Authored by Aaron Sobczak via The Mises Institute,
On January 20th, the Trump administration indicated it would pause foreign aid to most countries for 90 days. Newly-confirmed Secretary of State, “Little” Marco Rubio, confirmed this and paused “all new obligations of funding, pending a review, for (U.S.) foreign assistance programs funded by or through the Department and USAID.”
He also recently floated closing USAID permanently and merging it with the State Department. It is right to credit the Trump administration for this. He is pausing more aid than any other modern president and implementing parts of his “America First” agenda. Foreign assistance, after all, has been historically ineffective and rife with mismanagement and corruption. USAID is notoriously used to spread “pro-democracy” messaging (pro-censorship and Western intervention) via think tanks around the world. Libertarians and international realists should applaud any measure that seeks to curb the foreign aid cartels.
Unfortunately, President Trump’s attempt to cut foreign aid spending has hit some snags and features glaring omissions. What is probably most unfortunate is that this order does not officially touch military aid. Hundreds of billions of dollars are sent to countries worldwide, with the likes of Israel, Ukraine, and Taiwan being the chief recipients. Ukrainian President Zeleneky confirmed that Kyiv will still receive aid from Washington, and Trump recently ordered $1 billion in military equipment and weapons be sent to Israel. This military aid further entangles Washington in foreign conflicts and enriches politicians, defense contractors, and the like.
Secretary of State Rubio has also added regular exceptions to Trump’s order. “Life-saving” aid will continue in some countries, and USAID proponents are asking for more exceptions.
Real cuts to foreign defense spending could assist Trump in a hypothetical battle to rein in the deficit and show voters that he is serious about an “America First” agenda. Washington is also much more likely to abstain from future conflicts in East Asia, Eastern Europe, or the Middle East if aid were cut to Ukraine, Taiwan, or Israel, as this can ensure that policymakers stop falling for the “sunk cost fallacy.”
In addition to foreign entanglements, foreign aid drains the budget and has a low return on investment. The national debt is over $36 trillion, and interest on the debt is over $1 trillion. Rather than giving tens of billions in aid annually to foreign countries, Washington should focus on paying down the debt. The argument for cutting should be even more apparent when considering return on investment and some of the specific things foreign aid is spent on. A good investment should yield good returns rather than decades of lost capital.
Pakistan, for example, has received hundreds of billions over the years since 1947, with only brief instances of respite for various reasons. Aid peaked in the country initially in 1963 at around $3 billion and then again in 2010 at around $4.5 billion, with an almost complete pause from 1992 to 2002. The country saw its first big GDP jump from 1999-2000, when American aid was at a low, and then lagged significantly again from 2008-2010, when American aid was at a new peak. This observation alone isn’t conclusive, but it makes sense that long-term, no-strings-attached aid would serve as a moral hazard rather than a legitimate solution.
In addition to the general inefficiency of most foreign aid projects, there are numerous reports of the USAID agency promoting censorship or governmental changes in different countries. A former US State Department Official revealed that USAID had been funding NGOs in Brazil that were designed to affect the country’s political landscape. The former official claimed the agency operated as a “geopolitical manipulation arm.” In many of these cases, Brazilian journalist David Agape claims that these funds are given under a humanitarian or anti-disinformation guise but actually assist in pushing for American interests in the government.
That isn’t all; from assisting an Ecuadorian prosecutor as she targeted her opponents, to funding the cultivation of poppy fields in Afghanistan, this agency is clearly not just a vehicle for transferring American aid to less fortunate countries. It is deeply involved in spreading Washington’s ideology and crony agendas.
Unfortunately, it is doubtful whether Trump’s administration will make enough significant changes that will last beyond his second term. While technically having potential, Elon Musk’s DOGE has failed thus far in cutting meaningful government spending. Daily spending is at about $30bn a day under Trump, up from about $26bn under Biden. Only about 25 percent of the country’s 7 trillion dollar budget is discretionary, and about half of that goes to defense. President Trump and some Republicans have paid lip service to the “America-First” agenda, but the party is very unlikely to cut the Pentagon’s budget, as Republican voters generally prefer high defense spending. Even if Trump were to close USAID, it would save the US government .6 percent of its budget every year.
The first Trump administration had a mixed record regarding foreign aid, it still sent money to Ukraine and increased aid to Israel. Additionally, one of his favorite pieces of legacy is the Abraham Accords, which commit to Arab countries hundreds of billions in aid (and other promises) in return for their recognition of the state of Israel. Trump plans to expand the Abraham Accords in his second term, leading to further foreign aid promises and defense agreements. He would be wise to actually pursue an America-first agenda in his second term by not only scrapping aid provided through USAID but by also removing Washington’s financial interests from the Middle East and Ukraine. The hawks in the Republican Party are scared that he might just do it.
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