the past, this year members will face extraordinary pressures to cut every program. Yet the program enjoys bipartisan support, so with continued efforts, funding may still be protected.
To learn more about the budget process and to stay updated on what steps you can take to ensure effective foreign aid programs, including microfinance and microenterprise programs, please click here.
Image credit: Simon A. Eugster