Foreign-Aid Mania

June 4, 1956

One of the most baffling developments of the last decade has been the persistence and growth in Washington of the mania for giving away billions of the American taxpayers’ money to foreign governments. The pressure for ever-greater farm aid, old-age assistance, grandiose road-building programs, home-mortgage guarantees, and a score of other such projects is not difficult to understand politically. The pressure groups who want and get this aid have votes. But foreigners don’t vote here. Why is the pressure for foreign aid in Washington so persistent?

Part of the answer, no doubt, lies in an established bureaucracy. Once a bureaucracy of hundreds or thousands of people is built up to exercise any function whatever, its tendency is to keep pushing for the continuance or expansion of that function, regardless of whether changed conditions may have made the original reasons for it no longer valid.

AID MEANS HIGH TAXES

This bureaucratic pressure is not in itself a complete answer to the puzzle. And certainly the answer is not that the amounts involved are negligible. We have already turned over to foreign governments since the end of the second world war the enormous sum of more than $50 billion. The government now wishes to spend $4.4 billion on foreign aid in the next fiscal year alone. It wishes Congress to appropriate $4.9 billion. At any time prior to the last fifteen years, this would have been thought a staggering sum. It represents four times the entire amount spent for our own national defense in the fiscal year 1939.

But perhaps it is more meaningful to make a comparison in terms of present taxes. It has been estimated that if the top progressive income-tax rate stopped at 50 percent (instead of going on to 91 percent as at present) the revenue loss would be only $1.2 billion. On various estimates, in fact, if progression above the basic rate of 20 percent were totally abolished, the annual revenue yield would be only $4.7 to $5.8 billion less than now. But this approximates what the government is asking for foreign aid alone in the next fiscal year. In any case, anyone who is now paying a top income-tax rate of more than 22 percent can consider that the excess all goes for foreign aid. It need hardly be pointed out that if the top rate stopped at 22 percent, the result would be to give an enormous impetus at home to incentive, saving and investment, production, and jobs.

As former hopes of the benefits from foreign aid have been successively disappointed, the rationalizations for its continuance keep constantly changing. They become increasingly rhetorical and vague. We are now being told by “experts” that we are placing too much emphasis on military instead of “economic” aid; that our foreign giveaway should be given away without conditions; and that we should not try to foster free enterprise abroad or even to win friends with our aid. If such arguments are accepted, it becomes difficult to see what excuse for foreign aid remains. As National Review has put it: “A government has no right to dispose of the property of its citizens, except as their prudent, responsible steward and in their palpable interest. A government has no obligation, moral or political, to give aid to other governments.” In fact, the only foreign aid Congress is justified in giving at the expense of the American taxpayers is military aid or aid with a definite quid pro quo.

FOR PRIVATE LOANS

The blunt truth is that the only “economic” foreign aid that is likely to be beneficial either to the receiver or the giver is that in the form of private trade or private loans and investments. If foreign governments could no longer get these easy handouts from our government, they would be forced to turn for capital to private sources, either at home or abroad. In that case they would be obliged to move toward free enterprise. They would have to give real assurances against socialization or expropriation. Such reforms are necessary in any case for any permanent or rapid economic development. The “underdeveloped” countries have remained underdeveloped chiefly because of their own hostility to the profit-seeking system.