Obama's "smart power" plan risks death of 1,000 cuts

By Susan Cornwell and Andrew Quinn

WASHINGTON (Reuters) - President Barack Obama's pledge to boost America's global standing by ramping up U.S. diplomacy and development aid faces death by a thousand cuts as lawmakers prepare to carve huge chunks out of U.S. overseas spending to address budget shortfalls.

Secretary of State Hillary Clinton's State Department and the U.S. Agency for International Development (USAID) could be chopped back significantly.

Food aid to hungry countries, training for political parties in young democracies, improved medical services for expectant mothers and the U.S. response to natural disasters such as earthquakes and droughts could be hit in a major scale-back of U.S. assistance.

Republican congresswoman Kay Granger, an advocate of the cuts, said recently that with U.S. debt mounting, the focus should be on aid programs that demonstrate quick impact and further U.S. national security.

"In the past we've sometimes measured success by the size of the check we write. Today, we have to measure our success by the size of the change we bring," Granger, chairwoman of the House foreign aid subcommittee, told colleagues.

Aid analysts say the budget storm could undo Obama's "smart power" approach, which elevates diplomacy and development alongside military power as guarantors of U.S. security in a rapidly changing world.

The cuts -- some real, some proposed -- are looming despite repeated pronouncements from top U.S. officials, including former Defense Secretary Robert Gates, on the need to reverse the over-militarization of America's engagement abroad.

"What is under threat is the understanding that the U.S. engagement in the world must be broader than a military engagement," said Samuel Worthington of InterAction, an alliance of U.S.-based nongovernmental organizations. "The more we pull back, the less leverage we have."

The State Department's budget planner, Deputy Secretary of State Thomas Nides, said diplomatic and development spending took a massive hit this year and more pain may be on the way.

"Although its unclear what's going to happen in 2012, we could face more catastrophic cuts" in the coming months, Nides said at a recent event in Washington. "These cuts could be the most significant we've had in two decades, and they could have a devastating impact on the work that we do."


For proponents of U.S. international programs, proposals in Congress of more budget cuts follow a harrowing year in fiscal 2011 that has seen budget hawks empowered both by Republican electoral gains and grim news about the U.S. deficit.

Congress has already lopped some $8 billion off Obama's request for the State Department and U.S. foreign aid this year as part of a deal with the White House to keep the U.S. government running.

Lawmakers also chopped the Economic Support Fund, which helps stabilize fragile governments from the Middle East to South Asia.

Hundreds of millions of dollars have been sliced from U.S. contributions to the United Nations and international organizations, hitting peacekeeping and the World Food Program. Funds for international banks were cut and pay raises for U.S. foreign service officers were prohibited.

House Republicans have proposed whacking another $8.6 billion from the budget for the State Department and foreign aid in fiscal 2012, starting October 1.

As the worst famine in decades stalks millions in East Africa, 29 percent would be cut from the overall account that funds Obama's initiative for fighting global hunger, "Feed the Future," according to the U.S. Global Leadership Coalition.

The deficit-cutting deal between Obama and Congress in August set out $917 billion in overall savings, which puts more pressure on foreign aid along with other programs.

Lawmakers must now find another $1.2-$1.5 trillion in deficit reduction across the government over a decade.

Unpopular foreign assistance may be the first to go.

"Anything that smacks of spending money overseas ... is going to be in jeopardy," said Stan Collender, a former staffer on House and Senate budget committees who is now a partner at Qorvis Communications.

With Obama's backing, Clinton fought to broaden U.S. engagement with the world, arguing that America can only guarantee its long-term security by helping to roll back the root causes of instability, including poverty.

"We must use what has been called smart power -- the full range of tools at our disposal -- diplomatic, economic, military, political, legal, and cultural -- picking the right tool, or combination of tools, for each situation. With smart power, diplomacy will be the vanguard of foreign policy," Clinton said at her confirmation hearing in 2009.


The Obama administration put significant resources into play. In fiscal 2010, the amount appropriated for the State Department, diplomacy and foreign aid was $55.1 billion, up from $50.5 billion a year before, according to the Congressional Research Service. Of this, $37.5 billion went for foreign aid and the agency that administers it, USAID.

But by the time appropriations were agreed for fiscal 2011, spending on the State Department and USAID combined fell to $49 billion; the foreign aid chunk of this was $33 billion.

The numbers are dwarfed by U.S. military spending, which clocked in at $688.6 billion for fiscal 2011.

Harvard international affairs expert Joseph Nye, often credited with coining the term "smart power," said Clinton and Obama had made strides in coordinating work between the Pentagon and the State Department. But some of those gains were now at risk.

"The Pentagon is a giant while State is a pygmy in budgetary terms. Starving the pygmy will not help solve the problem," Nye told Reuters.

Democrats like Representative Nita Lowey fret that both State and USAID could see operating budgets cut by as much as 35 percent.

"It's really very sad ... I worked very hard with Secretary Clinton to build up the State Department, and the same with USAID," said Lowey, former chairwoman of the House appropriations subcommittee on foreign aid.

USAID has long ridden a budgetary roller-coaster. The agency was scaled back by Republicans in the 1990s after the Cold War's end. Then after the September 11, 2001 attacks, aid and public diplomacy programs were hastily rebuilt.

"I really do think this is repeating an historical mistake," said John Norris, a former USAID field disaster expert now at the Center for American Progress.

USAID Deputy Administrator Donald Steinberg emphasized that the agency was becoming leaner and meaner, seeking to focus its development efforts and establish a more cost-effective model -- albeit one that would require short-term budget support.

"We are in the midst of implementing the most significant reforms perhaps in the history of this agency to try to expand our capability to use resources effectively," Steinberg said.

"In many cases, we are eliminating smaller programs so that we can focus our attention -- even in a reduced budget environment -- on strategic priority. That means focusing on areas like food security, global health, global climate change, democracy and governance and economic growth," he said.

The State Department's Nides said a new $8 billion contingency fund for operations in frontline countries such as Afghanistan, Pakistan and Iraq could preserve essential spending there.

But this summer's deficit-reduction deal put new caps on "security" spending, which is defined as defense, homeland security, intelligence, nuclear weapons, diplomacy and foreign aid, for fiscal 2012 as well as 2013. That could set up fights for cash among competing agencies.

"There is real risk the Congress could decide to shield defense spending and other categories of spending by cutting everything else," Nides said.

(Editing by Warren Strobel and Christopher Wilson)