ISSN 2330-717X

How Big Is Big? Trump, The NYT And Foreign Aid – OpEd

By

There are a lot of people who are so stupid that they think foreign aid is a major part of the federal budget. Ever wonder why people could be so stupid?

Well, the NYT tells us at least part of the reason in a news article on a new agency established by Donald Trump to provide loans and loan guarantees as a way to help developing countries and extend U.S. influence. The article tells us that the bill that established the new agency, the United States International Development Finance Corporation [USIDFC],”gave it authority to provide $60 billion in loans, loan guarantees and insurance to companies willing to do business in developing nations.”

Okay, $60 billion is a lot of money, more than almost anyone other than Bill Gates and Jeff Bezos will see in a lifetime, but how much does it matter to our budget? My guess is that almost no NYT readers has a clue. Yeah, I know the NYT has a very well-educated readership, but very few of them have their heads in the federal budget.

To get a rough idea, we need to remember that this is $60 billion in loans and guarantees, it is not actual spending. And, it is a stock figure, it is a level of commitment, not an annual flow.

So let’s say that the subsidy component of the loan and guarantee averages 5 percent of the value. (That is probably high, it would mean for example that a loan that should carry a 10 percent interest rate would instead carry a 5 percent interest rate.) In this case, the subsidies coming from the USIDFC would be equal to $3 billion.

But again this is a stock figure. That would mean we hit this level of subsidy once the USIDFC has reached its $60 billion liability limit. Let’s say that takes five years, so the USIDFC is lending at its limits by 2023. At that point, the federal budget is projected to be $5.5 trillion.

This means that Trump’s new foreign aid program will be costing us a bit more than 0.05 percent of federal spending. Alternatively, we can put it at dollars per person and say that this program will be costing us a bit less than $9 per person.

This would have been useful information for the NYT to provide its readers. It would likely be very helpful the next time some right-wing politician wants to eliminate waste in the budget by cutting foreign aid.

This article originally appeared on Dean Baker’s blog Beat the Press.

Dean Baker

Dean Baker

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.