Following is a Web version of a document from USAID's 1997 Congressional Presentation. Please note that some formatting may have been lost in the automated conversion of the original file. This document is also available for download in its original WordPerfect 5.1 format.

USAID looks toward Fiscal Year 1997 with a sense of accomplishment and challenge, but also with deep concern: We fear that America's foreign policy leadership and USAID's capacity to be an effective foreign policy and national security tool are being threatened by continuing, deep cuts to the International Affairs function of the federal budget.

The Agency's work is achieving measurable results, creating markets and jobs for the American people, and confronting global problems that transcend borders and the limits of traditional diplomacy. USAID is embracing new challenges in Bosnia and Gaza and the West Bank, and continuing to build upon successes in areas once deemed hopeless, such as South Africa, Cambodia, and Haiti. USAID is charting a new role for foreign assistance in the post-Cold War era, targeting the social and economic problems that constitute a new strategic threat to the peace of the world.

At the same time, USAID faces the cumulative impact of years of budget cuts. It no longer is able to "do more with less." U.S. foreign aid levels are at their lowest ebb, in real dollar terms, since before World War II. In FY 1996 alone, Development Assistance was cut 23.1% from the year before. Support for Eastern European Democracy was cut 9.7%; aid to the Newly Independent States of the Former Soviet Union was cut 24.6%. P.L. 480 Titles II and III resources were cut 7.2%. In dollar terms, these cuts totaled $807,000,000.

USAID also continues to struggle to meet the limit imposed on its operating expenses, of $465,000,000, plus $25,000,000 from other programs. To accomplish this, the Agency has instituted a hiring freeze, restricted travel, lengthened tours of duty and implemented other cost savings measures. In order to stabilize the Agency and bring personnel levels in line with funding requested for FY 1997, a Reduction In Force (RIF) has been announced that will eliminate nearly 10% -- about 200 -- of the Agency's direct-hire jobs by September 30, 1996.

Budget cuts threaten USAID's ability to lead the international development community and advance American interests as it has throughout the post-World War II era. The Agency is a valuable tool of U.S. foreign policy and is recognized throughout the world as the leading foreign assistance institution. To many countries, USAID embodies the commitment of the United States to the developing world.

Recent cutbacks in the International Affairs accounts have been made almost entirely on the basis of the domestic perceptions about "foreign aid" at a time when the focus on balancing the federal budget is forcing deep cuts in domestic programs. A full-scale policy debate about the continued importance and the appropriate role of foreign assistance in the post-Cold War era has barely begun; what little discussion that has occurred has been overwhelmed by the domestic budget debate. This situation cannot continue without having a crippling impact on development assistance and transition programs. It threatens to deprive the United States of effective, low-cost tools that can decrease the need for far more expensive and dangerous diplomatic and military approaches.

Development assistance works. That singular fact should be the starting point for any discussion about USAID, any debate about spending levels, or any deliberation about the future shape of foreign assistance.

Measured over the span of a single generation, the costs of foreign assistance are dwarfed by the dividends. The benefits are social, political, and economic. Development progress kindles a sense of hope and possibility that is the antidote to social discord and a culture of crisis. It ameliorates strains within society and creates opportunities for accommodation. It lays the groundwork for a nation's rapid emergence as an exporter, a customer, a trading partner, and a valued ally.

Foreign assistance has a track record. Its value is apparent in the changes that have occurred in the developing world during the last 40 years. From 1950-1955 until now, infant mortality has dropped from nearly 20% to 7%. Life expectancy at birth has increased from 40.7 years to 62.4. People in developing countries consume 20% more calories per day than they did in 1961-1963. Literacy rates in some developing countries now nearly equal those in the developed world; today, there are two and half times as many literate people in the developing world as in the developed world. These facts are reason for optimism.

Development assistance serves our self-interest. Nations support foreign assistance in their own self-interest; it is not a charitable endeavor. This is especially true in the sphere of economics.

USAID's support for international research activities has led to advances that benefit U.S. agriculture. Much of the wheat and rice grown in the U.S. is derived from parent crops developed by the same research programs that led to the Green Revolution. The building blocks for U.S. crop and livestock production are strains of plants and animals that exist around the world; USAID supports a network of research centers that conserves these genetic resources for the benefit and food security of the entire world.

America's future prosperity depends upon its participation in international markets. USAID's programs help increase standards of living, enabling nations to begin to afford a greater quantity and quality of American goods and services. Foreign assistance also fosters an enabling environment for U.S. trade and investment in developing nations by helping secure open, competitive markets. USAID programs are often instrumental in establishing fair business codes, viable stock markets, sensible tax codes, and the rule of law. Foreign assistance helps create the stable and transparent business environment that U.S. companies must have to operate successfully abroad.

USAID helps to create and expand new markets for the U.S. economy, and the dividends from past investments are now materializing on a massive scale. Developing countries and their strong potential for growth have made the economies of developing nations increasingly important to the United States. Most of the growth in U.S. exports continues to come from countries in the developing world and countries in transition from state- dominated economies to free market economies. In 1995 alone, U.S. exports to developing countries rose by 11.8 percent. Between 1990 and 1995, American exports to transition and developing countries increased by $98.7 billion.

U.S. exports to the developing world in 1994 totaled a record $215 billion. That translates into over 4 million jobs for Americans. Developing countries are particularly good customers for our high-value exports: pollution control equipment, computers, software, telecommunications equipment, energy-efficient machinery, power-generation and cooling equipment, and instrumentation, as well as a wide range of engineering, academic, and consulting services. Many regions of the U.S. are increasingly dependent on exports for the health of their manufacturers and service businesses.

Development assistance is a primary tool of American foreign policy. Foreign aid does more than expand American markets. It has always been a powerful instrument of diplomacy. It is more useful now than ever before. In the former Soviet Union and Eastern Europe, foreign assistance helped lay the groundwork for market economies and societies that respect the rule of law. In Angola, aid has enabled a potentially rich nation, long divided by civil war, to begin fulfilling its promise. In South Africa, USAID helped to facilitate a peaceful transfer of power and the end of Apartheid. In Haiti, the Agency's work helped to provide an alternative to endless oppression.

These are estimable, important achievements; they have saved billions of dollars that might otherwise had to have been spent on military defense; they have lessened the need for humanitarian aid; and they have created and opened markets for American goods. Despite occasional setbacks, the achievements of foreign assistance have helped to make the world a more hospitable place for the United States, its people, and its interests.

No diplomacy by itself is clever enough to defuse hunger and want. No military can fight poverty or disease or environmental damage on a global scale. Throughout our government, there is a growing realization that poverty and development problems contribute to civil strife. It is significant that the U.S. military has emerged as one of the institutions most sensitive to this. They do not want to become the President's primary option, or only option, for dealing with such situations.

Development assistance is part of the U.S. strategic defense. Our national security community is rapidly coming to appreciate that America's security is now threatened by regional conflicts, movements across borders of people and diseases, environmental damage, unsupportable population growth, and political oppression. For example, a recent Central Intelligence Agency study correlates societal stability with the extent ofhuman development, the level and relative fragility of democratic systems and a nation's openness to trade. The CIA Task Force on Failed States has identified as key determinants of stability the very problems that foreign aid addresses.

This concern is evident in strong public statements supporting foreign aid from Secretary of Defense William Perry and General John Shalikashvili, Chairman of the Joint Chiefs of Staff. They wrote in USA Today last year that "Foreign aid, like defense spending, helps preserve our national security."

These assessments reflect a growing understanding throughout our government that U.S. leadership in development is a crucial part of our arsenal in the post-Cold War world. If we fail to act now, we know that in 20 years, when there are two billion additional people, the challenges will be far less manageable. No one wants our military to be the first and only option in an endless stream of engagements. We need a preventive strategy that we can afford and one that works.

We also need new instruments of prevention. We need more effective early warning systems that incorporate an assessment of the pressures created by deteriorating conditions. We need to act in concert with the international community to mitigate those conditions. And we need to find ways to intervene more effectively to resolve internal disputes within sovereign borders, before they spill over. Foreign assistance provides a means for addressing each of these issues.

Development assistance is prevention. Our programs of assistance are investments; they are considerably less expensive than humanitarian relief, reconstruction, and peacekeeping. For example, more than 3 million lives are saved every year through USAID immunization programs. More than 50 million couples worldwide use family planning as a direct result of USAID programs. Over 3.2 million people have been reached with HIV prevention education, and 58,000 people have been trained to implement these education programs in their own countries.

Foreign assistance demands vision and patience, with the understanding that the cost of not acting will be far higher. Such costs are already being tallied: Refugee assistance has exploded and now consumes productive resources; our efforts in Rwanda have cost us $580,000,000 and we are not yet through. Peacekeeping costs for the United Nations in 1994 exceeded everything spent on peacekeeping in the previous 35 years combined. This simply cannot go on. We will exhaust our financial resources and lose the will to act if the next 20 years see only crisis after crisis, without the promise of something better.

Working within the limited resources made available, USAID will continue to fulfill its mandate as a core component of American foreign policy. In this vein, the $600,000,000 commitment to assist Bosnia in its reconstruction is the natural complement to an exit strategy for American military forces. Just as U.S. leadership was critical to the peace negotiations and to the involvement of NATO in ending the fighting, so USAID's leadership in democracy and economic reform will help Bosnia embrace positive change. To the best of their ability, the people of USAID will continue to create opportunities for both the nations we assist and the American people.

Development assistance has support. Polls consistently show that the American people support the specific endeavors of foreign assistance -- disaster relief, market creation, environmental protection, and population, education, and public health programs. It is only the rubric of "foreign aid" that is unpopular.

The problem is exacerbated by the huge misconception of how many tax dollars are spent on aid. While a third of Americans consistently estimate that the U.S. spends about 18 percent of the federal budget on foreign aid, the true amount is less than one half of one percent. The United States ranks last among the top 21 industrial nations in the percentage of Gross Domestic Product we devote to foreign assistance. Polls show that voters want far more spent on specific aid activities than is presently appropriated.

USAID is a unique national asset. Looking toward the next Fiscal Year, USAID can say with conviction that every dollar requested for Fiscal Year 1997 is essential to maintaining a disciplined, efficient, modern, responsive foreign assistance program. The fat is long gone. Any cuts from the budget request will not simply cut into muscle; they will dismember USAID and permanently diminish our capability to act.

The U.S. Agency for International Development is not a faceless bureaucracy ripe for the trimming. We are a unique concentration of talent that this nation needs and on which other nations rely.

We are an assembly of the most experienced and highly trained development experts in the world.

We are the linchpin of agricultural research that spawned the Green Revolution.

We are a resource for medical research that saves thousands of children each day.

The people of USAID are relief workers who know how to get food to refugee camps that are days away from the nearest road. The people of USAID are environmental engineers who know how to clean up the blackened villages of Eastern Europe. The people of USAID are economists who know how to help poor women liberate themselves with only a small loan and a village bank.

These skills must be safeguarded and nurtured. Expertise cannot be turned on and off like water from a faucet. Once dissipated, they cannot be conjured out of thin air, no matter how pressing the need. And the capacity to deliver foreign aid involves more than individuals. It also involves the intangibles of skilled people operating as a group. When foreign aid is targeted, experience, institutional memory, and the cohesion of a shared mission also are threatened.

Any further cuts will rob the United States of the ability to utilize the skills and experience of the people -- our people -- who possess these critical skills.

USAID is working smarter and better. USAID has taken the lead in reengineering its own processes, in order to save money and work more efficiently. The Agency has: