How is the United States able to give billions to other countries when we are trillions in debt and how does it get approved?
In: Economics
Needs to be said, that foreign aid is not simply charity. We’re not just being nice with it. We’re usually looking to get something for our money.
That can be as direct as military basing rights, favorable terms for American companies, or support in local conflicts, or as ephemeral as wanting a nation strong just so there’s a strong nation there.
Point is, America is strong based on a certain international order, the state of the world. So we have a massive economic interest in *maintaining* that state of the world, and foreign aid is one of the ways we do that.
Cutting all foreign aid would be like a restaurant owner deciding not to pay utilities to save money. You might have a bit in the short term, but in the long term you go bust.
Lots of ways. Since Ukraine is in the news, let’s start there: most of the ‘aid’ is in the form of weapons. If those are new weapons, the money goes straight into American manufacturing plants to buy the weapons. Those plants then spool up, and hire a bunch of Americans to work the lines. The weapons leave the country, but the money stays at home.
Next, they give old or due-to-be-decommissioned weapons. Frequently simply giving something away is actually cheaper than paying to dispose of it… And believe it or not, it also costs money to simply sit on stockpiles of weapons. Giving them away to someone who can use them is not just generous, it’s the prudent financial thing to do. In fact the most valuable part of the whole thing is actually the manufacturing capacity. Anything that spools that up is better for national security than any amount of shells in deep storage.
It’s also a form of marketing. Sales of Javelins, for example, are through the roof since Ukraine showed the world how well these things did against tanks. Countries are now lining up to buy them from the good ‘ol US of A. Guess what country those sales are coming at the expense of? That’s right, Russia. A good part of their economy was selling military equipment to the countries who were duped into believing that it was nearly as good as the western stuff… that they could have a modern army on the cheap. Well, the war in Ukraine has disabused a great many countries about the quality of Russian arms. They’re paying attention and pulling dollars away from Russia and their crap quality arms, in favour of Western and the new Asian manufacturers.
Stepping away from Ukraine, aid has often been used by the West as an economic wedge to expand markets. For example: A nameless country makes a big deal about gifting a bunch of wheat to another country that’s struggling. Sounds great right? Well.. not always. All that free food floods the local market and essentially bankrupts the local producers who are struggling to make ends meet as well. So the local population doesn’t starve today, but they lose the capacity to be self sufficient in the long run. Now being reliant on food imports from those ‘generous’ countries. The local farmers are forced to sell out to big multinational plantation who then converts all that good producing land into coffee and chocolate cash crops that all get exported. If they’re lucky, those former farm owners get hired back at starvation wages to pick coffee beans. Meanwhile, the large agribusiness firms have a new market. The true solution to the problem was to buy the food from local producers and give that food to the starving people, until the crisis passed.
Aside from the fact it’s not actual money being given, but rather stockpiled weaponry, it is also more cost effective to support our allies through this than by directly going to war against our enemies.
IE: It would be magnitudes more expensive to go head to head with Russia directly. Nevermind the threat of things going nuclear.
Hamas, Hazbollah and the Houthis are another great example. Iran going directly at Israel would probably trigger a nuclear reaction from the Jewish state. Which is something they appear to not be shy of considering themselves. Financing those three groups, on the other hand, well, they get to take nasty lottle bites at the ankles of Israel while being at a far distance from the actual fight.
I mean, also if you pay American companies that pay a American employees to make 100m usd in weapons don’t the money gets transfered to those employees and suppliers in the US? Part is paid in taxes part keeps being spent in the country anyway?
This is only possible when they can keep most of the supply chain within the country
You guys are the only country that xan print money as much as you want and the rest of tge world will pay for it.
I have a mortgage, but I still have income/can get other loans to spend money however I’d like. The same goes for the US govt, except they are way better at convincing others to loan them money than any individual is.
Also, they are uniquely able to create money from thin air.
Don’t think of it as giving, think of it as buying popularity overseas
Other than that – giving a country a billion dollars of military aid is generally investing a billion dollars into your own economy – the work is done by people on the US who spend that money in the US and pay taxes in the US.
The federal reserve creates money out of thin air to pay for what Congress allocates to spend.
Congress allocates money to spend based on what lobbyists convince them to spend on. The military industrial complex is the most powerful lobby, so they get the most money.
The creation of money that the federal reserve does creates inflation (creating more dollars out of thin air makes the actual value of a dollar less)
Taxes are the mechanism to destroy dollars & reduce the inflation.
If the Fed creation and the Taxes destruction balance out, then there is no inflation, and the value of the dollar stays the same.
If the Rich and Corporations don’t pay their fair share, then the taxes fall on the middle class, and the value of your dollar decreases.
This is all COMPLETELY different than what a human experiences, where what you take in determines what you can spend.
Everyone that tries to relate those two systems together is lying to you on purpose, and should be burned alive in a tire fire.
Aid is not just for helping. Aid is buying policy, friendship, influence and interest.
For example, a third world country has huge political or economical instability or a war, yet a lot of resources. Helping them out now would make them friendly when conflict is resolved, when they get on their feet and start exploitation of those resources. Which could result in good trade deals or maybe US companies building the entire infrastructure for exploitation, and so on. Which maybe also gives you a legitimate cause to move your military there, get sea or air access for your defense forces and so on.
Also, all ambitious countries try to do that, debt or no debt. So it’s a race. China is basically building railroads and factories for entire African continent. Russia is also deep in Central African Republic, Syria and so on.
Foreign aid is not charity. Those dollars are usually given for a very good reason and reasonable expectations for some sort of benefit further down the road.
Ukraine is most obvious example – US has no other serious enemies apart from Russia, North Korea and China (and maybe Iran). So every gun, every bullet, every plane and ship more or less exists to deal with them.
So those things rusting away in landlocked US bases and costing ton of money in maintenance and training of servicemen to use those is ineffective. Like a bicycle you bought and takes up room, but you’ll never use. Giving those guns to Ukraine and using servicemen to train Ukrainians to use them will make those weapons do what they’re intended for. So, budget-wise, US is actually using that money (and weapons) for intended purposes, not wasting it away due peacetime. And if Ukraine manages to deal with Russian ambition and set them back for decades, US would need much less guns and military down the road. Threat and spending levels would go down and quality of life would go up.
Which should make every taxpayer happy, really.
Same way you can give your kid an allowance and contribute to church/charity even though you have a mortgage and car loans to pay off. So long as you can make the payments and still have something left over, it’s all good.
Latest Answers