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This Week in Global Development
Special episode: The US budget deadlock explained
00:31:09
The negotiation and approval of the U.S. budget is a complex process, filled with political bargaining and high-stakes showdowns that can have a profound impact far beyond Washington. This process directly shapes funding for foreign aid, global...
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- [00:00]
A
FOREIGN My name is David Ainsworth, and you're listening to this Week in Global Development, hosted by myself, Amitri Kamba and Adva Saldinghap. Welcome to a special episode of this Week in Global Development. We're going to be looking at the United States budget process, which is always a complicated process and critical for decisions about international development. But this time this year, it's particularly critical because of all of the thorny issues thrown up by the Trump administration. I'm joined by Advar Seldinger and Michael Igoe, two experienced US Reporters who've been covering the aid section of the US Budget for years and years. And we're going to have a little chat about how we think it's going to play out this time. And my role here is just to be a confused British person who doesn't understand how the American budget works and to therefore ask questions which Americans may not think to ask in order to help our foreign viewers understand what's going on. So we're going to start off by talking a bit about just how the US Process works in general, because it's slightly unusual. And then we're going to start to talk about some of the wrinkles that are particular to this year and why we're facing particular uncertainty about how much funding for foreign aid, for foreign assistance might actually emerge from the United States and try and help you build a picture of the factors that are going to potentially influence a very uncertain United States foreign assistance budget to understand what money might be flowing out of the States in the coming months. So that's a very long introduction. Without any further ado, let's just talk quickly. Advar, maybe you can just run us through how the United States budget process works, because it's slightly unusual in other countries. The executive says this is the money we want to spend, and the legislature says, okay, we'll spend that amount of money then, and there's a little bit of inquiry, but it pretty much goes forward in the United States is very different, right?
- [01:51]
B
It is. And I'll say a couple of things. You already sort of prefaced that this year is different. There is a way that the U.S. budget process is supposed to work in sort of normal order, normal times. We haven't sort of hewn exactly to that process in quite a few years, and this year it's even more different. But basically the way the budget process works is that the first sort of step is that the executive branch, the administration, decides on its budget. The various agencies go through a budget budget process. Often the office of management and budget actually sort of gives them a top line number, and then they figure out how they want to allocate that funding. But essentially what comes out of that is the President's budget request, which he gives to Congress and says, this is the amount of money I want to spend. Now, very often Congress kind of ignores that. They can use that as a guide, but it does not sort of become the holy grail of the budget process. So what happens then is that in both the House and Senate, the appropriations committees, and it sort of starts at the subcommittee level, craft bills for US Foreign assistance. And so they come up with. They're often actually given sort of the top line number, and then they figure out how they want to allocate those funds. And so typically the House will come out with their proposal first. They'll have a discussion that they call markup in committee. Then it would go to the full committee for a markup and approval, and then it would get a vote on the House floor. The Senate would run a parallel process where they're also crafting their own bill. It doesn't necessarily look the same as the House bill. Often it looks different. Sometimes there's different priorities, very often different numbers. So the Senate writes their bill. They're also going through a committee process, typically, but not always. And then at the end of the day, both the House and the Senate have to come together and sort of reconcile their two versions of the bill and come up with a compromise bill, then that then hopefully moves forward. Now, all this has to happen by the end of September. October 1st is the beginning of a new fiscal year in the United States. And what we've seen certainly in recent years is a big crunch at the end of the year in September and a lot of pressure to try to get a budget bill passed. Now, for the past many years, Congress has failed to meet that deadline. And so what they do is they pass something called a continuing resolution, which is a bill that essentially keeps funding the same as the year before and kicks the can down the road to give Congress more time to come up with a funding bill. And sometimes what you end up with is a package of bills where they pass essentially the whole US Budget in one bill. Sometimes they pass a series of bills at a time so parts of the government get funded and not if nothing happens by October 1st, there's a government shutdown, which has a whole number of ramifications. But that's sort of the Cliff notes version of how the US Budget process works. And I'm happy to go into more detail about different areas as we sort of talk about the current situation.
- [04:43]
A
Okay. Jump in at any stage, Michael, if you, if you have something that you'd like to add to this. So that's where it works in the, in the normal situation. Now, what happened in 2025, specifically, when we're looking at the aid budget, it may have looked to people who weren't paying terrifically close attention as if there were going to be huge cuts to the top line aid budget, but actually they ended up rolling over pretty much what happened in 2024, as I understand.
- [05:06]
B
Yeah. So a unique thing happened in the fiscal year 2025 budget where Congress not agree on a new set of budget bills. So they passed a year long continuing resolution which essentially funds the government at the same levels as the prior year. So that is sort of an unusual situation. It did mean that in fiscal year 2025 there was a significant amount of money. But what we've seen is then efforts by the Trump administration to sort of try to claw back some of those funds. And Michael, I don't know if you want to get into sort of this rescission process, because I know that's something you've been following closely. But just because the money has been appropriated, we are not necessarily seeing this administration spend all of those funds.
- [05:48]
C
Yeah, I'll just jump in and say, you know, I think ADVA just did a terrific job of walking us up to the point where Congress agrees to a budget. Right. And so then that becomes the appropriation that's handed to the executive branch with sort of the message like, here's the money that you have to spend. And you know, when it comes to foreign aid, even more than that, like, here are the many specific areas where you have to spend that money. Like a lot of the, the foreign aid budget, a huge amount of it, is essentially earmarked for very specific programs. And Congress puts a sort of firm hand on where that spending is supposed to go. So in normal times, that's what would sort of direct the White House through federal agencies to carry out foreign aid policies and programs. What we've seen this time is something radically different, which is that the White House, as Adva said, has been very reluctant to spend foreign assistance funding. Of course, this is all taking place within the context of a broader effort to dismantle usaid, fold its operations into the State Department, and sort of, through that effort, dramatically scale back the amount of foreign aid programming that the US Government is carrying out. So, you know, the broad point here is that this is a highly unusual moment, and they're sort of two big forces colliding at the same time. One is the normal budget process. The other is the Trump administration's very particular view and essentially antagonism towards large chunks of foreign aid. So there's sort of, you know, something has to give there. And I think so far what we've seen is that the normal. It's been the normal budget process that has given. And we can go into some of the ways that that's been the case. Happy to continue with that narrative if you'd like to.
- [07:33]
A
So, yeah, I mean, just to mention briefly what they've done is handed back already about $8 billion worth of aid that had been appropriated in previous years and said, we don't want to spend this, and Congress has agreed that it's not going to spend that.
- [07:46]
C
Yeah, I mean, I would back up a little further than that, which is to say that, you know, early on in the administration, they froze and then summarily canceled, you know, a huge number of foreign assistance programs. And so already you're at a very strange, unusual starting point, which is, you know, the executive branch sort of pressing pause on all foreign assistants around the world and going through this sort of unilateral process to review and decide which of those programs fit within its own foreign policy vision. You know, so that's a real, like, centralization of power within the executive branch over how foreign aid policy and programs are being delivered. And then you have this sort of ongoing process to work those decisions through the budget. And, you know, so you've got. You've got an appropriated chunk of funds, you've got an administration saying, actually, we don't want to do a lot of that. There needs to be a process that sort of brings those two streams of thought together. Right. And so one element of that has been the rescissions process that we've seen. Rescissions are a fairly normal thing in the US Government. The way that they've unfolded this time has been abnormal. So typically, you might have some discrepancies in terms of the amount of funding that a federal agency is able to spend in a particular place for a particular reason compared with what Congress originally intended. Things happen. They're emergency, there's a coup, there's whatever. And so a rescission is sort of an official procedure that allows for some flexibility or for some unforeseen circumstances or just sort of like the basic unknowns of implementing complicated programs, like you can send back a little bit of money, and we sort of, you know, balance out the checkbook. At the end of the day. What's unusual here is that this administration is using the rescissions process to essentially massively downsize an entire segment of U.S. foreign policy, which is typically benefited from bipartisan support in Congress. And so kind of going after a big sector like this and saying, you know, we have much broader concerns and, and skepticism about whether any of this is worthwhile. And, you know, there are specific people involved, like Trump's budget director, who we can talk about, who are just sort of generally opposed to the idea of foreign assistance writ large. To use the rescissions process to advance those kinds of agendas is unusual. And so the result of that has been a large rescissions package already passed, as you mentioned, $8 billion. We saw the debate over whether, you know, PEPFAR should be included or excluded in that. So there's still some congressional back and forth there. And now there's been another, a second rescissions proposal targeting foreign aid to the tune of about 4, a little over $4 billion. And this adds yet an additional wrinkle. And we can go into that as well. But this is all just to say Congress hands over a budget, typically the executive branch is responsible for expeditiously deploying those funds. And in this case, they have opted not to do that and sought a number of different procedural mechanisms to carry out that ambition.
- [10:52]
A
Yeah. And all of that would kind of give you the impression that the United States is turning its back on foreign aid and that it doesn't really want to spend very much at all on foreign aid whatsoever. But when we look at the actual numbers, we see something of a different story, although we'll come on in a second to quite how much that matters. But if we look at the headline numbers, what we're seeing is that the President has requested 38 billion be spent on foreign aid in the coming year. And then when the House of Representatives has laid out its targets for the year, it's actually laid out even a higher number. And we don't know what the Senate is going to lay out yet. But that could be higher still or it could be somewhere between the two. Is that correct?
- [11:32]
B
Yeah, that's right. And I think typically, if you look at the first Trump administration, you actually saw the Trump administration request larger cuts than ended up coming through in Congress. But as you mentioned, I think one of the key things this time around is even if Congress appropriates this money, the administration has made pretty clear that they want to, like, take up this fight. That the executive branch should actually have far more control over the budget process. So, historically, like, the way it works is that Congress has the power of the purse. That's one of the sort of key powers that they were given over the US Budget. But Michael mentioned the budget director, Russell Vaught, and he made clear even in his nomination hearing that he actually believes that the government doesn't have to spend all the money that Congress has appropriated. And this is like, this is kind of an unprecedented point of tension. And what we're seeing now is that, you know, I mean, it's generated a number of legal challenges. And what we're seeing now is that the issue is going to be in front of the Supreme Court. And we've sort of known that that was where things would end up. And we don't know how things will shake out. But one of the key cases we've been tracking that was brought by a group of foreign aid implementers. Just recently, the Trump administration sort of appealed a recent order by the lower courts to the Supreme Court. So the lower court basically told the Trump administration that they would have to spend the money before it expires at the end of the month. And the Trump administration has asked the Supreme Court to sort of pause that requirement as the. As the case moves forward. Now, if that happens, that might mean this money expires, because we don't know exactly the timeline behind all of this. But one of the things I did find interesting in the court filing is that the administration says it has about $10.5 billion that are left to be spent before the end of the fiscal year, and that they have plans to sell, spend or not spend, but obligate 6.5 billion of those dollars. Now, there's a slight discrepancy between the amount that they say they don't intend to spend and the amount that was actually in the rescission that was sent up to the Hill. It's somewhere between 4 and 4.9 billion. But I think that that's sort of the tension of where we are now, and the sort of unprecedented nature of this moment is that you have an executive that is trying to sort of argue that they should have more power, especially vis a vis the legislative branch, than there has been in the past than the sort of normal legal sort of jurisprudence or thought has been to date.
- [14:11]
A
Yeah, okay. So when we're looking back at prior year's money, they plan to spend quite a lot of it, but not as much as was originally kind of laid out for them to spend. They're in the process of trying to hand that back to unspent, but the courts are telling them that they may very well not be able to do that, and that will go to the Supreme Court and they will finally make a decision about whether that's allowed. And that through this process that people may have heard of already called pocket rescission, where they've basically said we're not spending the money and it's so close to the end of the fiscal year that that money will expire before anybody can make a decision about it. So it doesn't really matter what your decision is. And they've been told, no, you can't do that. The judge has ruled that and been told you're not, that that's not possible. But of course, the Supreme Court will make the final decision about that. And then, of course, we don't know what the administration will do once the Supreme Court makes its ruling either.
- [15:01]
C
Let me just, let me jump in quickly. Yes, the rescission is part of this, but there's also the basic question of whether the executive branch can just allow funds to expire without spending them. So the rescission is actually like the sort of, you know, quote unquote, like, legitimate route for sending money back to the Treasury. If you don't want to spend it like that, you have to it's a negotiation with Congress. You have to seek congressional approval. In this case, there's this wrinkle of it being at the end of the fiscal year. So Congress doesn't have enough time to go through that process, et cetera, et cetera. The rescission process is actually, you know, that's like statute, and that creates a mechanism for the executive branch to, to return money to the Treasury. I think the more like pressing constitutional question is just what if the White House decides it doesn't want to spend money and lets the funds expire at the end of the fiscal year? Do, like groups like these NGOs and contractors who might have competed for those funds have standing to challenge that in the courts? You know, that's one of the questions that's been adjudicated recently. How does sort of Congress enter into that situation? Will they require the administration to spend the funds? What would that look like? Do they have an opportunity or options to extend the sort of availability of funds that are due to expire at the end of the fiscal year? I think it's possible we'd see something like that, but that's really the fundamental question and frankly goes far beyond not to minimize the importance of several billion dollars for foreign assistance. But this question goes far beyond that. It's about what is the relative balance of power between the executive branch and the legislative branch, which is one of the fundamental questions dealt with by the US Constitution. That's sort of like this is one of those places where foreign aid is more of a, like an arena for an incredibly basic question about US Democracy. And so the substance of that argument is incredibly important, but also the broader implications should not be lost.
- [17:04]
B
Absolutely. And in this case, it's interesting because I think some of these cases related to foreign aid are sort of the tip of the spear in these broader constitutional sort of debates, cases, et cetera. So.
- [17:15]
C
Right. You know, it's c. Also, can the executive branch unilaterally dismantle a federal agency without congressional approval? There are a few different front lines of these types of struggles.
- [17:27]
A
Yeah. We know very much that foreign assistance is kind of been chosen as a battleground on which the Trump administration is going to fight to see how much control it actually has over the whole of the United States States and how much you can get away with. One of the battlegrounds.
- [17:49]
B
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- [18:17]
A
Another kind of wrinkle in if we're asking the question like, okay, how much money is actually going to emerge from the United States and be spent on foreign assistance over the next couple of years, is that, as you said, they've just dismantled USAID and transferred responsibility from that for the state to the State Department. And we're now in a position where not only have they said that they won't, but arguably they can't because they don't have anyone who's qualified to do that. Is that right?
- [18:43]
C
I mean, it's an interesting philosophical question. What does it mean to not be able to do something because you chose to dismantle the capability to do it? You know, there's a, I think an attribution of responsibility that has to happen there. To your question, to put some, some granularity around it, I had a conversation with a Hill staffer about what they're hearing from the administration. And when a federal agency is preparing to carry out a program to spend money on a program like a foreign aid program, they usually send a congressional notification to the Hill letting them know, hey, we're about to spend this. We're about to fund this program. You have a window of opportunity to kind of weigh in on that. And this Hill staffer told me that at this point in the fiscal year, this was last week, they would typically have received about 300 of those congressional notifications saying, hey, we're about to spend money on this program. And so far, as of last week, they had yet to hit the 100 mark. So that doesn't necessarily speak to the amount of overall funding. But regardless, it's pretty clear that just the pace of spending and obligations has been very, very slow from this White House through the State Department on foreign aid compared to years past. You know, we can sort of speculate as to why that is. Is that. Are those operational barriers, or is that an intentional effort not to spend funding, some combination of both the relationship between the State Department and the Office of Management and Budget that we've talked about a couple of times? I think, you know, there's sort of a black box there in terms of what is ombuds and some of the folks who are leading that office who are very skeptical of foreign assistance, you know, what sort of roadblocks are they throwing in front of the State Department to sort of slow down the pace of spending? But, yeah, I mean, the question of whether the US Foreign aid enterprise that exists right now is capable of delivering programs at the scale for which they are currently appropriated is a huge question on a lot of people's minds.
- [20:47]
A
Okay. So I think we've got to the heart of that there. Is there anything else kind of key at the moment that's going on that you think kind of people outside the United States should understand about this process?
- [20:58]
C
I think we can just play the tape forward a little bit. And I bought, you know, already did this to some extent. But so we've got the House budget proposal. We're expecting a Senate version at some point soon because it's three weeks until the end of the fiscal year. You know, if we were to assume that the Senate's proposal, and this is a pure assumption, I have no information about this, but if we were to assume that the Senate proposal looked something like the House proposal, you know, that would be like something on the order of a 23% cut to the foreign assistance budget, which is very significant but not sort of like existential compared to the White House proposal, which was a 48% cut. So say you get the House and the Senate agreeing to something along those lines, that would resemble kind of like a normal process. But then the question remains, like, what does the White House do with that budget? They've requested a 48% cut. The House has signaled that they're willing to make cuts, but only to the tune of something like 23%.
- [21:57]
B
You know, one of the things I just wanted to jump in and add about the House proposal is that a lot of the cuts actually come to multilateral assistance. And so that still sort of poses a big question about how much is going through, like the State Department, right, which is how the US Is going to program bilateral systems going forward and a number of other smaller agencies like the US International Development Finance Corporation, the Millennium Challenge Corporation, et cetera. But so how that money has been cut. There's also significant cuts in other areas, including humanitarian assistance, the merging of different accounts that they're proposing, a number of other things. But there would still be a lot of money to be spent by sort of the US Government itself in this enterprise, which then leads to all the questions that you're raising about wanting to spend it, capacity to spend it, et cetera. And I think one of the things that's important to note is that it also may like there is a very limited amount of time left. There are, you know, three weeks on the calendar, but far fewer legislative days actually left to take action at this stage. I think the very likely outcome is that there will be some sort of continuing resolution. I think it is unlikely that they will reach a budget agreement by the end of the the fiscal year, but we'll see. But I think, you know, certainly we've seen in recent years that there's going to be continuing resolution. Now, how does I think there's also a question of, like, does the White House try to weigh in on the sort of reconciliation process or as this moves forward until we'll see how things shake shake out. But I do think that there are still some unknowns in the coming weeks or in the coming months, which may end up being the eventuality. If they sort of say, hey, we don't want government, the other option is that there's a government shutdown. Right. Which is also an incredibly disruptive process. So if they avoid a government shutdown, do a continuing resolution, we might not actually see what the budget will be until the end of this year. It could go into next year. And it's kind of often it will be like a continuing resolution for a few months. But it could mean that this process, even though we think it might be completed by October 1st, will actually be extended further than that.
- [24:04]
A
Let's unpack that a little bit because I think people may be wondering how come if the Republicans control the Senate, they control the House of Representatives, they control the White House, how come the Republican Party can't reach an agreement in among themselves? And I think as I understand it, there's a couple of reasons for that. Maybe there's a little bit more disagreements among Republicans over this than there has been in the past, but also the Democrats have more, maybe a little bit more power in this particular instance. Is that right?
- [24:30]
B
I mean, I think one of the things I would say is one, there's very slim Republican majorities in both houses. In the Senate, depending on how the budget is passed, you might need 60%, 2/3 majority. And so that would require Democrats on board. Now they could pass it through a different budget process than it's just a simple majority. So it's a bit complicated there. But sometimes they're like, even if there's Houses are of the same party, they have different priorities in the House and Senate. Right. And then you have to negotiate and there are sort of different factions and you know, and you if there's like a handful of Republicans who disagree, that could derail something. Right. Because of the sort of slim majorities assuming that Democrats vote together. So yeah, it's just kind of the way things work. Even times when, you know, both the House, Senate and then the White House are all controlled by the same party, sometimes it's just still takes a lot of work to get to an outcome. And I think like one of the things that we're hearing is like Democrats are not necessarily particularly eager to help Republicans get on board to pass a vote. Right. I think they're letting them kind of hash things out a little bit at this point. But I think there is often pressure on all lawmakers to avert a government shutdown because of all the sort of ramifications of that.
- [25:51]
A
Okay. And I guess one more wrinkle to bring up here, which we should have brought up earlier, but it's just to catch me, is that typically they're given two years to spend this money, as I understand it. So if there's unspent money because the government, the administration has cut a lot of past programs, we're not likely to see that kind of crunch for some time because they may have longer to spend the money.
- [26:13]
B
So different parts of the development budget have different timelines. Some money is one year money, some money is two year money and a Lot of money is two year money. Some money is no year money. It's there until you spend it. And then other funding has other timelines. So it's not so clear cut that all funding is two year money. But there is a significant amount of money that is sort of two year money and has to be spent. So I think we could very well see big questions around like the FY 2025 money. Will we see other significant rescission requests coming down the road? Because the big rescission that we saw earlier this year was a lot of FY2024 money and the most recent was sort of a mix of years of money. Michael, I don't know if you have anything to add to that.
- [26:59]
C
No, I think that pretty well covers it.
- [27:01]
A
Right. So let's see if we can sum this up. Essentially, we're in a situation where the previous administration appropriated a lot of money to development. Some of that money is still waiting to be spent and some money was appropriated for development in 2025 and that's still waiting to be spent. So we've still got a little bit of a. A kind of buildup of cash that hasn't hit a deadline yet that normally they would be spending down quite rapidly over the course of this year that they're just not spending. So we can anticipate that still some months down the line we'll see a further kind of crunch as that money isn't spent and has to be spent. We're actually seeing a situation where the current administration has asked for a 48% cut. Congress has come back with something resembling a 23% cut. They might meet somewhere in the middle, but they might just continue to clash over this. And even if they do thrash it out and people start spending money on a regular basis, we've largely disrupted the architecture that in previous years would have spent that money. So it's going to be quite difficult to get the cash out of the door. Even if they can agree on a headline figure and how the money is supposed to be spent. So there's some good news and some bad news for people who are looking at the level of foreign assistance likely to emerge from the United States. The headline levels of cash are likely to be larger than we might have feared. But there's a great deal of work to be done to actually get that money out of the. Correct me if I've got any.
- [28:28]
C
I think that's pretty good for a confused British guy.
- [28:31]
A
Well, I'm less confused now because of the fantastic explanation that I've just been given by the two of you.
- [28:35]
C
The only thing I would add to that is, you know, it's not unusual that funds would build up at the end of the fiscal year. That's just sort of how the process tends to work. And then there's a big push to get them out the door before the end of the fiscal year. The irony here is that the easiest ways to do that and the ways that federal agencies have typically resorted to in the past is like you want to get a lot of money out the door really quickly. The quickest way to do it is to write large grants to multilateral organizations like UN agencies or to package those funds together into big contracts that go to, you know, large for profit companies or NGOs that are kind of capable of handling funds at that scale. And those are the two categories of organizations that the Trump administration has sort of shown the most antagonism toward. So, you know, if they're in this position where they have to get money out the door really quickly with a fraction of the personnel that USAID used to have, it's going to be interesting to see how they kind of square their past kind of statements and philosophical priorities with the logistics of getting that done.
- [29:47]
B
Yeah, I might just add one technicality. We talked a lot about the, like the process to get the budget out there, but there's like a whole other set of requirements and Michael talked about this a little bit in terms of the congressional notifications. So there's actually typically like a months long process that even happens once the money is appropriated. So that is part of what leads to that time crunch that you were talking about.
- [30:08]
A
Well, I think a hoax. That's certainly been educational to me and hopefully that has been educational to our readers who've been staring at the US Budget process, trying to understand why we're seeing kind of them suggesting that they're going to be giving large amounts of money to aid at the same time that actually the aid infrastructure seems to have been dismantled. And it's obvious that it's not really clear how this is going to move forward. There's still a huge amount of uncertainty about how much foreign assistance is actually going to emerge from the United States date over the next few years and what it's going to be spent on. We're going to be waiting with Beta Breath and we'll keep updating you obviously as we understand more about what's going to be happening happening here. It's far from a done deal and it's very unclear where this goes next. Hopefully this helps, and we'll continue to keep you informed, Sam.