Secretary Hillary Clinton spent Tuesday and Wednesday on Capitol Hill testifying before House and Senate authorizers and appropriators on the FY13 International Affairs Budget request.  In her testimony, she urged committee Members to support a strong and effective International Affairs Budget, saying: “American leadership is not just respected, it is required. And it takes more than just resolve and a lot of hours in the plane. It takes resources.”  Among others, Secretary Clinton took questions on aid effectiveness in the Frontline States, response to the Arab Spring and global health.

The four hearings gave Secretary Clinton the opportunity to address questions many lawmakers have about the FY13 budget request, including:

• Middle East and North Africa Incentive Fund (MENA-IF):  Secretary Clinton was pressed by several Members for details about the new incentive fund to respond in countries affected by the Arab Spring, such as Tunisia, Libya and Egypt.  Senate Foreign Relations Committee Chairman John Kerry (D-MA) expressed his support for the fund, saying that it will “make sure that we have the tools and the flexibility needed to act proactively and take advantage of opportunities when they arise.” While she did not provide many specifics, Secretary Clinton compared MENA-IF to similar funds created for Eastern European countries after the fall of the Berlin Wall, and said the fund would “complement existing bilateral and regional programs, but it would give us flexibility to look and be as smart as possible.”  She assured the Committee that projects would be chosen “based on rigorous analysis” to be most effective in supporting democratic transitions and that the Department would work with Congress in that vein.
• Funding for Egypt:  With strict legislative conditions included in funding for Egypt in the final FY12 appropriations bill, several Members asked Secretary Clinton what steps were being taken to certify Egyptian compliance with those conditions following raids on democracy promoting NGOs last December.  Clinton stressed that she was confident Egypt would meet the standards for certification, and it was announced Thursday that the travel ban on NGO workers had been lifted.
• Decreases to Global Health:  Both State-Foreign Operations Appropriations Subcommittee Chairman Kay Granger (R-TX) and Ranking Member Nita Lowey (D-NY) raised concerns over decreases to global health programs in the FY13 request.  Similarly, Senator Marco Rubio (R-FL) asked Secretary Clinton how decreases to the President’s Emergency Program for AIDS Relief (PEPFAR) would impact President Obama’s pledge to put 6 million people on HIV/AIDS treatment by the end of this year.  Secretary Clinton stressed that the U.S. is still on track to meet the commitment by lowering costs and leveraging money through the Global Fund to Fight AIDS, Tuberculosis and Malaria, and highlighted the bipartisan support of our global health programs, saying: “The request that we have given to you will give us the maximum impact in our investment in fighting HIV-AIDS.  This was a really historic program started under the Bush administration, begun by President Bush fully supported on a bipartisan basis. It buys us so much good will. If you go to Sub-Saharan Africa it’s one of the reasons why people have a positive view of the United States.”

The Senate State-Foreign Operations Appropriations Subcommittee and Senate Foreign Relations Committee hearings on Tuesday focused primarily on the Frontline States and U.S. policy towards Egypt and Syria.  Many Senators expressed their support for the International Affairs Budget, but raised concerns about the prioritizing of programs in Iraq, Afghanistan and Pakistan at the expense of other programs.

• State-Foreign Operations Appropriations Subcommittee Chairman Patrick Leahy (D-VT) cautioned about the continuing budget challenges, saying: “We will certainly receive an allocation below the amount requested by the President.”
• State-Foreign Operations Appropriations Subcommittee Ranking Member Lindsey Graham (R-SC) highlighted the national security implications of the International Affairs Budget, saying: “I would just tell my fellow citizens and people from South Carolina… if you don’t believe military force is the answer to every problem, which I don’t, then we need an engagement strategy, and sometimes investing in a country at the right time can pay dividends.” He also commended Secretary Clinton for “running the State Department in a business-like fashion.”
• Senator Kerry applauded the FY13 request, calling it “a smart investment that ultimately yields outsized returns and saves us money over the long haul.”  In an op-ed for The Wall Street Journal Wednesday, Kerry highlighted the International Affairs Budget’s cost-effectiveness, noting “There’s nothing fiscally conservative about starving our foreign policy budget of a billion dollars today only to spend a trillion dollars years later in armed conflict.”
• Senator Chris Coons (D-DE) stressed “how an American values agenda around governance and transparency and rule of law also helps promote economic opportunity” around the world, asking Secretary Clinton to elaborate on her recent keynote address at the State Department’s inaugural Global Business Conference and discuss her economic statecraft initiative.  Secretary Clinton highlighted several initiatives funded by the International Affairs Budget – including trade delegations of U.S. companies to Africa, the Millennium Challenge Corporation, and mobile technology programs – promoting economic development and long-term growth in Africa. 

The House State-Foreign Operations Appropriations Subcommittee and House Foreign Affairs Committee hearings on Wednesday also focused on world events but included some concerns about the request level as well.

• House Appropriations Committee Chairman Hal Rogers (R-KY) raised concerns about the overall budget request, saying: “While I share your interest in supporting key national security priorities, I am concerned that … even while the proposed Department of Defense budget is being reduced by the administration, State and USAID continues to rise in their requests.”
• While raising her concerns about some areas of the budget request, including decreases to global health and Latin America, Representative Granger noted how vital the International Affairs Budget is, saying: “I wish every Member of Congress could hear the questions that were asked and the answers that were given in this hearing today because hearing that, they couldn’t fail to understand how important this bill is.”
• Representative Lowey praised the request as “a responsible and realistic vision for these vital programs that balances many competing priorities” and commended Clinton for her commitment to transparency and efficiency through the Quadrennial Diplomacy and Development Review (QDDR).
• Representative Tom Cole (R-OK) expressed concerns about growing isolationist tendencies in certain corners of both the Republican and Democratic parties and asked Secretary Clinton what the Appropriations Committee could do to “sustain support for a robust American presence around the world.”  Secretary Clinton replied, “I think that American leadership is absolutely essential in every area we are concerned about. And we have to support our presence and our involvement around the world to sustain that leadership.  And very often the kinds of claims that come from people who wish to see us withdraw from the world are not taking into account the consequences of that.”
• House Foreign Affairs Committee Chairman Ileana Ros-Lehtinen (R-FL) criticized Administration priorities towards the Middle East and decreases for Latin America in the FY13 request, but added, “I appreciate your restraint with the top line number in your budget proposal, coming in at $5.1 billion below last year’s request.”
• House Foreign Affairs Committee Ranking Member Howard Berman (D-CA) responded to the misperception that many Americans have about the amount we spend on foreign assistance, saying: “Many people believe, erroneously, that foreign aid accounts for 20% or more of our budget.  The truth is that we spend just over one percent of our national budget on diplomacy and development.  Yet these programs have an outsized impact on our health, prosperity and security here at home.”

2.    Secretary Panetta Emphasizes National Security Role of International Affairs Budget

In a House Budget Committee hearing Wednesday, Secretary of Defense Leon Panetta underscored the importance of a strong diplomacy and development alongside defense.  Committee Ranking Member Chris Van Hollen (D-MD) noted the strong support for the International Affairs Budget from national security leaders such as former Secretary of Defense Robert Gates and Chairman of the Joint Chiefs General Martin Dempsey and asked Secretary Panetta if he agreed with their views. Secretary Panetta concurred, saying: “Strong national security is dependent on having a strong diplomatic arm, a strong development arm, a strong intelligence arm, a strong capability to try to have strong economies in the world… And I think if any one of these areas suffers cuts above and beyond others it’s going to damage our security just by virtue of the kind of broad approach we need to have to be — to maintain the leadership position we have in the world.”

3.    Latest Outlook on FY13 Budget and Appropriations Schedule

House Republicans are hoping to unveil their FY13 Budget Resolution later this month, with the goal of completing floor action on the measure before the two-week recess that begins on April 2.  Similar to last year, the House’s FY13 budget resolution is expected to call for major reductions in both discretionary and mandatory spending, including the International Affairs Budget.

Complicating House action on a budget resolution this year, however, are divergent views within the House Republican caucus of what the top-line FY13 discretionary spending cap (302a) should be.  House appropriators generally want to abide by the $1.047 trillion cap that was adopted last year as part of the Budget Control Act.  But other Republicans, including Budget Committee Chairman Paul Ryan (R-WI), prefer a lower discretionary spending level more in line with the $1.028 trillion level in their budget resolution last year.  Others in the caucus, including many Freshmen, prefer to cut spending even further.  One proposal being put forward would dramatically lower the FY13 spending cap to $931 billion, a level reached by taking the FY12 House Budget Resolution level of $1.028 trillion and subtracting an additional $97 billion, which is the level of cuts to FY13 that will be required in January under sequestration’s automatic cuts.  House Republican leaders are trying to forge a compromise on these funding preferences so that action on the Budget Resolution can get underway.

On the Senate side, Majority Leader Harry Reid (D-NV) has made clear that the Senate will not take up an FY13 budget resolution this year, in part because an FY13 discretionary spending cap (302a) is already in place under the terms of last year’s Budget Control Act.  Nonetheless, Budget Committee Chairman Kent Conrad (D-ND) is still expressing his desire to report a budget resolution out of his Committee.

As the budget discussions continue, appropriators in both the House and Senate are gearing up to advance as many FY13 bills as possible this spring into early summer.  The all-important 302(b) allocations are anticipated by mid April, with Subcommittee and Committee markups of those measures to follow later in April and May.  As was the case last year, allocation levels will be higher in the Senate than in the House, including for the International Affairs Budget.  It remains to be seen if many bills will ever make it to the floor for consideration, particularly in the Senate.  Congress is likely to adopt an FY13 Continuing Resolution in September that would last until after the November election, thus delaying any major decisions on FY13 appropriations until the post-election lame duck session or the new 113^th Congress in January.

4.    Administration Continues Push to Reorganize Trade Agencies; Congressional Approval Unlikely

The Administration is continuing its effort to gain congressional approval for the authority to reorganize and consolidate the federal government’s trade-related agencies, including several funded by the International Affairs Budget.  Office of Management and Budget (OMB) Acting Director Jeffrey Zients recently sent a letter to Congress, accompanied by draft legislative text, asking it to reinstate an authority granted to past presidents to streamline and reform the Executive Branch.  On the heels of OMB’s action, Senators Joe Lieberman (I-CT) and Mark Warner (D-VA) introduced the draft text as a bill: the Reforming and Consolidating Government Act of 2012 (S. 2129), which would reinstate the authority.  According to multiple bipartisan congressional sources, it is very unlikely that any action will be taken on the legislation in either the House or the Senate.