In the spring of 1993, Under Secretary of State for Political Affairs Peter Tarnoff explained to a group of reporters that America's quiescent approach to the war in Bosnia would exemplify U.S. foreign policy in the post--Cold War era because "we certainly don't have the money" to tackle many international crises. These remarks were later disavowed by Clinton administration spokesmen, but Tarnoff had done nothing more than voice the conventional wisdom established as soon as the Cold War ended. Most often it is said that the United States no longer has the resources that it once devoted to foreign policy. But how can this be? America is the richest country the world has ever known, and its resources have been expanding.

There is no resource problem; there is a budget problem based on the American public's failure to reconcile its aversion to taxes with its appetite for benefits. Opinion polls consistently show that Americans prefer Republicans on taxes (to keep them low) and Democrats on benefits (to keep them high). Of course, Americans would rather not admit that federal budget woes arise from greed; better to blame generosity. Thus polls show that when Americans are asked to estimate the share of the budget devoted to foreign aid, the median response is 15 percent. When they are asked to suggest a proper amount, the median is 5 percent. There is a method in this madness: if foreign aid did consume 15 percent and was cut to 5, that would mean cutting the budget by 10 percent, which for now would almost bring it into balance.

Unfortunately, the share actually spent on U.S. foreign aid amounts to less than one percent; zeroing it out would scarcely dent the deficit. Indeed, the elimination of all spending related to foreign policy, even including the entire defense budget, would not balance the U.S. budget for long--not, that is, if entitlement spending continues on its recent trajectory.


The problem will reach new proportions as the baby boom generation becomes eligible for Social Security and Medicare, starting in 15 years. The Bipartisan Commission on Entitlement and Tax Reform, chaired by Senators Robert Kerrey (D-Neb.) and John Danforth (R-Mo.), calculated that by 2012 spending on entitlements and interest on the debt combined will exceed federal revenues. Some dissenters say that forecast, despite its use of official budget projections, is overly optimistic. It was made before the new Republican majority in Congress, breaking a taboo, began trying to restrain the growth rate of Medicare, Medicaid, and welfare. It was also, however, before the Republican majority began cutting taxes.

The effect of the explosion in entitlements can be readily seen from the historical tables of outlays that accompany the president's fiscal year 1996 budget, which used fiscal year 1962, the first budget year of the Kennedy administration, as a base line. Discretionary spending then made up about two thirds of the budget. Today it makes up about one third. Entitlements, which then were about a quarter of expenditures, today are about half. Interest paid on the debt has grown to about 15 percent annually from about 6 percent.

Among entitlements, the share devoted to means-tested programs--that is, those aimed at the poor--has grown the fastest, more than tripling in this 30-plus year span, while the share spent on Social Security and other entitlements that are not means-tested has almost doubled. This may help explain the clamor for welfare reform. But despite the different growth rates, non-means-tested entitlements--that is, benefits that go mostly to the middle class--are still more than three times as large a share of entitlements as spending on means-tested ones.

That shows where the budget dollars have ended up. But where have they been flowing from? The shrinkage in the discretionary share of the budget pie has come entirely at the expense of foreign policy. Foreign policy spending--defense, foreign aid, diplomacy, and other international programs--used to dwarf domestic discretionary spending, but today it is just barely larger. Its share of the budget has fallen by more than half since 1962. Domestic discretionary spending, in contrast, has ebbed and flowed during this period. Its share climbed during the Kennedy-Johnson and Nixon-Ford years, plateaued under Carter, fell under Reagan, and crept upward under Bush. In real terms, domestic discretionary spending is now somewhat higher than it was in 1962, although the Clinton budget calls for decreases in the years ahead.

The trend of diminishing spending on foreign policy has accelerated since the end of the Cold War. Foreign policy spending absorbed about 10 percent of GDP during the Kennedy years, about 7 percent during the Reagan years, and 4.5 percent in 1994.ffi In 1995 it was scheduled to drop to 4.2 percent and in 1996 to 3.8 percent, with further decreases as far as the projections reach. Since 1989, the year the Soviet empire dissolved, foreign policy spending as a share of GDP has fallen by more than a third. Defense spending in the first five budget years after the Cold War was $350 billion below the amount projected in the last of the Cold War budgets.

That was the peace dividend, and a whopping one it was. But it came and went virtually unnoticed, sucked into the great maw of entitlements. Further foreign policy cuts are coming. Although criticizing Clinton's defense cuts, the Republican majority has not restored defense spending. It would merely hold defense spending steady, without even matching inflation. At the same time, Republicans in Congress propose to cut the nonmilitary side of foreign policy--diplomacy, foreign aid, broadcasting, and support for international organizations--by one third in nominal dollars, far more once inflation takes its bite. None of these cuts, however, will solve the long-term budget problem. That can only be solved through significant cuts in entitlements, especially those that are not means-tested.


While further cuts in foreign policy accounts will not solve the budget problems, they may greatly damage the instruments of American statesmanship. For example, the same week that Russian Prime Minister Viktor Chernomyrdin took himself out of the running for president, thus increasing the chances that extreme nationalists or unrepentant communists will take power in Moscow, the U.S. Senate voted to cut the already shrunken budget of Radio Free Europe/Radio Liberty so deeply that their operations would be crippled and might have to shut down entirely. In countries such as the Czech Republic and Poland, where democratic institutions continue to gain strength, RFE broadcasting has been superseded by domestic news services. In other parts of the former Soviet empire, most importantly Russia itself, a free press is far from established and democracy and freedom hang in the balance. Governments still own most of the media there and often try to control the content of news, while much of the independent media is still learning Western standards of journalistic objectivity. Nonetheless, since the Cold War ended, RFE/RL's budget has dropped by two thirds, to $75 million from $225 million, hardly enough to maintain operations suited to the new geopolitical realities. If the Senate's position withstands the current fiscal year's baroque appropriations process, the $75 million would be cut to $29 million.

Likewise, although the president and congressional leaders have for several years agreed on the value of creating a Radio Free Asia to encourage liberalization in China, Indochina, and North Korea, that project has withered on the vine for want of the $25 million it would take to launch it. The broadcasting of Voice of America, whose raison d'être, unlike that of RRE/RL, was not drastically affected by the end of the Cold War, has also absorbed sharp budget cuts, forcing it to curtail news gathering, reduce its airtime, and eliminate some language services. Even high-priority targets of the post--Cold War era, such as the Islamic world, have felt the effect of the budget ax. The U.S. Information Agency has had to eliminate nearly 900 positions, or about ten percent of its personnel, in the last three years, and another ten percent will be cut this year. The State Department and the National Endowment for Democracy have also been slashed.

The State Department was forced to close 22 of some 275 foreign posts from 1992 through 1994 and schedule 19 more for closing since then, although a few of them have so far been spared. Some of those closed have been in pivotal countries such as Egypt, Turkey, Mexico, Thailand, Nigeria, Venezuela, Brazil, and Indonesia. Moreover, the United States has fallen about $1.25 billion behind on its U.N. obligations, an amount that constituted more than half of the unpaid obligations of all U.N. members as of the end of 1995. One hardly needs to be an admirer of the United Nations to believe that it is foolish for the United States, the world's richest and most powerful country, to appear a piker.

The lion's share of foreign policy spending goes to defense. This, too, is being shortchanged. In the last Reagan years, defense spending began to fall. The reductions were accelerated during the early years of the Bush administration and again when the Soviet Union collapsed. As a presidential candidate, Bill Clinton promised further defense reductions of $60 billion over five years. Once in office, however, Clinton opted for a cut of $120 billion. After the Republican congressional election victory of 1994 and the airing of worries about the readiness of U.S. forces, Clinton proposed to restore $25 billion, although the bulk of that was penciled in for the years 1999 and 2000, for which the figures are notional.

While concerns about military readiness have received the most publicity, the drastic economies in the defense budget have been in modernization, the procurement of new weapons and equipment. Procurement has received a diminished share of a diminished defense budget. William Kaufman of the Brookings Institution calculates that while 27 cents out of each defense dollar has gone to procurement in the past, under Clinton that number has fallen to 17 cents. This has been possible because the services have been living off the large inventories stockpiled during the Reagan military buildup. But knowledgeable observers from across the political spectrum agree that the reserve of materiel is now largely exhausted and procurement will have to rise sharply. Under Secretary of Defense Walter Slocombe says that the U.S. military needs to be "recapitalized." But with the total defense budget not projected to increase in real terms, where will the money come from? Procurement accounts can only grow through offsetting reductions in force size (already reduced by a third), compensation (which is essential to an all-volunteer force), readiness, or research and development.

Stopping the shriveling of the military and peaceful instruments of U.S. foreign policy will probably mean devoting about four to five percent of GDP to them. This, of course, is a lot of money in absolute terms, but it is modest compared with what the United States spent during the Cold War. Throughout the 1950s and 1960s America spent about ten percent of its GDP on foreign policy, and for much of that time it did so without deficits. For example, during the 11-year span from 1947 through 1957 the country ran a cumulative budget surplus of about $14 billion. The America that made such large sacrifices was much poorer than it is today. The standard of living, measured in constant dollars of per capita income, was about half of what it is now, and the difference showed in various indicators of social well-being. Although Americans worry greatly about education and medical care today, citizens on average now receive several more years of schooling and live several years longer.


The argument for relentless reductions in foreign policy spending centers on three rationales: economic health, policy priorities, and global politics. All are fallacious. The argument that America risks decline through excessive defense spending is still heard, although it makes even less economic sense than it did during the height of the Reagan buildup, when it first gained credence. America is 15 to 20 percent better off in per capita income than the next richest countries, so even spending 7 percent of its income on foreign policy, as it did under Reagan, would leave its per capita income 10 to 15 percent ahead of that of Japan or Germany, whose economies seem to awe so many. That is a margin that the United States could consume or invest, as it saw fit.

Whether the funds spent on defense, foreign aid, or other programs are wasted is subject to political judgment, but there is no reason to believe that foreign policy spending is harmful to the economy. There is no correlation between the economic growth rates of nations and their foreign policy expenditures. The Republic of China, for example, boasts the greatest run of economic growth ever recorded, and it is doing so while laboring under a heavy defense burden. More to the point is the U.S. experience. The quarter century from 1948 to 1973 was something of a golden age of economic growth in America: the annual growth of GNP per capita averaged 2.2 percent in real terms, about one third higher than the growth rate before or since. Yet those years were also the era of America's highest foreign policy spending (except for the war years). Over that quarter century the United States spent roughly ten percent of its GDP on foreign policy. This data is not to suggest that the high rate of foreign policy spending caused the high rate of growth, only that high foreign policy spending is not inherently harmful to the economy.

The argument about priorities claims that America should put foreign policy on the back burner while remedying its domestic problems. The trouble with this argument is that domestic problems are never solved. Most domestic problems reduce to issues of prosperity, where no known amount is considered enough, or race, where incremental increases in equality and harmony are more likely than any definitive solution.

Admittedly, the more America reduces foreign policy expenditures, the more funds will be available for domestic programs or tax cuts. But can liberals argue that a little more spending will solve domestic problems when many of those problems have grown worse even as spending to combat them has increased? Can conservatives, whose most compelling argument is for renewing moral values, make a coherent case that the nation can achieve moral renewal while renouncing international responsibilities? The United States defeated Nazism, contained the Soviet empire, and lifted Europe and Japan from the ashes at a time when its standard of living was far inferior to today's. How different--and how terrifying--the world would be if the United States had taken the view that it could not shoulder foreign burdens until its domestic problems were solved.

The principal goal of foreign policy is not wealth but safety: the peace dividend, someone has aptly remarked, is peace. But safety from what? The absence of a clear threat, such as Soviet imperialism immediately after World War II, has led to the belittling of foreign policy. Such a circumstance is more like the aftermath of World War I, when the threat was not clear. The Bolsheviks were feared only for the power of their example, not as a force capable of generating an external challenge to America. Nor was Hitler taken seriously until much too late. Where are the threats today? Certainly a potential threat lies in a Russia that reverts to dictatorship and militarism, a China that grows wealthy and imperious without growing free, and an Islamic world that becomes further infected with virulent extremism and secures weapons of mass destruction. Which of these or other threats will spread? The point is not to guess, but to recognize that the answer is not foreordained and that the United States, the most influential nation, has some capacity to influence the outcome. The hope that future Americans can enjoy the generous measure of security of today is worth paying for. If America fails to do so, it will not be because it lacks the resources--except perhaps the inner resources of foresight, temperance, compassion, and strength.

ffi By foreign policy spending, I mean that comprised within the federal budget categories entitled "national defense," which includes intelligence, and "international affairs," which consists of direct foreign aid, the conduct of diplomacy, programs for the exchange of academics, students, scientists, and the like, financing of projects in other countries, and the overseas broadcasting, publishing, and informational activities of the U.S. government.

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  • Joshua Muravchik is a resident scholar at the American Enterprise Institute. His most recent book, The Imperative of American Leadership: A Challenge to Neo-Isolationism, from which this article is adapted, will be published by AEI Press in April.
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