Perpetual Foreign Aid

June 3, 1957

The President’s decision to throw the weight of his great military prestige behind his military budget might have been more effective had he not chosen to defend nearly every other segment of his budget with equal ardor. “No great reductions in it are possible,” he declares, “unless Congress eliminates or curtails existing programs.” If this merely refers to some programs, it is self-evident. But it seems to assume that any program, once started, must continue without re-examination forever.

And this assumption appears to be the chief reason for the continuance of the foreign-aid program. If we had not previously embarked on that program, and got everybody inured to it, and some public figure came along now and suddenly proposed that we give $4 billion away next year to some 60 different countries, he would be thought to have taken leave of his senses. But as we have already handed out some $62 billion on foreign aid since the end of the second world war, the burden of proof is assumed to be on those who would “desert our friends” now.

Let us begin, for example, with the arguments that attempt to belittle the size of the foreign-aid program. Its cost, declares the President, “amounts to only 5 percent of the budget.” But the more extravagant the total budget, the smaller a percentage of it is any given sum. The $3.8 billion proposed for 1958 for foreign aid alone is greater than the entire Federal budget in any fiscal year from 1922 to 1932.

WHAT IT COSTS US

The most realistic way of measuring the present fiscal burden of foreign aid is to ask how much taxes could be reduced if foreign-aid spending did not exist. On the basis of estimates compiled by the Tax Foundation, I find that if no one were taxed at anything higher than a combined normal and surtax rate of 30 percent (which now applies to the income-tax bracket between $6,000 and $8,000 a year), the loss in revenue would be no more than $3.5 billion. Anybody paying any higher personal-income-tax rate than this, therefore, can figure that the addition is what the foreign-aid program costs him personally.

An elementary point constantly forgotten is that it is impossible in practice to tell the difference in net effect between foreign “military” aid and foreign “economic” aid. When we pay for part of a country’s defense, we free that much of its own funds to enable it to buy other things. When we give a country “economic” aid, it has that much more to spend on its military establishment. This means that the constant distinction made between “military” and “economic” aid is of dubious practical importance.

UNPROVED ASSUMPTION

Our military aid (which in 1958 would be some $3 billion, or three-fourths of total foreign aid) rests on the unproved assumption that none of the aided countries can fully pay for its own defense. This assumption is implausible on its face. The President tells us: “Around the world we have provided our allies, over the past seven years, some $17 billion in direct military assistance. Over the same period, the defense budgets of our allies have totaled some $107 billion.” The question naturally arises why these “allies” could not have increased their military budgets an average of 16 percent to pay for the whole of their own defense? A year ago (April 16, 1956) I pointed out in this place that whereas the U.S. was spending some 62 percent of its total budget on defense, thirteen of our principal “allies” spent an average of only 26 percent of their total central government budget on defense.

To claim that we are getting our own defense cheaper by paying also for part of 38 other countries’ defense begs an enormous question. Generally speaking, countries that think they need us for allies continue to want common defense treaties with us whether we help to support them financially or not. Countries that think they do not need us for allies, but only that we need them, may of course consent to take our money. But we merely delude ourselves about what we are buying with it.

The case for foreign “economic” aid is far weaker than the case for “military” aid. But that is another column.