The United States is a net recipient of foreign aid. Sound incredible? Like so much else in Washington, it depends on how you keep the books, but consider the following:
More than one-third of the economic assistance provided by the Agency for International Development (AID) and its predecessor agencies since World War II has been on a loan basis. Repayments are currently coming in at such a rate that many countries, including India, Ecuador, Paraguay and the Ivory Coast are sending us more in repayments than we are providing them in new assistance. Latin American as a whole will send us 85 cents in repayments this year for every new dollar of bilateral aid we provide them, much of which will be in the form of new loans.
Foreign countries have an excellent record of repaying their debts on time. Since 1940, $85 billion in foreign aid has been provided on a loan basis. Julius Katz, the assistant secretary of state for economic and business affairs, has testified that the default rate on these loans has been an impressive .04 percent. Most of the overdue payments involve unique situation; one-third of them involve Korean War logistical support claims, whose validity is in doubt. In fiscal year 1978 alone, repayments of principal and interest totaled about $50 billion.
Seventy-five percent of AID's budget is spent in the United States to purchase American goods and services. In fiscal year 1978, over $1 billion worth of products were exported under AID financing.Since loan receipts exceed the amount of AID development assistance funds actually spent abroad, it appears that our bilateral aid program actually reduces our balance-of-payments deficit.
Our "security supporting assistant" program, primarily to Israel and Egypt, is on a grant basis. However, two-thirds of our food aid and military aid programs are on a loan basis, both programs procure their goods and services almost exclusively in the United States and both are famous for creating large new commercial markets for American grain and guns.
Even United Nations programs are economically benefical to the United States. In 1977, for example, UNICEF purchased $48.8 million worth of American goods and services, compared with American contributions to UNICEF, from both public and private sources, of only $26.3 million.
In recent years, the largest portion of our foreign aid program has gone through the multilateral development banks (MDBs). C. Fred Bergsten, the Assistant Secretary of the Treasury for International Affairs, has testified that between 1946, when the first such bank was established, through the middle of 1978, direct accumulated receipts by all segments of the U.S. economy have exceeded outflows to the banks by $2.4 billion.
In addition, an econometric analysis by the Treasury Department concluded that our real GNP increased annually between $1.2 billion and $1.8 billion as a result of exports of U.S goods and services to markets directly created by MDB-finanaced projects in developing coutries. This means that every U.S. dollar paid into the banks generates between $2.39 and $3.38 in real U.S. economic growth annually. This also means that MDB activities have created between 50,000 and 100,000 jobs every year.
Our bilateral aid program also creates new export markets for the United States. It is likely that econometric analysis of our other aid programs would discover benefits to the U.S. economy comparable to those we receive from MDB activities.
It seems fair to conclude that loan repayments and proceurement of U.S. goods and services by aid agencies and institutions probably exceed the amount of foreign aid money we send abroad. When secondary economic effects are factored in, there is little doubt that our foreign assistance program is a net benefit to our balance of payments.
We get more foreign aid than we give. It would be only slightly hyperbolic to say that we are the recipients of "handouts" from rich and poor nations around the world, that the United States is on the international dole.
The Senate Foreign Relations Committee recently decided to reduce our economic aid program authorization by 10 percent, presumably in order to help alleviate our domestic economic difficulties. Additional cuts will undoubtedly be made at the appropriation level, accompanied by tirades aganist our "giceaway" programs abroad.
We will just be shooting ourselves in the foot.