As every American has an idea on how to deal with the challenges of a balanced federal budget, some suggest that U.S. foreign aid should be trimmed, if not eliminated, as wasteful spending.
My late husband worked 25 years in the U.S. Foreign Service, serving in Bangladesh, the Dominican Republic, Panama, Bolivia, Guatemala, the Republic of Upper Volta and Nicaragua.
I can tell you that foreign aid is far from wasteful spending, and indeed it’s probably that one part of the federal budget where taxpayers get full return on their money.
There are misconceptions about how much of the federal budget is devoted to foreign aid. Many even suggest is up to 25 percent.
According to the government website foreignassistance.gov, the federal government disburses about $58 billion a year in foreign assistance through more than 20 agencies. The U.S. Agency for International Development roughly manages $37 billion, less than one-half of 1 percent of the federal budget.
Federal spending abroad is crucial to help maintain our leadership in the world while furthering our foreign policy interests in developing democratic governments that in turn create the basis for a free market economy.
Those who decry U.S. assistance as wasteful contradict this nation’s long history of helping other nations through programs that alleviate poverty while contributing to health and disease prevention, literacy and small business development, all of which is beneficial to the United States.
Spending 1 percent of the federal budget to fulfill these goals is certainly my taxpayer money well spent.
Some people are suggesting that it’s time for U.S. citizens to pay for the benefits they enjoy.
I do believe the price we pay for living in the United States today is truly negligible. Paradoxically, that may be why our economy continues to lag.
The tax revenue as a percentage of the GDP is only 24 percent in the United States compared to the United Kingdom, 34.3 percent; Sweden, 46.4 percent; Spain, 30.7 percent; Germany, 37 percent.
The Unites States’ tax-to-GDP ratio is more in line with developing countries, South Korea, 25.6 percent, Turkey, 24.6 percent, Chile, 18.2 percent, Mexico, 17.5 percent.
This is perhaps why the American people cannot afford the benefits most developed nations afford, among them, affordable health care, free higher education, state-of-the art public transportation services and a fair policy of social welfare.
But we all seem to be OK with this state of things. In effect, I have trouble sorting out my feelings about this.
On the one hand, I do not want to pay more taxes simply because I cannot afford to pay more.
On the other hand, if what I pay in increased taxes means a decrease in my expenses in gasoline, health care and college education I can see why this would make sense - of course as long as I trust the government to do its job.
Now, would allowing the government to take care of the cost of some of my wellbeing be better for the economy in the long run?
I was in Spain last year and saw first hand the benefits of a country with an incredible amount of citizen services. I also watched its economic downturn.
Spain is the fifth largest economy in the European Union. What came to be known as the “Spanish Miracle” gave Spain the fastest economic development in Europe since the 1960s.
But this success proved to be unstable basically because what drove it was a housing bubble, much like the one in the United States.
The problem there as here was the lack of competitiveness in a global economy. Many of the jobs created during the housing bubble were low wage and low skill while the more lucrative industries remained sluggish.
But for the sake of comparison let’s look at what happened in Germany.
Germany saw its highest rate of economic growth in two decades, with an annual 3.6 percent GDP growth in 2010. German households have the second lowest (after Sweden) debt levels in Europe. Germany’s budget deficit is the lowest in Europe. Its unemployment rate is 7.4 percent.
Now remember that the tax revenue as a percentage of the GDP in Germany is 37 percent and in Spain, 30.7 percent compared to the U.S.’s 24 percent.
What’s the difference in their economies?
Germany is a manufacturing and export powerhouse. Their high taxes pay the incentives to entice world investors to come to this country by providing all the services developed nations are expected to provide like affordable health care, an education system that technically trains its workforce, and a transportation system that is an energy saver.
In short, their high taxes provide the right social environment for a free market economy to work.
Shouldn’t we have a major change in mindset and a true and honest way to confront what will face eventually in the future?