A Unified Security Budget for the United States

Thomas Nides
Deputy Secretary for Management and Resources 
Center for American Progress
Washington, DC
August 31, 2011

Thank you very much. Thank you, Larry. I want to thank everyone for being here in August. I hope this is not considered a vacation day for those of you who are sitting in the audience. If so, that’s quite sad. I want to thank Larry and Miriam for, quite frankly, the hard work they have done on thinking how we can better spend taxpayers’ money to protect and enhance our national security.

I also want to thank my pal Rich Verma. As you know, Rich has left a few months ago as the assistant secretary for legislative affairs. I want to be clear there’s probably no finer assistant secretary this Administration had than Rich Verma. You don’t have to ask me. You can ask about anyone at the White House that will also attest to my good words. We probably wouldn’t have a New START Treaty, a defense trade agreement with the UK or Australia, or sanctions against Iran, and much, much more without Rich’s fantastic assistance. And I, along with about just every other senior official at the State Department, wouldn’t have their job either because Rich was in charge of getting us all confirmed. And for me, that was a heavy lift, so I am appreciative and thank Rich for all the work he’s done not only on behalf of myself and my colleagues, but on behalf of the American people. And even though he’s not here, I want to thank my friend John Podesta because he’s built one heck of an organization and he deserves an enormous amount of credit.

As I said, thanks to Rich, I have a great job that I’ve had for about nine months. As Deputy Secretary of State, I could be focused on many issues and in many places. But few things are as important to me than fighting for the resources that our diplomats and development experts need to enhance our national security and our economic security. Few things are more important than making the case for security, economic, and humanitarian assistance. And few things are more important than making sure that Washington appropriates funding in a rational way.

Beginning in 2007, the Department of State and USAID’s budgets dramatically increased, and credit starts with Secretary Condoleezza Rice. Secretary Clinton picked up where she left off and pushed forward strong budgets for the State Department and USAID. We made great strides in getting additional resources to elevate diplomacy and development alongside our military. As the three pillars of our national security, we added Foreign Service officers and civil servants. We invested in programs to combat hunger, illness, and poverty, and we increased our diplomatic presence in places like Iraq, Afghanistan, and Pakistan.

The reality is that State and USAID and the military are working more closely together in places around the world than ever in our history. I saw it when I was in travel to Iraq and Pakistan and early this summer in Afghanistan. You can see it when our diplomats and development officers are working hand in glove with the military to respond to humanitarian crises in Japan and Haiti. Around the world, you will find representatives from across the interagency and the security establishment working together on joint missions on behalf of the country. They don’t think about which subcommittee funds them or what respective budget allocations are. They really just don’t care. All they know is that they work together with a common purpose and often in dangerous and deadly environments. We need a budget that reflects this reality.

But, as everyone knows, we’re facing the process of major budget cuts. These cuts could be the most significant we have had in two decades, and they could have a devastating impact on the work that we do. Let me put our situation in clear and stark terms for you.

In the Fiscal 2011 budget, which has now been finished, State and USAID took a massive hit, a 13.6 percent cut from what the Administration believed we needed in 2011. And although it’s unclear what’s going to happen in 2012, we could face more catastrophic cuts, which I’ll get to in a minute.

Secretary Clinton has made the case that State and USAID are essential to our national security, and ought to be considered part of a national security budget, which Larry and Miriam recommended in their paper. Secretary Clinton and key allies – Secretary Clinton has very – several key allies in making the argument – current, former Defense secretaries, the chairman of the Joint Chiefs of Staff, and numerous senior military officials. Now, for the first time as part of the debt ceiling legislation that just passed, State and USAID funding are included in a national security budget alongside spending for defense, intelligence, homeland security, the veterans programs, and military construction. That is the good news.

But there is a real risk that Congress could decide to shield defense spending and other categories of spending by cutting everything else, and that, my friends, is the bad news. The House Foreign Affairs Committee already approved the State Department budget that included substantial cuts as well as potentially debilitating restrictions on how we can spend our money. The House Appropriations Subcommittee approved a bill that provides just $36.9 billion of our core budget, which is an 18 percent cut. The House did accept the President’s proposal for the Overseas Contingency Operations Account, or what you might have heard of called OCO, to pay for the temporary and extraordinary costs in Iraq, Afghanistan, and Pakistan. This is the same approach that DOD takes. By isolating the extraordinary costs for these three countries, OCO has the effect of showing that the core budget for State and USAID, the core budget which manages our day-to-day operations, is relatively flat from 2010 to 2012.

As we increase the cost in these three countries around $4 billion for State and USAID, the Defense Department’s OCO spending is coming down by $45 billion. So to repeat: As our cost of our OCO is going up by $4 billion in 2012 for our operations in Iraq, the DOD’s cost is going down by $45 billion.

Now, in the business world, they call that leveraging an investment, investing $4 to save $45. Although the OCO account is helpful – it is helpful – we cannot just fund our efforts in the frontline states and gut our base budget for everything else we do in the world. So the question is: What do we do about it?

We at State and USAID are not trying to rob the Pentagon to pay ourselves. I am not here today to talk about cutting military spending. Our goal is to match our spending on diplomacy and development and the military with our national security challenges. I’ve said this until I am blue in my face and I’ll repeat it again: The State Department and USAID make up about 1 percent of the federal budget. Deep and disproportionate cuts in the State and USAID won’t do anything or make any sense if our goal is to enhance our national security.

We know that resources are necessary to advance our national security interests and prosperity around the world, and we are at risk of not getting them. This is no time to retreat from the world, because as everyone knows, it is a critical moment in our foreign policy. We have a chance to capitalize on opportunities in the Middle East and to be part of an historic pivot point in the Arab world. We have the chance to invest in programs to curb and even prevent humanitarian crises. We need the resources to sustain our diplomatic presence and effectiveness in Iraq, Afghanistan, and Pakistan.

And we need the resources to advance our economic agenda as well. Our economic officers and our ambassadors work to open markets abroad and create jobs at home. They facilitate trade and travel and tourism. This is especially important at this moment as our economy recovers from a very long recession.

The reality is that if we don’t seize these opportunities, someone else will. As Secretary Clinton has said, other countries will promote their own models and serve their own best interests. They will create jobs elsewhere rather than in the United States. They will claim the mantle of global leadership. We should not allow this to happen.

We recognize as well as everyone else that we get value from every dollar spent. We have to be able to justify each dollar we spend every day, and we have to be fixated on improving what I like to refer as our rate of return. That is why Secretary Clinton, with Rich, undertook the QDDR, the Quadrennial Diplomacy and Development Review, which is the first of its kind top-to-bottom review of how the State Department works and how it doesn’t work and how we can operate more effectively and efficiently in the 21st century. To her credit, most organizations wait until a crisis breaks out to undertake such an initiative. Secretary Clinton started the QDDR when things were going pretty well.

With Secretary Clinton’s leadership, we’re undertaking more public-private partnerships with NGOs and, yes, with the business community as well. Most importantly, in this difficult budget climate, we have to make our case to win it. Humanitarian security and economic assistant in tough times and in not so tough times are often the first buckets of spending to get thrown out the window. I understand that most Americans think that the foreign assistance makes up 25 percent of our budget, even though, as I said, it’s only about 1 percent. The positive side, however, is that when asked how much we ought to be spending on foreign assistance, people say between 10 and 15 percent, which I’ll take. (Laughter.)

Finally, we’re not making this case alone, as Larry pointed out. There is bipartisan support for what we do. Senator Lindsey Graham understands as well as anyone the importance of State and USAID’s work for our national security. General Dave Petraeus, our new CIA director, Admiral Mullen, and Leon Panetta understand the role of diplomacy and development in enhancing our national security. Bill Gates, Bono, and the former Senate majority leader Bill Frist, who just returned from the Horn of Africa with Jill Biden, all understand our mission. NGOs, and just as importantly, the business community also understands that diplomacy and development support are national security. They understand that our national security and economic security and our leadership role in the world are at stake if these cuts are too dramatic.

We recognize the threat that the deficit and the long-term debt poses to our national security, but there is a smart and balanced approach to deficit reduction. When we don’t need to do is hammer at a bipartisan program that over time have created safer, more stable, and quite frankly, a more prosperous world.

I want to thank the Center for American Progress and Larry and Miriam and Rich for giving me a chance to speak, and I am more than happy to take a few of your questions. Thank you very much. (Applause.)

PRN: 2011/1393