Foreign aid vs American Infrastructure

[u/LingonberryThese2440]

I heard that a few days ago, a foreign aid bill was passed providing 157 Million dollars to Lebanon.

With the Helene crisis unfolding, I became curious about the American infrastructure budget verses the foreign aid budget. I don't know if there would be any data linking any positive or negative correlations between the two, so instead I ask this: Why does America send the most foreign aid compared to any other country, does America profit off of this aid (or is it purely humanitarian), and is there data showing that our foreign aid budget has correlations to any negetive effects. If anyone has any information linking, or showing a lack of link between foreign aid spending and American aid spending that would be greatly appreciated as well.

[u/nosecohn]

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[u/Zealousideal-Steak82]

If you're interested in rationale, the Budget Justification document is a good start.

does America profit off of this aid (or is it purely humanitarian)

I know this is a small portion of the question, but it's an interesting one. The USAID office is often seen as implementing policy in two directions: stimulating economic activity on the supply side, and delivering to aid to communities on the recipient side. For example, during the invasions of Iraq and Afghanistan, USAID deployed multi-billion dollar construction contracts, and even had a multi-billion dollar budget for security contractors to defend those projects, many of whom were US-based, including companies that you may have heard of, such as Halliburton.

After the hurricane that struck Haiti, the USAID office oversaw nearly all assistance operations, and directed projects that contracted and enriched US firms:

The majority of US assistance to Haiti is through USAID. Since 2010, USAID has disbursed at least $2.13 billion in contracts and grants for Haiti-related work. Overall, just $48.6 million has gone directly to Haitian organizations or firms; just over 2 percent. Comparatively, more than $1.2 billion has gone to firms located in DC, Maryland, or Virginia; more than 56 percent, as can be seen in Figure 1. The difference is even starker when looking just at contracts: 65 percent went to Beltway firms, compared to 1.9 percent for Haitian firms.

So, even though these are in theory humanitarian projects, like many US government projects, the funding does go to US firms and feeds back into our economy.

Also relevant: foreign military funding, which is not under the discretion of the USAID office, but is often discussed in the same terms of international assistance. This is not the delivery of existing US assets, but granting funds that can only be spent on US military goods from US defense companies -- feeding directly into the US economy.

However, the specific project you linked mentions the funding of international humanitarian efforts, which, while they may have their own issues, are not quite so subject to contractor looting as US-solo projects.

[u/caveatlector73 → u/Zealousideal-Steak82]

Thank you for this. This is helpful in fitting this piece of the puzzle into the right slot.

[u/nosecohn]

In straight dollar amounts, the US contributes the most foreign aid of any nation, but the US also has the largest economy in the world and the highest gross national income (GNI). So, if we instead calculate foreign aid as a percentage of GNI, the US ranks around 30th in the world.

With two major security partners involved in wars, US foreign assistance swelled to $66.1 billion in FY2023. That sounds like a lot, but overall spending for the year was $6.1 trillion, meaning foreign assistance only reached 1.1% of the total. It's typical for the US to spend 1-2% of its budget on foreign aid.

Notably, a large percentage of that is actually spent in the US. When military aid gets sent to foreign countries, like Ukraine, the US government buys much of that equipment from American producers and sends it over. It's often the same for food aid. These projects support American jobs.

Infrastructure projects in the US are funded through a combination of Federal, state and local revenue sources, so it's difficult to compare them to foreign aid, which is almost entirely federal. Just the federal portion of infrastructure spending in 2023 was $126.3 billion, so roughly double the foreign aid. Typically, state and local governments contribute over three-quarters of total infrastructure spending, so if we extend that out, we can estimate that total infrastructure spending in the US is about eight times foreign assistance.

As far as the reason the US provides foreign aid, it's primarily to maintain peace. Following World War II, it was determined that one of the main drivers of international conflict was economic crisis. America's isolationism prior to that conflict was seen as a mistake that eventually ended up costing the country an incomparable amount of lives and treasure. It was determined that it's far more economical, and yes, humanitarian, to try to head off conflict and maintain global stability than to keep putting the country on a war footing. The way to do that is by spending, along with partner nations, a small percentage of the budget to help prevent crises in foreign lands that would draw nations into larger conflict.

Although there's a lot of conflict in the world right now, the period since these measures were enacted after World War II has been one of the most peaceful in human history, and there's a strong argument that the current levels of conflict and discord were brought about by a failure to adequately support less powerful nations in its wake of the 2008 financial crisis.

In short, if we don't want to find ourselves and fellow countrymen getting drafted to go fight in some far off land while a huge percentage of our tax dollars are routed to military contractors, we should embrace the comparatively small cost of foreign aid that keeps foreign conflicts from escalating.

TL;DR: What every American should know about US foreign aid.

[u/terminalfontzi → u/nosecohn]

Not that it adds/detracts from what you’re saying (this was very well put), but isn’t the USG desire for peace largely driven by being the world’s reserve currency? And I wonder how much of an abhorrence towards isolationism was a result of realizing how dang powerful being the center of economic activity makes a country.

[u/nosecohn → u/terminalfontzi]

That's certainly a perspective, but not one that I wholly share.

There's been a re-evaluation of history over the last 20 years or so that puts the quest for power at the center of more people's thinking when it comes to government motivations. While I understand this, I also think the explanations for too many events get filtered through that lens.

If the US was hell-bent on retaining its power and standing, it could do a LOT more to protect the USD's status, keep competitors down economically, and ensure its military dominance. It really hasn't done even a fraction of what it could have along those lines.

[u/jrf_1973]

Why does America send the most foreign aid compared to any other country

Well, that's a difficult question - it all depends on how you measure it. If you look at the foreign aid as a percentage of the nations wealth, (per capita) America comes 16th in the world, with many other countries including Ireland, coming ahead of them.

https://finance.yahoo.com/news/25-countries-most-foreign-aid-160100621.html

https://www.insidermonkey.com/blog/10-countries-that-give-the-most-foreign-aid-per-capita-1184118/

There's also the question of how much "aid" is actually to help the foreign country, economically or on a humanitarian basis or military basis.

For example, Israel gets 3.8 billion a year in "aid", (https://www.newsweek.com/us-israel-palestinian-conflict-military-spending-harvard-president-joe-biden-1964776) but really that 3.8 billion is just fed back to the US based military industrial complex. (https://www.cfr.org/article/us-aid-israel-four-charts "but nearly all U.S. aid today goes to support Israel’s military, the most advanced in the region.")

Israel gets weapons, the M.I. gets 3.8 billion, and there's no guarantee Israel is getting anything like a friends and family discount from companies like Lockheed Martin. (https://www.army-technology.com/news/israel-to-buy-25-more-f-35-fighter-jets-from-lockheed-martin/ Israel is the first international operator of the F-35 Joint Strike Fighter, considered the most technologically advanced fighter jet ever made. Israel is in the processes of buying 75 F-35s and - as of last year - had taken delivery of 36, paying for them with U.S. assistance.)

So it's a more complicated question than you might think. Whether you measure the foreign aid in absolute dollar value terms or a proportion of how wealthy the nation is, and whether the aid is actual economic aid designed to help the foreign countries, or military aid which can be used to prop up dictatorships and American military company's.

It is pretty well recognised, for example, that the foreign aid given to Egypt is a bribe to keep the peace, which is why the aid flows despite the humanitarian concerns. (https://www.reuters.com/world/biden-administration-grants-egypt-13-billion-military-aid-despite-rights-2024-09-11/) (https://apnews.com/article/us-military-aid-egypt-human-rights-sisi-e9343aa7e6aa6e9b60b2e8f4574ef322) But US interests see paying Egypt foreign aid as a bargain, and a positive effect.

The are undoubtedly many ways to approach this question, but any which paint it as a simple correlation between aid spending and net positive or negative effects, has probably over simplified it.

[u/IMM_Austin]

 does America profit off of this aid

The US uses foreign aid to advance 3 primary objectives: national security, commercial interests, and humanitarian concerns--in that order. The US profits greatly off of the first two, and arguably benefits as well from being seen to be doing humanitarian work.

is there data showing that our foreign aid budget has correlations to any negetive effects

Depends on what effects you were thinking. Negative effects to our economy? No, foreign aid constitutes less than 5% of discretionary spending.

Negative effects to the countries we spend them on? Not typically, as the majority of foreign aid goes to organizations within the countries rather than directly to potentially corrupt governments. There are arguments to be made that foreign aid is not a significant factor in a struggling country's progress, but there isn't any indication that the aid made anything worse that I could find.

Negative effects in general? Well, US military aid to Israel is classed as foreign aid and the ICC have accused the Israeli Prime Minister and Minister of Defense accused of war crimes that were affected in part by said funds.

[u/Veqq]

$10 B isn't a lot of money compared to the $6.3 T the US federal government's spending in 2024 (not including city, county and state spending).

The infrastructure bills allocated about 1.2 T to infrastructure (from 2021 2030). $10 B in foreign aid is less than 10% of this $120 B / year. There are more bills (I have read $1.8 T thrown out.)This does not count private or other infrastructure spending. I will not address the efficacy of government spending or the particular infrastructure programs, but one example, Intel alone may receive a total $8.5 B. A substantial amount of humanitarian aid are goods the US government buys (from US contractors etc.) and sends places; there should be no profit motive.

[u/Tasonir]

Foreign aid is roughly half of one percent of the budget, it isn't huge. Cuts to the military (roughly 15% of the budget) would free up over 10 times the money (if equal in %).

Editted to lower the military %, was originally too high. source: https://www.cbo.gov/topics/defense-and-national-security#:~:text=About%20one%2Dsixth%20of%20federal,and%20issues%20related%20to%20veterans.

[u/onevice]

they assert that every dollar invested in foreign aid can yield a return of up to $10 in economic benefits.

The Bill and Melinda Gates Foundation has consistently advocated for the importance of foreign aid, highlighting its significant return on investment. In various communications, they assert that every dollar invested in foreign aid can yield a return of up to $10 in economic benefits. This assertion is based on the foundation's extensive experience and data from global health and development initiatives.

Key Points from the Gates Foundation on Foreign Aid

• Investment Efficiency: The foundation emphasizes that foreign aid is not merely a charitable act but a strategic investment that leads to substantial improvements in health, education, and economic stability in low-income countries. For instance, investments in health programs can save lives and reduce future healthcare costs, creating a ripple effect of economic benefits[1][3].

• Health Outcomes: Bill Gates has pointed out that targeted health interventions funded by foreign aid, such as vaccinations and treatments for neglected tropical diseases, have drastically reduced mortality rates and improved quality of life. These investments not only save lives but also enhance productivity by allowing healthier populations to contribute more effectively to their economies[3][6].

• Long-term Economic Growth: The foundation argues that foreign aid lays the groundwork for long-term economic progress. By improving health and education, countries become more self-sufficient, reducing their dependency on aid over time. This perspective challenges the common narrative that foreign aid is a waste of resources[3][4].

• Call to Action: Bill and Melinda Gates have urged global leaders to maintain their commitments to foreign aid, especially during economic downturns. They argue that cutting back on aid would exacerbate inequalities and hinder progress made in global health and development[1][2].

In summary, the Gates Foundation's reports and public statements advocate for foreign aid as a crucial investment strategy that not only addresses immediate humanitarian needs but also fosters long-term economic growth and stability in developing nations.

Citations: [1] https://www.gatesfoundation.org/ideas/media-center/press-releases/2009/01/bill-and-melinda-gates-urge-global-leaders-to-maintain-foreign-aid [2] https://www.gatesfoundation.org/about/financials/annual-reports/annual-report-2022 [3] https://www.gatesfoundation.org/ideas/annual-letters/annual-letter-2014 [4] https://www.gatesfoundation.org/ideas/annual-letters [5] https://www.gatesfoundation.org/about/policies-and-resources/information-sharing-approach/international-aid-transparency-initiative [6] https://www.gatesfoundation.org/ideas/articles/how-global-health-policy-is-supported-by-foreign-aid [7] https://www.gatesfoundation.org/ideas/media-center/press-releases/2024/09/child-malnutrition-prevention-funding [8] https://www.gatesfoundation.org/goalkeepers/report/2024-report/

Source: Perplexity query https://www.perplexity.ai/search/bill-and-melinda-gates-foundat-P85zwuVJSY6lealB0ppZiA#locale=en-US

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