Money Talks: The Implications of U.S. Budget Priorities

According to a recent report by the Council on Foreign Relations, “[T]he average American believes we spend 18% of the federal budget on foreign affairs, while thinking we should spend only 6%. In reality, foreign affairs spending, the bully pulpit of America’s strength overseas, is now only 1% of the federal budget–a little more than one penny of every federal tax dollar.” 1

This argument has been the centerpiece of Secretary of State Madeleine Albright’s campaign for more funds for international activities. “That 1%,” she argues, “may well determine 50% of the history that is written about the era.” But although the secretary’s cause is a good one, her argument is profoundly misleading, for it excludes the bulk of U.S. international spending–the military budget. Americans basically have it about right when the military is included. The U.S. spends about 17% of its total budget on national security and international activities, with the military consuming 94% of the total sum.

Indeed, the military captures almost one-half of the entire federal discretionary budget–money for everything the government does from the FBI to Head Start, excluding only mandatory spending, primarily interest on the national debt and entitlements like Social Security and Medicare. 2

Facts, Ronald Reagan once said, are inconvenient things. And numbers are easy to distort. But looking at how the U.S. spends its money on international and national security affairs gives a good sense of our priorities–what we invest in and what we choose to neglect, and what the implications are for U.S. foreign policy.

In FY 1999, the United States spent over $276 billion on its military. 3 This figure includes outlays of the Pentagon and the Department of Energy nuclear weapons programs plus more than $27 billion spent on the intelligence agencies–about half on tactical military intelligence and half for intelligence agencies, including the Central Intelligence Agency (CIA) and the National Security Agency. With this budget, the Pentagon fields a military force without rival in the world. It sustains over 1.4 million men and women in active duty plus another 870,000 in the reserves. Standing forces include 10 active Army divisions, three Marine divisions, 13 active and seven reserve Air Force fighter wings, and 12 aircraft carrier battle groups (11 active), plus around 7,200 deployed nuclear warheads capable of being launched from the ground affixed to MX and Minuteman missiles, by sea from Trident submarines, and by air from B-52 and B-2 bombers. The Pentagon has basically completed its post-cold war drawdown and, with minor reductions, plans to sustain this force structure indefinitely. 4 The Pentagon budget also includes over 770,000 civilian employees, almost 40% of total executive branch civilian personnel.

The $276 billion does not include the cost of military pensions or the Veteran’s Administration–another $43 billion in FY 1999–nor the military’s share of the national debt, a good portion of which was amassed either in active wars or in the massive Reagan military buildup in the 1980s. Loan guarantees offered by the Defense Department to promote arms sales are also an obligation not included in that national security figures.

When you think of big government, this is it. The military establishment issues over half of all government paychecks. It makes about two-thirds of government purchases of goods and services. It sponsors 53% of all government research and development. 5 It is the nation’s second largest health care insurer and provider and the largest day care provider. It runs the world’s largest educational enterprise. It manages over 5,000 properties on lands with a total land area about the size of the State of Ohio. 6 Outside of China, it is without rival as the world’s largest bureaucracy.

It is also without question the largest source of waste, fraud, and abuse in the federal government. It employs over 40,000 accountants and budget analysts to manage over 250 accounting systems. In 1998, the General Accounting Office reported that the Pentagon was unable to account for $250 billion of more than $1.2 trillion worth of property, equipment, inventory and supplies. 7 Yet, it continues to disperse billions of dollars without records of what it is purchasing. As conservative Republican Senator Charles Grassley has said: “We have financial chaos in the Pentagon. We have meaningless accounting numbers . . . We have meaningless cost estimates.” 8 The Pentagon also provides the pork, or pet projects, that both conservatives and liberals can love. Senator John McCain estimates that $5 billion in pork-barrel special interest projects–primarily weapons or construction projects that the Pentagon did not ask for–were larded into the FY1999 defense budget.

Each year, the General Accounting Office (GAO) publishes reports on what it calls “at risk” agencies, where mismanagement raises the risk of waste, fraud, and abuse. In 1999, the GAO reports that after “decades of neglect,” the Pentagon has a financial management system that:

is unable to properly account for billions of dollars in assets … is unable to make sound resource decisions … consistently pays more and takes longer to develop [weapons] systems that do not perform as anticipated … continues to make erroneous, fraudulent and improper payments to contractors … [and whose] inventory management system is ineffective and inefficient. 9

The GAO’s auditors could not match about $22 billion in signed checks, $9 billion in supplies and material could not be located, and contractors received $19 million in overpayments. Defense Week summarized: “[T]he Pentagon doesn’t know what it can send to troops, can’t avoid buying more of something that the military already owns, and can’t tell how much its programs actually cost.” 10

Congress not only condones this endemic waste, it adds to it. It has blocked additional rounds of base closings that Defense Secretary Cohen estimates might save $2-3 billion per year. It happily supports, without question, the Pentagon’s grossly inflated estimates of readiness, weapons, and force needs. Between 1994, when Republicans took control of Congress, and mid-1999, it has added a total of $30 billion to the Pentagon’s own requests. Despite the “financial chaos,” the Pentagon does not hesitate to demand more money, which the Republican Congress and the Democratic president rush to provide.

Meeting the Threat of Peace

Not surprisingly, with the end of the cold war and the collapse of the Soviet Union, military spending began to wane–both in real (inflation adjusted) dollars, as a percentage of the budget, and as a percentage of the overall economy (or gross national product–GNP). But the cuts have been remarkably limited given the Soviet breakup: 1999 allocations, adjust

However, because the economy has been growing, the relative burden of sustaining this military establishment is less than in the decades of the cold war. As advocates of more military spending like to point out, we now spend a smaller percentage of our budget and our GNP on the military than at any time since before World War II. The bipartisan budget agreement forged by President Clinton and the Republican Congress projected that military spending (in inflation-adjusted dollars) would continue to decline slowly through the year 2002. In response, both the president and Congress have pledged to increase spending in both nominal and real dollars. 12

That we can more easily afford this level of military spending does not address the question of whether we should support it–whether we need to spend this amount–nor does it consider what we forego at home and abroad in order to devote such resources to the military.

In reality, Washington is spending far more on its military than is needed for defense. Alone, the U.S. accounts for about one-third of the world’s military expenditures and more than all other NATO allies combined. (See Figure 2-3: U.S., Allies & Potential Enemies Defense Expenditures) We spend over three times as much as the most exaggerated estimate of Russian spending, over four times that of China. Indeed, with our allies and friends, we account for about three-fourths of global military spending. Eight of the world’s ten largest military budgets are those of our allies. 13

Moreover, the decline in U.S. military spending is often exaggerated. In dollar terms, the cutbacks have essentially succeeded in reversing the Reagan buildup, which doubled the military budget in the early 1980s–the largest peacetime military buildup in recorded history. In 1999, in constant dollars, the U.S. will spend more on its military than it did during the cold war under Richard Nixon and Gerald Ford and about as much as it did under Jimmy Carter in 1980 before Reagan was elected. 14

No threat or potential threat justifies this spending. During the cold war, often exaggerated estimates of Soviet and Chinese military spending and arms buildups were used to conjure up readiness scares and justify large military expenditures. 15 Today, there is no such external justification. The United States, as former Chair of the Joint Chiefs of Staff Colin Powell noted in 1991, is “running out of demons. I’m down to Fidel Castro and Kim Il Sung.” 16 The Soviet Union is no more. The Russian military is literally disintegrating. We are threatened far more by Russia’s weakness–its fear of disintegration, its peddling of weapons and knowledge in desperation–than by its strength. The Chinese, for all the brouhaha about their buildup, spend an estimated $40-65 billion on their military. 17 They lack a modern air force, a blue water navy, and any semblance of modern communications. Russia and China together account for about 15% of global military spending. 18

The so-called “rogue nations” that the Pentagon identifies as potential adversaries–Iran, Iraq, Sudan, Libya, Syria, Cuba, North Korea–collectively spend about $15 billion on their militaries each year, under 2% of global spending. All of these relatively small countries lack a modern industrial base, cannot produce advanced weapons, are in economic crisis, and have been cutting spending on their militaries in past years.

Diplomacy Starved

In sharp contrast to its military spending, the U.S. devotes comparatively few dollars to foreign diplomacy, international assistance, and support for international institutions. The total net outlays in FY 1999 will be around $15 billion, less than 1% of the $1.66 trillion federal budget. 19 This budget pays for the vast majority of the U.S. civilian role abroad. It includes 150 different account funds, ranging from food aid to the State Department’s antiterrorism programs to the U.S. contributions to multilateral financial institutions like the World Bank and its affiliated regional banks. Major items include the State Department, with its worldwide infrastructure of embassies, missions, consulates, and an overseas staff of more than 35,000. Also included are the Agency for International Development (AID) and bilateral assistance programs, the United States Information Agency (USIA) and a range of activities called “public diplomacy,” the Commerce Department’s trade offices, as well as the Peace Corps and other humanitarian programs. The funding encompasses assistance to the Newly Independent States (once part of the Soviet Union), U.S. non-military aid commitments to Bosnia, security aid to Israel and the Middle East, and support for the Export-Import Bank and the Overseas Private Investment Corporation. 20 (The figure does not include the $14.5 billion U.S. quota increase for the International Monetary Fund (IMF) nor the $3.4 billion credit commitment to the IMF’s New Arrangements to Borrow program, still pending before Congress. IMF appropriations are considered monetary exchanges–with the IMF providing the U.S. with Special Drawing Rights–and thus are not considered budget outlays.) 21

Secretary Albright is surely right to suggest that this total is shamefully inadequate. The U.S. is the world’s wealthiest nation–and its largest scofflaw. As of mid-1999, our debt to the United Nations totals over $1.6 billion in back dues, and we owe more than $600 million to the international financial institutions (including the Global Environmental Facility). The U.S. provides less of its wealth to support the impoverished abroad than any other industrial country. U.S. spends less than one tenth of 1% of its GDP on official development assistance, and about the same amount on other aid related activities (including peacekeeping). The Organization for Economic Cooperation’s Development’s Development Assistance Committee (DAC) average is about four times as much or four-tenths of 1%. (And the official target of the United Nations is that donors provide seven-tenths of 1% in aid.)

Note: The high-income members of the Organization for Economic Co-operation and Development (OECD) are the main (though not only) source of external finance for developing countries. These members form the Development Assistance Committee (DAC). The DAC exists to help its member countries coordinate their development assistance and to encourage the expansion and improve the effectiveness of the aggregate resources made available to developing and transition economies. In this capacity DAC monitors the flow of all financial resources, but its main concern is official development assistance (ODA). DAC has three criteria for ODA: It is undertaken by the official sector. It promotes economic development or welfare as a main objective. It is provided on concessional terms, with a grant element of at least 25 percent on loans.

Despite having by far the world’s largest economy, the U.S. is no longer the world’s largest aid provider. Economically troubled Japan provides more aid in absolute dollar terms, giving $9 billion in 1997; the U.S., Germany and France each provided around $6.5 billion. These numbers are falling rapidly: since 1995 aid from these four countries has dropped 6% in real dollars and total DAC support has dropped 18%.

Moreover, U.S. spending on international affairs when measured in constant dollars has been declining steadily since 1980. From 1992 through 1998, funding dropped an average of about 6% annually. Under the projected balanced budget agreements, international affairs funding is slated to be cut another 13% by 2002, and U.S. overseas development assistance could drop to about one-tenth of the global total. By 2002, international affairs spending will be about half of its 1980-95 average in constant 1997 dollars and at its lowest level since 1955. 22

At a time of dramatically increasing U.S. investment, trade, travel, communications, and exchanges abroad, the State Department has been forced to close diplomatic missions and AID programs, to delay building consulates in the new states forming from the former Soviet Union and Yugoslavia, and to postpone expansion in China as provinces open up. Under President Clinton, the State Department has cut more than 2000 employees, closed more than 30 embassies and consulates, and deferred long-overdue modernization of computers and communications, to say nothing–as noted after the bombings in Tanzania and Kenya–of recommended security improvements. Foreign assistance programs have fallen 30% since 1991 in constant dollars.

Of the funding that does exist, a striking portion is consumed by security or military concerns and commitments. From 1992 to 1998, fully one-third of international affairs spending was devoted to supporting international security and peacekeeping activities, including security assistance to Egypt and Israel and U.N. peacekeeping operations. 23 Foreign military financing programs–grants, loans, and loan guarantees to foreign governments to purchase U.S. military weapons–continue to be the single largest component of security assistance contained in the international affairs budget.

Similarly, our bilateral assistance programs are skewed toward security concerns rather than economic, development, and social needs. Support for Egypt and Israel consumes 82% of all security-related costs and almost 25% of all international affairs spending. Assistance to Bosnia, following the commitment of U.S. troops, is the single largest program of U.S. aid in Eastern Europe and the former Soviet Union. “Hot spots”–such as Somalia, Bosnia and Haiti–attract significant portions of a declining pool of money, with AID shifting funds from ongoing programs to meet demands essentially generated by military commitments. The anomaly is apparent: Israel, with a per capita GDP of over $12,000, receives over $3 billion in bilateral assistance each year, while all of sub-Saharan Africa, with a per capita GDP of under $500, receives a total of about $165 million. 24

Even the State Department’s budget reflects similar priorities: funding will swell in the wake of events like the bombings of the U.S. embassies in Kenya and Tanzania, but the increased funding will largely be devoted to fortifications, rather than to modernizing communications, increasing political reporting, or adding consulates to help handle the burgeoning traffic of tourists and business people.

Only about 30% of the total FY 1999 budget of $22.5 billion for international affairs actually goes to bilateral assistance programs, the foreign aid that is routinely criticized as excessive and wasteful. Of the total $7.3 billion dollars requested in FY 1999 for the U.S. Agency for International Development (AID), about $867 million went to Food for Peace programs, $1.4 billion for aid to East Europe and the Newly Independent States (formerly the Soviet Union), $205 million for International Disaster Assistance, and $3.8 billion for programs included in such funding categories as Child Survival and Disease, Development Assistance, and Economic Support Funds. The remainder is allocated for AID operating expenses. 25

Were Washington to match the aid level of our allies, significant additional resources would be available for international assistance. If the U.S. spent, as our allies average, 0.4% of its GDP on overseas development aid, it would quadruple its outlays from $6.8 billion to over $27 billion per year. If it invested as generously as Sweden does–nine-tenths of 1% of GDP–U.S. aid would rise to about $76 billion a year.

Implications: The Globocop

Whenever any politician speaks on the U.S. role in the world–whether conservative or liberal, interventionist or isolationist–one phrase recurs like a ritual mantra: “Of course, the U.S. cannot police the world.” We are the “indispensable nation,” Secretary Albright trumpets, but we can’t “police the world.” Pentagon staffers routinely referred to General John Shalikashvili, the now-retired chair of the Joint Chiefs, as “globocop,” even while President Clinton proclaimed, “We cannot and should not try to be the world’s policeman.” 26 The president’s incantation pays tribute to public sentiment, for poll after poll shows that large majorities of Americans oppose the notion of the U.S. policing the globe, but the general’s sobriquet is closer to the truth.

Pentagon planners say that U.S. force structure is determined primarily by the self-assigned mission of being ready to fight two regional conflicts at the same time–without allies and on opposite sides of the world–with North Korea and Iraq as the central examples. (See Sidebar 2-1: Military Strategy) But we fought only three major wars throughout the cold war, and we face North Korea and Iraq–the designated adversaries for Pentagon planning–with the support of allies. North Korea now has difficulty feeding its troops. Iraqi military strength was decimated in the Gulf War and after, and U.S. air patrols erased one-fifth of the Iraqi air defense system in early 1999 without anyone paying much attention. The two-war mission–an inconceivable response to an implausible threat–is used to justify a force still girded for the cold war, laden with the tanks, heavy armor divisions, nuclear warheads, and baroque weaponry designed for another age. No wonder Pentagon analyst Franklin Spinney has described this strategy as a “marketing device for a high Pentagon budget.” 27

The two-war theory–confirmed and reconfirmed in official mission and enshrined in Pentagon planning–is perhaps an understatement of the Pentagon’s actual role of a permanent world police force. In day-to-day operations, the U.S. military spans the world. The scope of its activity is staggering. The Pentagon maintains 100,000 troops in Asia (primarily in Japan and South Korea) and another 100,000 in Europe, with the capacity to reinforce them immediately. The troops in Asia, the administration has now announced, will stay even if the two Koreas unite. The Pentagon sustains 15,000 troops in rotating station in the Persian Gulf, a direct contradiction to the pledge made by President George Bush before the war that no U.S. forces would stay in the region. The Pentagon also rotates over 50,000 active-duty and reserve personnel through Latin America every year. 28

And the forces permanently deployed abroad are but a small portion of the U.S. presence. The United States, as Secretary of Defense William Cohen reported in his 1999 annual report to Congress, is “the only nation in the world able to project overwhelming military power worldwide.” 29 He further stated, it is the “only country in the world that can organize effective military responses to large-scale regional threats” while “participating in smaller-scale contingencies and dealing with asymmetric threats like terrorism.” 30

The Defense Secretary says the U.S. is committed to the “unilateral use of military power” to do “whatever it takes to defend” vital interests. Vital interests, he reports, include not simply defense of the United States but also “preventing the emergence of hostile regional coalitions or hegemons, ensuring uninhibited access to key markets, energy supplies and strategic resources, deterring . . . aggression against U.S. allies and friends,” and “ensuring freedom of the seas, airways and space.” The writ extends to every continent and every ocean. 31

The annual reports of the various military branches give some indication of the pace and scope of the U.S. effort to police the globe. The Secretary of the Army reports that in 1997 the Army averaged 31,000 active and reserve soldiers deployed in over 70 countries, not counting those in Europe and Asia. In May 1997, worldwide deployments reached the 100-country mark for the first time in history. 32

The Secretary of the Navy reports that each day of the year more than 50,000 sailors and Marines and over 100 ships are deployed around the world. Naval forces provide “near continuous presence in four major regions–the Mediterranean Sea, the Arabian Gulf/Indian Ocean, the Western Pacific and the Caribbean.” Naval carrier battle groups also police sea lanes, with what the Department of Defense (DOD) calls “operational assertions” challenging other nations’ claims to territorial seas. In FY 1997, these operations challenged the claims of over 20 countries from Albania to Yemen. 33

The Air Force secretary reports that its total force is designed to protect people and facilities “anywhere in the world.” A snapshot of its actions include continued sorties over Bosnia; Operation Southern Watch and Northern Watch over Iraq; counterdrug operations in South America; disaster relief in North Dakota and Minnesota, Italy and Indonesia; evacuations of civilians in Cambodia, Albania, and former Zaire; support for West African states; Cuban Flotilla operations; medical evacuation of the President of Ghana; and support for Kurdish refugees, as well as 20 exercises with 25 Partnership for Peace countries in Europe, including CENRAZBAT 97, a combined exercise with forces from the United States, Kazakhstan, Uzbekistan, Kyrgyzstan, Russia, and Turkey. 34

The arms of U.S. training reach far beyond these Air Force joint exercises. In 1998, the DOD contributed to the training of over 8,000 foreign military members from about 100 countries through the International Military Education and Training (IMET) program. 35

In addition, more than a dozen intelligence agencies maintain “plumbing in place”–a network of agents and assets that spans the globe, particularly in less developed nations–as well as managing covert actions large and small focused on varying targets across the world. Given that the intelligence agencies failed to predict either the collapse of the Soviet Union or the Indian nuclear tests, complaints about the quality of their intelligence are well founded. But our commitment to surveillance is unparalleled: the U.S. spends more on its intelligence budget alone–over $27 billion in 1999–than all but five countries in the world spend on their entire military establishments.

The U.S. is engaged militarily across the world every day, in areas most Americans can’t find on the map. As former Senator Richard Russell once said, “[T]he more ability we have to go someplace to do something, the more likely it is that we will go there and do it.” America’s military currently has both the ability and the fiat to go anywhere and to do almost anything.

President Clinton came to office at the end of the cold war, the first baby-boom president, a product of the anti-Vietnam War sentiment, and a skeptic of U.S. intervention. Yet, in his administration alone, in a time of relative peace and prosperity, U.S. forces have been engaged in more strikes and interventions–Somalia, Haiti, Bosnia, Kosovo, Iraq, Afghanistan, and Sudan–than most presidents would have dared at the height of the cold war. In fact, by March 1999 when NATO air strikes against Yugoslavia began, Clinton had notified Congress 46 times that he was deploring U.S. troops abroad to face “imminent hostilities,” as required by the 1973 War Powers Act.. In contrast, President Ford notified Congress that he was sending troops only four times, Carter once, Reagan fourteen, and Bush just seven times.

This behavior reflects the post cold war elite conceit–shared widely among national security managers and within the Pentagon–that the U.S. is, as Secretary Albright puts it, the “indispensable nation.” Whatever sentiment existed for giving the Europeans more responsibility for policing Europe ended with their failure in Bosnia. The U.S. chose to expand NATO’s membership and mission and to reassert its role as commander of NATO forces rather than dismantle that structure at the end of the cold war. In Asia, as well, the 1998 face-off against China in the Taiwan Straits was graphic demonstration of an increasing U.S. commitment to global policing. In Latin America, the U.S. military has expanded its drug interdiction roles, revived its arms sales and training programs, lifted the ban on the sale of high-tech weaponry, and increased its police aid and training programs. The military complains that it is strained by the surging tempo of peacekeeping, peace enforcement, drug interdiction, and other missions, since it considers these as extra tasks beyond its existing commitment to be ready to fight two major regional conflicts at once.

Although most Americans oppose the notion of the U.S. patrolling the world, and tend to be appalled when U.S. soldiers are slain in conflict in obscure nations, the interventionist temper of U.S. policy has support across partisan and ideological lines in establishment political and foreign policy circles. In the late 1990s, the Republican leadership in Congress insisted on more money for the military and criticized the Clinton administration for being too passive toward Iraq, North Korea, China, terrorists, and drug peddlers. Liberal human rights advocates criticized the administration for its ignominious withdrawal from Somalia, its failure to intervene against genocide in Rwanda, and its unwillingness to move earlier to stop the violence in Bosnia. Secretary Albright helped advance her career by publicizing her criticism of General Colin Powell for his caution regarding intervention–his Vietnam-grounded reluctance to send men into peacekeeping missions of indeterminate nature and indefinite duration. The gulf between popular and elite opinion often tempers the tactics of U.S. policy (prompting a reliance on high-tech weaponry rather than troops and placing an emphasis on avoiding casualties) but it has no effect on the tempo of routine, global policing.

The Privatization of U.S. Diplomacy

Given America’s global military presence and economic prowess, the impoverishment of U.S. public diplomacy and aid budgets has not greatly eroded Washington’s influence around the world. In essence, the U.S. has privatized its “soft powers.” 37 Corporate communications and computer capacity outstrip that of the State Department. Private economic data and reporting is often far more current than U.S. intelligence agency information. U.S. culture is spread less through cultural exchanges than through Big Macs and Hollywood movies.

Given the dearth of public assistance, needy countries are consigned to wooing private investment from private banks, corporations, and speculators. Most poor countries have meager natural resources, small internal markets, inadequately educated populations, rudimentary infrastructures, and suffer from political instability–limiting their commercial attractiveness. For the handful of developing countries that can entice external private investment, private capital flows–and private debts–far exceed pubic flows. (See Figure 3-3: Long-Term Financial Flows to Developing World, 1990-1998.) But burdened by debt and policed by the IMF and the World Bank, they must focus on exports to service their debts. U.S. public economic assistance merely reinforces the model. Thus, the great bulk of U.S.-backed resources are dispersed not in grants through the public assistance budget but in loans via the IMF (and to a lesser extent the World Bank and other international banks) at times of crisis, to reassure foreign investors by insuring that foreign debts are repaid. Washington’s assistance budget is dominated not by AID but by what has been labeled the Wall Street-Treasury Department complex.

With limited resources, bilateral assistance programs have increasingly either been subordinated to security concerns or provided as a carrot to spur export-led development models. As Benjamin Nelson of the General Accounting Office noted in the careful language of official reports, “AID appears to have established as a priority the importance of influencing domestic policy in the recipient countries.” 38 U.S. foreign aid is concerned less with serving basic needs in desperate countries than with cheerleading the market-based reforms that we export.

The starvation of U.S. diplomatic and aid budgets contributes to and reflects the U.S. default after the cold war regarding the development of innovative public aid programs and strong, multilateral institutions. Any hope that the United Nations might develop into a truly multinational peacekeeping force has been frustrated. Instead UN activities have been cribbed by the U.S. failure to pay its debts. 39

The harsh contrast between the treatment accorded Russia after the cold war and that provided Germany, Japan, and the European allies after World War II reflects the starvation of public aid commitments. Whereas Germany received assistance to rebuild, leeway to control its markets, and cash to revive employment, Russia–facing a far greater challenge–was bludgeoned into opening its markets and making the ruble convertible immediately. Assistance was limited, contingent, and parsimonious. Russia was treated more like Germany after World War I than Germany after World War II, and the devastating aftereffects reflect this treatment. The U.S. devoted about 2% of its annual GDP to the post-World War II Marshall Plan–far more than the entire U.S. aid and international affairs budget now consumes.

Similarly, both Grenada and Haiti–the two microstates where the U.S. directly intervened to change regimes–found that Washington was afterwards unwilling to supply the kind of public assistance needed to foster equitable development. Given Washington’s indifference, hopes for increased U.S. private investment evaporated. Honduras, El Salvador, Costa Rica, and Nicaragua were virtually abandoned once the frenzied focus of the cold war passed. Even after the region was wracked in 1998 by Hurricane Mitch in one of the worst natural disasters of the century, U.S. assistance was slow and limited. The president traveled through Africa to celebrate the emerging democracies there, but he could offer them little more than free advice: attract foreign investors. No wonder his agenda received a public rebuke from then-South African President Nelson Mandela, the one leader of sufficient global stature to speak candidly.

As the Asian financial crisis spread to Russia, Brazil, and elsewhere, the limits and perils of this strategy became clear. “America has wanted global leadership on the cheap,” Harvard economist Jeffrey Sachs, an architect of the U.S. policy in Russia argues, It was desperate for the developing world and post-communist economies to buy into its vision, in which globalization, private capital flows and Washington advice would overcome the obstacles to shared prosperity, so that pressures on the rich countries to do more for the poorer countries could be contained. In this way, the United States would not have to shell out real money to help the peaceful reconstruction of Russia or to ameliorate the desperate impoverishment and illness in Africa. 40

Sachs is surely right about the limits on U.S. aid. With an expanded budget for international affairs and aid, the U.S. might lead the way toward bolstering the UN and international peacekeeping capacity, enlisting the industrial nations in providing poor nations with debt relief, funding programs to eradicate unnecessary disease and hunger, redressing global warming, and relieving Russia of its misery. The effects would be both sweeping and vital in building a more prosperous and peaceful world.

But Sachs is wrong about the money. The U.S. is “shelling out real money” on foreign affairs–but it is being spent on military activity, not on diplomacy, institution building, or assistance. Again the contrast to the Marshall Plan and the end of World War II is instructive. Then, the U.S. demobilized and cut the military budget by 90% in three years, freeing up resources for a major commitment to the Marshall Plan. Ten years after the end of the cold war, the U.S. budget remains close to its average cold war level.

Domestic Investment Deficits

The cold war ended with the U.S. running massive deficits, largely the result of the lethal Reagan combination of cutting taxes while doubling the military budget during peacetime, from 1981 to 1984. With the collapse of the Soviet Union, there was widespread hope and a belief that reduced U.S. military spending would enable America to begin to make long-deferred domestic investments and to bring the budget into balance.

Deficit reduction took first priority, and the total discretionary budget–all of government except entitlements and interest on the debt–has been reduced both in real dollars and as a percentage of GDP since the early 1980s. But the emphasis on deficit reduction and the continued high levels of military spending have forestalled any major progress on the domestic

Robert Borosage is the Director of the campaign for America’s Future in Washington DC.