Sunday, January 07, 2007

# Posted 7:24 PM by Ariel David Adesnik  

AMERICA'S HIDDEN PHILANTHROPY: OxFriend David Pozen recently published an excellent note in the Yale Law Journal entitled Tax Expenditures as Foreign Aid. The article's premise is simple: when calculating the total amount of foreign aid provided by a government, one has to include the value of tax revenue lost because of exemptions allowed for charitable donations. As David explains:
Through the many tax privileges that the United States grants to its nonprofit organizations, the government implicitly foots some portion of the bill anytime these organizations send money abroad for development purposes...This is not private aid; it is privatized aid.
Interestingly, US tax law has much more generous provisions to facilitate foreign giving than any other OECD tax code. For example, Sweden provides zero tax subsidies for foreign charity.

At the moment, it is only possible to provide a very rough calculation of how much "privatized aid" the US tax code facilitates. David's cocktail napkin math suggests that the tax code may currently provide $1.5 billion per year of hidden aid, as compared to a direct foreign aid budget of about $16 billion.

Even with this increment, the fact remains that US giving as a percentage of national income remains much lower than that of every other developed nation. Thus, we tend to be looked down upon by most of the foreign aid community.

One way to approach this problem is simply to give more foreign aid. We can clearly afford it. On the other hand, raw numbers are a pretty bad way to evaluate the positive effects of foreign aid. Since so much of it is lost to corruption and mismanagement, there is a significant gap between what is given and what is received.

In short, our foreign aid budget should not rise just because we are concerned about our reputation. It should rise when we are confident that the aid is being well spent.

Another way to look at this issue is from the perspective of Kosovo. Why Kosovo? Because it was the recipient of an unusual form of foreign aid: humanitarian intervention. What is the value of such an intervention? It's hard to say. We don't really know how many lives we saved.

What we do know is that only the United States' incomparable and incomparably expensive military power prevented Slobodan Milosevic from doing to the Kosovars what he did to the Bosnian Muslims. Should part of our military budget count as foreign aid? No, of course not. Rather, the point is that looking at the numbers isn't the only way to assess what a nation contributes to the developing world.

It is also worth keeping in mind the value of the security that the United States provides to its already-developed allies. Only the United States could have brought down the Taliban government and chased Al Qaeda out of its basecamps (although that war isn't over). Imagine if NATO and other allies had to spend their own tax revenue to develop the kind of military capabilities necessary to take out the Taliban. It might be a lot harder for them to afford all of that foreign aid.

The same pattern of behavior existed during the Cold War. The US paid far more than its share of the Western world's security costs, while Europe gave more foreign aid as a percentage of its income. Again, I'm not opposed to giving more aid if it can be effective. I just don't have much time for lectures about American stinginess.

Anyhow, I strongly recommend reading the full text of David's note. It is sharp, persuasive, and very, very substantive.
(10) opinions -- Add your opinion

I think one almost has to factor in a portion of U.S. military aid as humanitarian aid for one simple reason; most places where humanitarian aid is most needed require a cetain amount of stability to be achieved, or need the aid in a timely manner, and only the U.S. military has the organizational skill and organic capability, as well as necessary training, to meet most of these needs.
While the U.S. and other countries have humanitarian agencies, these agencies are generally unable to operate in the hostile or remote areas of the world where the aid is most needed.
Prior to 9/11, the U.S military was engaged in peacekeeping ops, first by encouraging all parties to "play nice" so the aid could be given out, with the understanding that tanks and other force could be brought in if any party decided to interfere in that aid.

To most Americans, Bosnia is ancient history, and a happy ending was never in doubt. A closer examination shows that inadequate European military forces, and the will to employ them, only encouraged the Balkan crisis to elevate to the level it did by the time U.S. forces were sent to the area.

The 2005 Tsunami illustrates the other end of military humanitarian aid. A U.S. Navy force was able to start assisting before most other countries could even get off the dime. There is no way that the Europenas will spend the kind of money that would give them the support infrastructure that would
allow them to project aid in a rapid manner into an unstable environment.

I have been stationed in Europe for most of my career, and happily, I might add. I do get tired of hearing a very few Europeans scoff at U.S. aid to other nations. Sometimes, I like to point out that they can make their comments in their native languages and not Russian.

Another thing, and I could be wrong, but don't Europeans pay higher taxes, thereby supporting whatever aid program the government chooses? Doesn't that also diminsh the amount of private donations by Europeans?
One shouldn't think of the US military as solely an "enabler of aid," something that makes their aid more effective, as the previous post argued. It is also a prerequisite for their aid, something that makes their aid possible in the first place. Imagine a world in which generous, aid and welfare dispensing European counties had to spend as much on their militaries on a per capita basis as we do on ours. And then ask how much aid they would send abroad. If you're like me, the answer to that thought experiment is "Not very much."

Moreover, color me naive, but I prefer it when the initiative for aid programs rests in the private sector. The first reason being I prefer smaller government as opposed to larger ones as a general -- though not inviolate -- rule. The second reason being that I consider humanitarian aid as something that ought to be more idealistic and less political than other forms of aid, therefore submitting it to a political process degrades its nature by dragging motives other than the intrinsic worth of every person into consideration.

SO, in those circumstances where the US military destabilises a country, should we subtract the costs of that from the overall aid budget? Or does it only work in one direction, hmm???
"SO, in those circumstances where the US military destabilises a country, should we subtract the costs of that from the overall aid budget?"

Nobody is talking about the effect of foreign aid spending, only the amount spent. So, no, nothing is subtracted.
Niall, I mentioned Kosovo because that was a clear example of an intervention undertaken for humanitarian reasons.

In contrast, I didn't describe Afghanistan that way because the intervention's purpose was to benefit the population. (Although I did argue that our ability to fight wars like Afghanistan benefits our allies in Europe and facilitates their aid.)

So what about Iraq? Does our intervention there count as a conceptual subtraction from our foreign aid? It's hard to answer such a question clearly.

On the one hand, Saddam no longer kills thousands (or tens of thousands) of people every year. Yet we helped bring about a situation where tens of thousands are still dying. Yet those deaths are the work of Sunni terrorists and Shi'a death squads. Yet a better US policy could've reduced the killer's influence. Yet...

So no easy answer there. Better to stick with the Kosovo principle.
off topic but...

when does Josh's book come out?
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Three quick points on what is a very interesting topic: First, it may be important to distinguish between the military delivery of humanitarian relief (i.e., tsunami, Pakistani earthquake), and military humanitarian intervention, as the former could feasibly be done by relief agencies themselves, if they had the resources.

Second, while your point is well taken that much aid could not be done without security, counting the provision of security as aid itself for me is a step too far. The obvious question is security at what human cost and by what means to still 'count'?

Third, 'credit' should no doubt be given for humanitarian interventions, but I would prefer to keep both the credit and critique separate from that of aid. In doing so, while perhaps the EU could criticize America for low aid to GDP, the US could rightly criticize the EU for not having the capacity to stop genocides. Both are fair, I just don't see the utility in conflating them.
Finally some one is doing the math. David Kenney
Some years ago, dealing with exchange students, I heard the following exchange between and Aussie kid and a Norwegian:

A. Do you have a draft?

N. Yes.

A. How is it being in the army? Do you know anybody who has? Is it hard.

N. It's not a big deal. Training is easy. If anything happens, we know who'll take care of it.

Aubrey--sotto voce. "You're welcome, you complacent asshole."

I believe that one of the war plans for conventional war involving NATO and the Warsaw Pact had an entire Marine division in Norway, and there was some training in Norway.

That kind of security? Priceless. For them. Also free.
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