Shaping a new foreign aid policy for today's world.

• Author: Bandow, Doug

FOREIGN AID has become one of the constants of American foreign policy. Since World War II, the U.S. has provided more than one trillion dollars in bilateral economic assistance to other nations, supplemented by generous contributions to such multilateral organizations as the World Bank, regional "development banks," the International Monetary Fund (IMF), and the United Nations. Washington also has provided developing nations with large-scale military support, trade subsidies, etc.

Aid money continues to flow by about $18,000,000,000 a year. Although spending is down from a decade ago, pressures to increase expenditures in the future remain strong, given not only the Clinton Administration's general looseness with the public purse, but also the "emergencies" that regularly seem to come America's way. For instance, after the collapse of Mexico's peso in December, 1994, the Administration offered to extend an extra $3,000,000,000 credit, on top of the previously promised $6,000,000,000, to help buttress Pres. Ernesto Zedillo's government. Undersecretary of the Treasury Lawrence Summers explained, "Clearly, in approaching this situation, we've recognized the central importance of Mexico to the United States because it is our second largest trading partner, because we share a 2,000-mile border, and because our societies are so closely intertwined." As Mexico's economic woes expanded, the Administration proposed an additional $40,000,000,000 in loan guarantees, only to face mounting public opposition. Pres. Clinton then bypassed Congress and announced his plan to provide $20,000,000,000 in loans and loan guarantees through a special Treasury Department fund. (The over-all $50,000,000,000 assistance package includes $17,800,000,000 from the International Monetary Fund, to which America is the largest contributor.)

Not that this should come as any surprise. The Bush Administration forgave nearly $7,000,000,000 in Egyptian debt to reward Cairo's participation in the Persian Gulf War; Washington formally wrote off about $2,700,000,000 in Polish debt to assist that nation's move to democracy. The Clinton Administration is a leading supporter of increased assistance to Moscow. There is, it seems, a perception among foreign aid advocates that the pot of cash is endless.

However, with the coming of a Republican-majority Congress, a new world finally may have dawned. Most Republicans in the House never have cared for foreign aid. The chairman of the...