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How Big is Big? Trump, the NYT and Foreign Aid

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 isprojected 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.

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Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC. 

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