After seeing Congress repeatedly reject its proposals for drastic foreign aid cuts (which have been condemned as “insane” even by the Trump administration’s Republican allies in Congress), the White House is once again making a late-breaking attempt to subvert Congressional budget intent. When the White House tried this last year, they ultimately relented in the face of strong bipartisan pushback. But might they get away with it this year? The lives and well-being millions of US aid recipients in the developing world could hinge upon the outcome.
An August 3 letter from the Office of Management and Budget to USAID and the State Department instructed them to freeze further obligations of federal funding from foreign aid accounts until OMB could conduct a review of their balance sheets. This was widely seen as a first step toward a rescission of the unobligated money, which would return it to the Treasury rather than use it to fund programs. After a congressional outcry, the White House initially lifted the spending freeze but quickly instituted a new requirement limiting daily obligations of new funds to two percent of the remaining balance.
These measures are designed to look like good-faith steps to take stock of federal spending before the end of the fiscal year, avoid a frivolous spend-down of expiring funds, and conserve unused resources. An anonymous administration official argued to the Washington Post that “if the money was so important… it would already have been spent.”
The reality is far different.
Some backstory on the US foreign aid spending cycle
Most aid resources appropriated by Congress must be used within the fiscal year in which they were appropriated—so a lot of money does go out the door in the final months of the fiscal year. But not because USAID and State are recklessly spraying out money before it expires. Rather, the August-September period is the busiest time of year for the US foreign aid apparatus because it is the culmination of months- or- years-long processes of issuing funds for new aid programs.
To understand why, it helps to understand the rhythm of US foreign aid spending. Disbursing US aid is not a quick process. Due to an ever-growing thicket of administrative requirements, congressional directives, and quality control measures, it can take months or years for USAID and State to issue new funding awards. US development professionals spend months assessing the need for a new program, designing a solicitation to invite applications from potential partners, reviewing the applications that come in, negotiating with prospective awardees over the program design, and jumping through final administrative hoops before putting the final signature on the issuance of a new award.
Much of this process takes place early-to-midway through a normal fiscal year, to ensure that new awards are ready for disbursement by the end-of-FY deadline. But the FY 2019 process was badly disrupted due to the budget fight over the border wall, and the protracted government shutdown. By the time the spending bill passed in mid-February, more than a third of the fiscal year was already gone. The shutdown left a huge amount of prep work undone as staff were forced to stay home for five weeks; when they returned to their jobs, they faced a vast backlog of work and a compressed timeline in which to do it. That delay meant that definitive budget planning for the fiscal year could not begin until midway through the year, with knock-on effects for completing funding actions before the end of the fiscal year in September.
Even in normal times, the final quarter of any fiscal year becomes a mad dash as new awards pile up, ready for issuance. But—and this is critical to understanding the play that the White House is attempting here—funds advancing through the pipeline remain technically unspent until a grant or contract is formally issued. At any point up to that stage, the government can pull back the funds and decline to issue the award.
By asking for a “balance sheet” with unspent funds, the White House is not seeking a catalog of funds that have proved unneeded. Rather, they are obtaining a catalog of funds that may be approaching obligation but are still possible to cancel.
Cancelling these unspent funds would be disastrous, and almost certainly illegal
There are several dimensions to this.
1. The enormous squandering of government staff time that would occur if these funds were returned to the Treasury.
By the time an award goes to the contracting officers for final review and signoff, there can be anywhere from six to 18 months of USG staff time that will have gone into it (the process often starts well in advance of appropriations, using projected planning figures while awaiting confirmed budget levels). Because much of the still-unspent money is well advanced in the funding pipeline but still undisbursed, it sits at the tail end of months’ or years’ worth of staff work—work that would be rendered useless if the grant is not issued. This cut would amount to retroactively nullifying millions upon millions of dollars’ worth of federal staff time.
2. Refusing to spend money lawfully appropriated by Congress is known as “impoundment”—and it is illegal.
The White House hopes to circumvent this prohibition via a legal fig leaf: they are not explicitly rejecting Congressional funding levels, but instead merely proposing rescissions to them (rescissions of this type must be proposed by the administration and approved or rejected by Congress).
But by proposing these rescissions so late in the fiscal year, and at a time when Congress is in recess and aid funds are normally moving to final sign-off, the White House is willfully throwing a grenade into the federal spending process at a critical moment (the fact that it has exempted programs promoted by the President’s daughter also speaks volumes). The late notification of the proposed rescissions leaves Congress with insufficient time to review and respond. And by slow-rolling new funding actions until Congress responds, the White House creates a self-fulfilling prophecy in which the funds will expire while awaiting Congress’ decision. Even if Congress ultimately rejects the rescissions, there will be too little time left in the fiscal year to disburse much of the money. This transparent attempt to void Congressional intent on the budget violates the fundamental Constitutional requirement that Congress sets spending levels and the President must then faithfully execute the budget. If a President can use an end-run like this to subvert Congressional intent, it raises fundamental Constitutional issues—which is why a GAO study assessed that this kind of action is unlawful.
3. These cuts would deal enormous harm to people helped by US assistance around the world.
Freezing funds from the accounts listed—including development assistance, global health, peacekeeping, and international organization support—would directly undermine key US programs and commitments.
US peacekeeping support helps to keep peace missions around the world running: like the programs of UN peacekeepers, who are protecting hundreds of thousands of conflict victims from attack in South Sudan. US global health budgets help to fund vaccine programs, AIDS treatment, and pandemic preparedness—all first-order lifesaving programs. Development assistance programs and support to international organizations provide funding for everything from women’s empowerment to clean water to childhood education. Halting these programs does real harm, and will likely cost lives.
It's up to Congress to read between the lines of the White House’s political game and stand firm in support of US global leadership.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.