The One Percent Solution

A dangerous game is being played in Washington with America's national security. Call it the "one percent solution" -- the fallacy that a successful U.S. foreign policy can be carried out with barely one percent of the federal budget. Unless the next president moves urgently to end this charade, he will find himself in a financial straitjacket that frustrates his ability to promote American interests and values in an increasingly uncertain world.

Ultimately, the only way to end the dangerous one percent solution game is to develop a new national consensus that sees the international affairs budget as part of the national security budget -- because the failure to build solid international partnerships to treat the causes of conflict today will mean costly military responses tomorrow. Those who play the one percent solution game do not understand a post-Cold War world in which a host of international problems now affects Americans' domestic welfare, from financial crises and the closing of markets to global warming, aids, terrorism, drug trafficking, and the spread of weapons of mass destruction. Solving these problems will require leadership, and that will cost.

MONEY CHANGES EVERYTHING

If this all sounds exaggerated, consider the way the one percent solution game is being played this year, when America has a GDP of nearly $10 trillion and a federal budget of over $1.8 trillion. Secretary of State Madeleine Albright asked the Office of Management and Budget (OMB) for $25 billion in the budget for fiscal year (FY) 2001, which begins October 1, for the so-called 150 Account, which covers the nonmilitary costs of protecting U.S. national security. OMB cut that figure to $22.8 billion to fit President Clinton's commitment to continued fiscal responsibility and limited budgetary growth. The congressional budget committees cut it further to $20 billion, or $2.3 billion less than the $22.3 billion approved for FY 2000. At the same time, the budget committees raised defense spending authority for FY 2001 to $310.8 billion -- $4.5 billion more than the administration requested.

Clinton and Albright strongly protested the congressional cuts. They will undoubtedly protest even more when the appropriations committees of the Senate and the House divide up the meager 150 Account pie into inadequate slices for essential foreign affairs functions. At the end of this congressional session, $1 billion or so of the foreign affairs cuts may be restored if Clinton threatens to veto the appropriation bills -- not easy to do in an election year. Of course, the next president could make another familiar move in the one percent solution game -- ask for a small supplemental appropriation to restore the previous cuts. But if the past is any guide, Congress will do its best to force the next administration to accommodate most of its supplemental spending within the existing budget. (This year, for instance, Congress resisted additional spending to pay for the U.S. share of multilateral projects such as more U.N. peacekeeping and debt reduction for the poorest countries.)

Even more discouraging for the next president are the projections for the 150 Account that the Clinton administration and the budget committees have presented as spending guidelines until 2005. The president's projected foreign affairs spending request of $24.5 billion for 2005 hardly keeps up with inflation, and the budget committees' target of $20 billion means a decrease of nearly 20 percent from FY 2000, adjusted for inflation. By contrast, the administration's projected defense spending authority goes up to $331 billion in FY 2005; the budget committees' defense projection is comparable. Thus the ratio of military spending to foreign affairs spending would continue to increase in the next few years, rising to more than 16 to 1 .

The percentage of the U.S. budget devoted to international affairs has been declining for four decades. In the 1960s, the 150 Account made up 4 percent of the federal budget; in the 1970s, it averaged about 2 percent; during the first half of the 1990s, it went down to 1 percent, with only a slight recovery in FYS 1999 and 2000. The international affairs budget is now about 20 percent less in today's dollars than it was on average during the late 1970s and the 1980s.

A nation's budget, like that of a corporation or an individual, reflects its priorities. Both main political parties share a broad consensus that assuring U.S. national security in the post-Cold War era requires a strong military and the willingness to use it to defend important U.S. interests and values. The Clinton administration and Congress have therefore supported recent increases in the defense budget to pay for more generous salaries and a better quality of life in order to attract and retain quality personnel; fund necessary research, training, and weapons maintenance; and procure new and improved weapons systems. Politicians and military experts may differ on the utility and cost-effectiveness of particular weapons, but after the catch-up defense increases of the last several years, Washington appears to be on an agreed course to keep the defense budget growing modestly to keep up with the rate of inflation.

Why then, at a time of unprecedented prosperity and budget surpluses, can Washington not generate a similar consensus on the need to adequately fund the nonmilitary component of national security? Apparently spending on foreign affairs is not regarded as spending for national security. Compounding the problem is Washington's commendable new commitment to fiscal responsibility after years of huge budget deficits -- a commitment reflected in the tight cap that Congress placed on discretionary spending in 1997. Even though that cap is already being violated and will undoubtedly be revised upward this year, the new bipartisan agreement to lock up the Social Security surplus to meet the retirement costs of the baby boomers will continue to make for difficult budget choices and leave limited room for increased spending elsewhere, foreign affairs included.

The non-Social Security surplus -- estimated at something more than $700 billion during the decade 2000-2010 -- will barely cover some modest tax cuts while keeping Medicare solvent and paying for some new spending on health care and education. Fortunately, higher-than-expected GDP growth may add $20-30 billion per year to the non-Social Security surplus, affording some additional budgetary wiggle room. Even so, that windfall could be entirely eaten up by larger tax cuts, more domestic spending, or unanticipated defense budget increases -- unless foreign affairs spending becomes a higher priority now.

More money is not a substitute for an effective foreign policy, but an effective foreign policy will simply be impossible without more money. Foreign policy experts therefore disdain "boring budget arithmetic" at their peril.

The State Department recently set forth seven fundamental national interests in its foreign affairs strategic plan: national security; economic prosperity and freer trade; protection of U.S. citizens abroad and safeguarding of U.S. borders; the fight against international terrorism, crime, and drug trafficking; the establishment and consolidation of democracies and the upholding of human rights; the provision of humanitarian assistance to victims of crisis and disaster; and finally, the improvement of the global environment, stabilization of world population growth, and protection of human health. This is a sensible list, but in the political climate of today's Washington, few in the executive branch or Congress dare ask how much money will really be required to support it. Rather, the question usually asked is how much the political traffic will bear.

Going on this way will force unacceptable foreign policy choices -- either adequate funding for secure embassies and modern communications systems for diplomats or adequate funding for U.N. peacekeeping in Kosovo, East Timor, and Africa; either adequate funding for the Middle East peace process or adequate funding to safeguard nuclear weapons and materials in Russia; either adequate funding for family planning to control world population growth or adequate funding to save refugees and displaced persons. The world's greatest power need not and should not accept a situation in which it has to make these kinds of choices.

THE STATE OF STATE

Ideally, a bipartisan, expert study would tell us what a properly funded foreign affairs budget would look like. In the absence of such a study, consider the following a rough estimate of the increases now required in the two main parts of the 150 Account. The first part is the State Department budget, which includes not only the cost of U.S. diplomacy but also U.S. assessed contributions to international organizations and peacekeeping. The second part is the foreign operations budget, which includes bilateral development aid, the bilateral economic support fund for special foreign policy priorities, bilateral military aid, and contributions to voluntary U.N. programs and multilateral development banks.

Take State's budget first. The United States maintains 250 embassies and other posts in 160 countries. Far from being rendered less important by the end of the Cold War or today's instant communications, these diplomatic posts and the State Department that directs them are more essential than ever in promoting the seven fundamental U.S. foreign policy interests identified above.

Ambassadors and their staffs have to play multiple roles today -- as the "eyes and ears" of the president and secretary of state, advocates for U.S. policies in the upper reaches of the host government, resourceful negotiators, and intellectual, educational, and cultural emissaries in public diplomacy with key interest groups, opinion leaders, and the public at large. As Albright put it in recent congressional testimony, the Foreign Service, the Civil Service, and the foreign nationals serving in U.S. overseas posts contribute daily to the welfare of the American people "through the dangers they help contain; the crimes they help prevent; the deals they help close; the rights they help protect; and the travelers they just plain help."

Following the tragic August 1998 bombings of American embassies in Nairobi and Dar es Salaam, the secretary of state, with the support of the president and Congress, established the Overseas Presence Advisory Panel (OPAP), composed of current and former diplomats and private-sector representatives, to recommend improvements in America's overseas diplomatic establishment. "The United States overseas presence, which has provided the essential underpinnings of U.S. foreign policy for many decades, is near a state of crisis," the panel warned. "Insecure and often decrepit facilities, obsolete information technology, outmoded administrative and human resources practices, poor allocation of resources, and competition from the private sector for talented staff threaten to cripple America's overseas capability, with far-reaching consequences for national security and prosperity."

The OPAP report focused more on reforms than on money, but many of its recommendations have price tags. The report called for $1.3 billion per year for embassy construction and security upgrades -- probably $100 million too little, since an earlier and more authoritative study by the Accountability Review Boards under former Joint Chiefs of Staff Chair William Crowe proposed $1.4 billion annually for that purpose. OPAP also called for another $330 million over several years to provide unclassified and secure Internet and e-mail information networks linking all U.S. agencies and overseas posts.

Moreover, OPAP proposed establishing an interagency panel chaired by the secretary of state to evaluate the size, location, and composition of America's overseas presence. Visitors who see many people in U.S. embassies often do not realize that the State Department accounts for only 42 percent of America's total overseas personnel; the Defense Department accounts for 37 percent, and more than two dozen other agencies such as the Agency for International Development and the departments of Commerce, Treasury, and Justice make up the rest. If one includes the foreign nationals hired as support staff, State Department personnel in some large U.S. embassies are less than 15 percent of the employees, and many of them are administrators.

The State Department's FY 2001 budget of $6.8 billion provides $3.2 billion for administering foreign affairs. Of that, even after the East Africa bombings, only $1.1 billion will go toward embassy construction and security upgrades, even though $1.4 billion is needed. Moreover, only $17 million is provided for new communications infrastructure, although $330 million is needed. Almost nothing is included to fill a 700-position shortfall of qualified personnel. The State Department therefore requires another $500 million just to meet its minimal needs.

The FY 2001 State Department budget contains a small but inadequate increase -- from $204 million in FY 2000 to $225 million -- for the educational and cultural exchanges formerly administered by the U.S. Information Agency. Most of this money will go to the Fulbright academic program and the International Visitors Program, which brings future foreign leaders in politics, the media, trade unions, and other nongovernmental organizations (NGOS) to meet with their American counterparts. These valuable and cost-effective exchanges have been slashed from their 1960s and 1970s heights. A near-doubling of these programs' size -- with disproportionate increases for exchanges with especially important countries such as Russia and China -- would clearly serve U.S. national security interests. A sensible annual budget increase for educational and cultural exchanges would be $200 million.

The budget includes $946 million for assessed contributions to international organizations, of which $300 million is for the U.N. itself and $380 million more is for U.N.-affiliated agencies such as the International Labor Organization, the World Health Organization, the International Atomic Energy Agency, and the war crimes tribunals for Rwanda and the Balkans. Other bodies such as NATO, the Organization for Economic Cooperation and Development (OECD), and the World Trade Organization (WTO) account for the rest.

Richard Holbrooke, the able American ambassador to the U.N., is currently deep in difficult negotiations to reduce the assessed U.S. share of the regular U.N. budget and the budgets of major specialized U.N. agencies from 25 percent to 22 percent -- a precondition required by the Helms-Biden legislation for paying America's U.N. arrears. If Holbrooke succeeds, U.S. contributions to international organizations will drop slightly.

But this reduction will be more than offset by the need to pay for modest U.N. budget increases. The zero nominal growth requirement that Congress slapped on U.N. budgets is now becoming counterproductive. To take just one example, the U.N. Department of Peacekeeping Operations is now short at least 100 staffers, which leaves it ill-prepared to handle the increased number and scale of peacekeeping operations. If Washington could agree to let U.N. budgets rise by inflation plus a percent or two in the years ahead and to channel the increase to programs of particular U.S. interest, America would have more influence and the U.N. would be more effective. Some non-U.N. organizations, such as NATO, the OECD, and the WTO, also require budget increases beyond the rate of inflation to do their jobs properly. Moreover, America should rejoin the U.N. Educational, Scientific, and Cultural Organization (UNESCO), given the growing foreign policy importance of its concerns and the role that new communications technology can play in helping developing countries. The increased annual cost of UNESCO membership ($70 million) and of permitting small annual increases in the U.N.'s and other international organizations' budgets ($30 million) comes to another $100 million.

Selling this will take leadership. In particular, a showdown is brewing with Congress over the costs of U.N. peacekeeping. After reaching a high of 80,000 in 1993 and then dropping to 13,000 in 1998, the number of U.N. peacekeepers is rising again to 30,000 or more as a result of new missions in Kosovo, East Timor, Sierra Leone, and the proposed mission in the Democratic Republic of the Congo (DRC). So the State Department had to ask Congress for $739 million for U.N. peacekeeping in the FY 2001 budget, compared to the $500 million it received in FY 2000. (The White House also requested a fy 2000 budget supplement of $143 million, which has not yet been approved.) But even these sums fall well short of what Washington will have to pay for peacekeeping this year and next. In Kosovo, the mission is seriously underfunded; the U.N. peacekeeping force in southern Lebanon will have to be beefed up after an Israeli withdrawal; and new or expanded missions could be required for conflicts in Sierra Leone, Ethiopia-Eritrea, and the DRC. So total U.N. peacekeeping costs could rise to $3.5-4 billion per year. With the United States paying for 25 percent of peacekeeping (although it is still assessed at the rate of 31 percent, which is unduly high), these new challenges could cost taxpayers at least $200 million per year more than the amount currently budgeted. Washington should, of course, watch the number, cost, and effectiveness of U.N. peacekeeping operations, but the existing and proposed operations serve U.S. interests and must be adequately funded.

Add up all these sums and one finds that the State Department budget needs an increase of $1 billion, for a total of $7.8 billion per year.

A DECENT RESPECT

The Clinton administration has asked for $15.1 billion for the foreign operations budget for FY 2001 -- the second part of the 150 Account. Excluding $3.7 billion for military aid and $1 billion for the Export-Import Bank, that leaves about $10.4 billion in international development and humanitarian assistance. This includes various categories of bilateral aid: $2.1 billion for sustainable development; $658 million for migration and refugee assistance; $830 million to promote free-market democracies and secure nuclear materials in the countries of the former Soviet Union; and $610 million of support for eastern Europe and the Balkans. It also covers about $1.4 billion for multilateral development banks, including $800 million for the International Development Association, the World Bank affiliate for lending to the poorest countries. Another $350 million goes to international organizations and programs such as the U.N. Development Program ($90 million), the U.N. Children's Fund ($110 million), the U.N. Population Fund ($25 million), and the U.N. Environment Program ($10 million).

The $10.4 billion for development and humanitarian aid is just 0.11 percent of U.S. GDP and 0.60 percent of federal budget outlays. This figure is now near record lows. In 1962, foreign aid amounted to $18.5 billion in current dollars, or 0.58 percent of GDP and 3.06 percent of federal spending. In the 1980s, it averaged just over $13 billion a year in current dollars, or 0.20 percent of GDP and 0.92 percent of federal spending. Washington's current 0.11 percent aid-to-GDP share compares unflatteringly with the average of 0.30 percent in the other OECD donor countries. On a per capita basis, each American contributes about $29 per year to development and humanitarian aid, compared to a median of $70 in the other OECD countries. According to the Clinton administration's own budget forecasts, the FY 2001 aid figure of $10.4 billion will drop even further in FY 2005, to $9.7 billion. Congress' low target for total international spending that year will almost certainly cut the FY 2005 aid figure even more.

Considering current economic and social trends in the world's poor countries, these low and declining aid levels are unjustifiable. World Bank President James Wolfensohn is right: the global struggle to reduce poverty and save the environment is being lost. Although hundreds of millions of people in the developing world escaped from poverty in recent years, half of the six billion people on Earth still live on less than $2 a day. Two billion are not connected to any energy system. One and a half billion lack clean water. More than a billion lack basic education, health care, or modern birth control methods.

The world's population, which grows by about 75 million a year, will probably reach about 9 billion by 2050; most will live in the world's poorest countries. If present trends continue, we can expect more abject poverty, environmental damage, epidemics, political instability, drug trafficking, ethnic violence, religious fundamentalism, and terrorism. This is not the kind of world Americans want their children to inherit. The Declaration of Independence speaks of "a decent respect for the opinion of mankind." Today's political leaders need a decent respect for future generations.

To be sure, the principal responsibility for progress in the developing countries rests with those countries themselves. But their commitments to pursue sound economic policies and humane social policies will fall short without more and better-designed development aid -- as well as more generous trade concessions -- from the United States and its wealthy partners. At the main industrialized nations' summit last year in Birmingham, U.K., the G-8 (the G-7 group of highly industrialized countries plus Russia) endorsed such U.N.-backed goals as halving the number of people suffering from illiteracy, malnutrition, and extreme poverty by 2015.

Beyond these broad goals, America's next president should earmark proposed increases in U.S. development aid for specific programs that promote fundamental American interests and values and that powerful domestic constituencies could be mobilized to support. These would include programs that promote clean energy technologies to help fight global warming; combat the spread of diseases such as aids, which is ravaging Africa; assure primary education for all children, without the present widespread discrimination against girls; bridge the "digital divide" and stimulate development by bringing information technology and the Internet to schools, libraries, and hospitals; provide universal maternal and child care, as well as family planning for all those who wish to use it, thus reducing unwanted pregnancies and unsafe abortions; support democracy and the rule of law; establish better corporate governance, banking regulations, and accounting standards; and protect basic worker rights.

What would the G-8 and U.N. targets and these specific programs mean for the U.S. foreign operations budget? Answering this question is much harder than estimating an adequate State Department budget. Doing so requires more information on total requirements, appropriate burden-sharing between developed and developing countries, the share that can be assumed by business and NGOS, the absorptive capacity of countries, and aid agencies' ability to handle more assistance effectively.

Still, there are fairly reliable estimates of total aid needs in many areas. For example, the 1994 Cairo Conference on Population and Development endorsed an expert estimate that $17 billion per year is now required to provide universal access to voluntary family planning in the developing world, with $5.7 billion of it to be supplied by developed countries. Were the United States to contribute based on its share of donor-country GDP, U.S. aid in this sector would rise to about $1.9 billion annually. By contrast, U.S. foreign family-planning funding in FY 2000 was only $372 million; the Clinton administration has requested $541 million for FY 2001.

We already know enough about aid requirements in other sectors to suggest that doing Washington's fair share in sustainable-development programs would require about $10 billion more per year by FY 2005, which would bring its total aid spending up to some $20 billion annually. This would raise U.S. aid levels from their present 0.11 percent of GDP to about 0.20 percent, the level of U.S. aid 20 years ago. That total could be reached by annual increases of $2 billion per year, starting with a $1.6 billion foreign-aid supplement for FY 2001 and conditioning each annual increase on appropriate management reforms and appropriate increases in aid from other donors.

An FY 2005 target of $20 billion for development and humanitarian aid would mean a foreign operations budget that year of about $25 billion; total foreign affairs spending that year would be about $33 billion. This sounds like a lot of money, but it would be less than the United States spent on foreign affairs in real terms in 1985. As a percentage of the FY 2005 federal budget, it would still be less than average annual U.S. foreign affairs spending in the late 1970s and 1980s.

STICKER SHOCK

For a newly elected George W. Bush or Al Gore, asking for $2.6 billion in additional supplemental funds for FY 2001 on top of reversing this year's budget cuts -- thus adding $1 billion for the State Department and $1.6 billion more for foreign operations -- would produce serious "sticker shock" in the congressional budget and appropriations committees. So would seeking $27 billion for the 150 Account for FY 2002 and additional annual increases of $2 billion per year in order to reach a total of $33 billion in FY 2005. How could Congress be persuaded?

The new president -- Democrat or Republican -- would have to pave the way in meetings with congressional leaders between election day and his inauguration, justifying the additional expenditures in national security terms. He would need to make the case with opinion leaders and the public, explaining in a series of speeches and press conferences that America is entering not just a new century but also a new era of global interaction. He would need to energize the business community, unions, and the religious and civic groups who are the main constituencies for a more adequate foreign affairs budget. Last but not least, he would need to emphasize reforms in the State Department, in foreign-aid programs, and in international agencies to provide confidence that the additional money would be spent wisely.

Starting off a presidency this way would be a gamble, of course. But most presidents get the benefit of the doubt immediately after their first election. Anyway, without this kind of risk-taking, the new commander in chief would be condemning his administration to playing the old one percent solution game, almost certainly crippling U.S. foreign policy for the remainder of his term. The one percent solution is no solution at all.