State's 'swagger' will be a Limp if OMB's Rescission Goes Through
By Dan Runde | AUGUST 22, 2018
The Trump administration may pay a high and long-term geostrategic price for a short-term budget “win” for the Office of Management and Budget (OMB).
The OMB reportedly wants to carry out a major “rescission” of foreign assistance funding “duly appropriated” in Fiscal Year 17 and Fiscal Year 18, forcing the return of up to $4 billion in foreign assistance to the Treasury. The OMB might just get away with it this time – it tried and failed to do something similar in June – because it tactically plans to submit these plans so late in the fiscal year that it will make it difficult for Congress to act. Despite significant likely pushback from Congress, the rescission could still happen because of this maneuvering.
It is not in anyone’s interest for this to go forward, least of all the administration. The OMB may be able to get this rescission done this one time, but Congress will find ways in the future to close the loophole the OMB is using. Congress could then take a number of very strong steps to reduce the Trump administration’s -- and future administrations’ -- ability to use our soft power in ways that back up executive branch national security and foreign policy priorities.
The United States spends foreign assistance across a diverse set of countries, that often includes challenging environments where we are much better off administering foreign assistance programs than sending in American troops. As a result, Congress gives aid agencies up to two years to obligate most money. Under the Budget Control and Impoundment Act, the administration is generally required to obligate and spend Congressionally appropriated money, with the exception that if the administration submits to Congress a proposal to rescind (i.e. cancel) the funding, it can essentially put the process on hold for 45 days, ostensibly to give Congress time to consider the proposal.
In this case, by submitting the proposal so late in the fiscal year, the 45-day period will push some funding past its expiration date, effectively killing that funding even absent Congressional approval to do so. In other words, if Congress does not act quickly, the monies revert back to the U.S. Treasury on September 30.
At its core, this is an ideological decision driven by the OMB, which has signaled its views on foreign assistance via two proposed budgets that included 30 percent cuts to foreign assistance, both of which were rejected by Congress. In FY18 and FY19, Congress very clearly said that foreign assistance is of strategic importance to the United States and 30 percent cuts would have disastrous consequences for U.S. foreign policy.
The reality is the OMB will not balance the budget by rescinding $1 billion to $4 billion in foreign assistance. $4 billion would be a disaster for our very small soft power budget; and yet, it represents but a drop in the broader federal budget bucket, which stood at nearly $4 trillion in 2017. It makes no sense from a budget cutting standpoint. Yet, for U.S. foreign assistance, even $1 billion is a significant cut and would make it difficult for the United States to implement programs that help keep America safe, strengthen our partnerships abroad, and counter the rise of strategic competitors.
There are three additional reasons why the Trump administration should not go forward with these rescissions.
First, this will further reduce Congress’ trust in the administration and will have long-term effects on the rest of the Trump administration’s time in office. Both Democratic and Republican Congressional appropriation staffers will remember this, and will include directives further limiting the Trump administration from accomplishing its objectives. Congress recently added directives to the foreign assistance budget totaling around $1 billion in the FY18 because of fears that the administration would simply re-direct appropriated funds away from programs that Congress felt were achieving significant impact.
The Trump administration is clearly moved by the rise of China: if we are to compete, we will need money to back up our plans for places like Africa. We have a new partnership with Japan, an Indo-Pacific region strategy, and recently expressed interest for international cooperation with North Korea. The Trump administration will need financial resources to implement these strategies and partnerships. A rescission will hamper them from accomplishing their agenda.
Second, rescinding this money means we have far less ability to respond to the China challenge and to get countries off the foreign aid dole. The Development Assistance and Economic Support Funds are the accounts that the U.S. uses for supporting allies, countering terrorists and the sorts of programs that help create economically functioning democratic countries – ones that do not need foreign aid. As we have less of those accounts, China will fill the void.
Third, and most importantly, the rescission may well impact larger Executive-Congressional relations, including defense spending negotiations and confirmations of Presidentially appointed positions which have already threatened to be held up. We currently have dozens if not hundreds of key positions yet to be filled.
The OMB attempted a $15B rescission package in June and – with the help of several Republican Senators – it went nowhere. Trying this again could easily impact continued support for the Trump administration’s defense budget increases — which were embraced in Congress only after difficult negotiations over raising the spending caps imposed by the Budget Control Act of 2012. The current agreements on domestic and defense spending with Democrats and Republicans in the Senate end in 13 months.
The Constitution guarantees Congress the power of the purse; that is being disregarded by the OMB through its timing of this rescission request. Congress can and should take steps to counter this approach by, for example, including language in the upcoming Continuing Resolution extending the availability of any funding threatened by the proposal.
It is not in anyone’s interest to enact a rescission: it will lower trust with Congress with long-term consequences. It will hamper the ability of the Trump administration to respond to strategic challenges. It will limit the administration’s ability to spend “soft power” money, and it will bleed into other negotiations, including large increases to defense spending starting in 2020.
Secretary Pompeo talked about bringing back the State Department “swagger” in his inaugural speech – if this OMB rescission goes through, Secretary Pompeo’s swagger will be more like a limp.
Daniel Runde is a Senior Vice President and William A. Schreyer Chair in Global Analysis at the Center for Strategic and International Studies. He previously worked for the U.S. Agency for International Development, the World Bank Group, and in investment banking, with experience in Africa, Asia, Europe, Latin America, and the Middle East.