The State Department and USAID are facing their toughest budget season ever as the GOP looks to international affairs accounts for major cuts. But the new Deputy Secretary of State for Management Tom Nides said that the State Department's argument this year will be that international affairs spending is crucial for America's national security and therefore can't be sacrificed.

"Taxpayers want to understand where our money is going. Our view of this is very simple, it is a national security budget," Nides told The Cable in an exclusive interview in his new office on the 7^th floor of State's Foggy Bottom headquarters. "Our budget should be looked upon no differently than the department of defense's budget. The DOD budget is a national security budget, the State Department and USAID, likewise."

The Obama administration has long considered State and USAID spending part of the "security" budget, a view that congressional Republicans don't share. Secretary of State Hillary Clinton has been calling for a unified budget that would combine the Pentagon and State Department budgets into one big account, but that idea has yet to gain traction.  

Some senior lawmakers, such as House Appropriations State and Foreign Ops subcommittee ranking Democrat Nita Lowey (D-NY) and Senate Appropriations State and Foreign Ops subcommittee ranking Republican Lindsey Graham (R-SC), have been arguing that certain parts of the foreign aid budget are certainly crucial to national security, especially the programs in Afghanistan, Iraq, and Pakistan.

Nides argues that all the funding should now be defended on national security grounds -- regardless of whether or not they are directly related to countries where the United States has troops on the ground.

"Let's be clear, the State Department and USAID have a national security mandate. We are helping countries through Feed the Future, Global Health Initiatives, climate change, economic support funding -- we're doing that because we're building up these countries to be more self reliant and have stronger economies. By doing that, that helps our national security," Nides said.

Already, the Obama administration has subjected the State Department to a disproportional amount of cuts compared to other departments when making budget deals with congressional Republicans. State's fiscal 2011 budget was cut by $8 billion in the budget deal the administration struck in April to avoid a government shutdown.

Meanwhile, the long-term budget announced in April by House Budget Chairman Paul Ryan (R-WI) would cut the budget for international affairs and foreign assistance by 29 percent in 2012 and 44 percent by 2016 -- while increasing the defense budget by 14 percent over the same timeframe.

Administration officials believe their $53 billion fiscal 2012 budget request reflects their first ever Quadrennial Diplomacy and Development Reivew (QDDR), an effort modeled after the Pentagon's QDR, and aligns resources with national security objectives while making tough choices in a difficult fiscal climate.

But there are signs that State is already thinking about giving up some authorities that it struggled to take from the Pentagon as part of the QDDR's overall drive to put diplomats and civilians back in charge of foreign policy. For example, State gave back control of the Pakistani Counterinsurgency Capability Fund (PCCF) in the 2011 budget deal in order to take that money off of its ledger. Nides said that was a one-time deal and State would take back that program next year.

"Fiscal year 2011 was an extraordinary year. The transfer back of [PCCF] funding for fiscal year 2011 [to the Pentagon] was just for fiscal year 2011 only. We don't believe it's an ongoing policy decision," he said.

He also pledged to keep a robust civilian presence in Afghanistan going forward, despite that Clinton recently said that the buildup of civilians there has peaked.

"We've got to keep all this in perspective. There are 100,000 military boots on the ground. We had 300 [civilians in Afghanistan], we're now at approximately 1,140 civilians. It's not easy to sustain the level of civilians in a voluntary situation of the level of talent that we need. Over time, we will see a leveling off to a more normalized number of diplomats," said Nides.

Of the 1,140 civilians in Afghanistan now, about 500 are from State, 300 are from USAID, and the rest come from various other government agencies.

Overall, State will continue to make the argument that international-affairs spending comprises only 1 percent of the federal budget and helps produce new economies that can become markets for American companies and goods.

But the main focus will be to identify America's diplomats and development experts and the front line soldiers in the ongoing battle to keep the country safe and secure, especially as instability due to food shortages and economic turbulence increases around the world.

"You have hungry people, which destabilizes your country. You have a destabilized country, all sorts of bad things happen. State and USAID work to prevent that," Nides said. "This is a very important frame and a very important view.

Freshman Sen. Marco Rubio (R-FL) is becoming an increasingly critical and hawkish voice on the Obama administration's foreign policy, but he is actually a supporter of U.S. foreign assistance programs and made the case for maintaining this funding to his constituents last week.

"We certainly have to be more careful when spending foreign aid.... On the other hand, sometimes in the press and in the minds of many, our foreign aid is exaggerated," Rubio said in an online question and answer session on June 29. "It really is a minuscule part of our overall budget and it's not the reason we have this growing debt in America."

Rubio was responding online to a letter from "Will," a 14-year-old constituent in Palm Bay, who asked the senator to consider the needs of people at home before sending U.S. taxpayer money abroad.

"I think it's crazy that we are spending all this money helping others when we are the ones needing help, wrote Will, "I understand others need help, but we've already done so much that we're hurting ourselves."

"Foreign aid is important. If it's done right, it spreads America's influence around the world in a positive way," Rubio responded.

Rubio praised the Bush administration's effort to provide HIV medicine and relief to Africa as a prime example of a successful foreign aid program. He said the program had not only saved lives but had increased U.S. popularity throughout the continent.

"These are allies that in the future can help us, not just in political struggles but who can be our partners in economic trade," he said. "A world where people are prosperous and free to grow their economies and pursue their own dreams and ambitions is a better world for all of us."

Overall, Rubio may not support the Obama administration's handling of the Libya war, its policy toward  Russia and China, or its interactions with international organizations. But when it comes to foreign aid, Rubio and the Obama administration are on the same page.

"The real problem in America's spending is not foreign aid, which is a very small part of our budget," Rubio said.

The new fiscal 2012 budget request for the State Department and USAID made some tough choices, including ending or cutting foreign assistance to dozens of countries and delaying the goal of increasing the number of foreign service officers by 25 percent for years. But those cuts could be become much more drastic when Congress takes its turn slashing diplomacy and development funding for next year.

"We recognize that these are exceptionally tight times. With the resources outlined in this budget, the State Department and USAID can continue to protect our interests, project our values, promote growth, and above all, serve our national security," Deputy Secretary of State Thomas Nides told reporters at Monday's State Department budget briefing.

Development advocates praised the Obama administration's new budget request, arguing that it tackled the issue of government waste while still protecting the diplomatic and development programs that are crucial to U.S. national security. But they also warned the request may be dead on arrival in Congress.

"After two years of planning, review and reform, the Obama team has readied itself to make the best case possible for a robust international affairs budget," wrote Anne Richard, vice president of the International Rescue Committee, on the Stimson Center's budget blog.

"The good news: the departments and agencies that run these programs are better prepared than ever before to justify their budgets.  The bad news: that may not matter."

The State Department is comparing its fiscal 2012 budget request numbers to fiscal 2010 levels because Congress has not passed a fiscal 2011 budget, even though the fiscal year began Oct. 1. The government has been running on a continuing resolution (CR) since then, which will expire March 4. The House unveiled an extension for the CR, which would provide funding for the rest of the fiscal year. Under the CR, State and foreign operations would receive $44.9 billion in fiscal 2011.

Secretary of State Hillary Clinton met with House Speaker John Boehner (R-OH) on the Hill on Monday morning and emerged from the meeting expressing grave concerns about the House's plans to slash fiscal 2011 spending for diplomacy and development in the 2011 CR, which would set a lower baseline for the 2012 budget as well.

"We would be forced to scale back significantly our mission in the frontline states of Iraq, Afghanistan, and Pakistan, where we work side by side with the American military. We would also be required to roll back critical health, food security, climate change, border security, and trade promotion efforts abroad as well," Clinton said. "We certainly understand the tight budget environment... But the scope of the proposed House cuts is massive."

In a Monday letter to House Appropriations Committee chairman Harold Rogers (R-KY), Clinton wrote that the proposed cuts, "will be devastating to national security, will render us unable to respond to unanticipated disasters, and will damage our leadership around the world."

A news release by House Appropriations State and Foreign Ops subcommittee Chairwoman Kay Granger (R-TX) praised the $44.9 billion figure and said it was a reduction of $3.8 billion, or 8 percent from total 2010 appropriations and a reduction of $11.7 billion, or 21 percent, from the president's 2011 budget request. Granger and GOP congressional leaders are promising to cut Obama's 2012 request even further.

Granger's Democratic counterpart, Rep. Nita Lowey (D-NY), issued a statement on Monday railing against the House Republicans' bill, hammering home the argument that diplomacy and development funding are key to national security.

"Even in these difficult economic times, we cannot afford to enact broad and haphazard cuts to key pillars of our national security. We must not allow our response to an economic challenge to create a national security crisis," Lowey said.

The entire State Department and USAID fiscal 2012 budget request, which can be found here, seeks just over $47 billion, which the Office of Management and Budget notes is a 1 percent increase over fiscal 2010 levels. The president is requesting a grand total of $50.9 billion for U.S. diplomacy and development efforts, after accounting for programs outside State and USAID, such as the Peace Corps, the Broadcasting Board of Governors, and the Millennium Challenge Corporation. That's $3.7 billion -- or 6.7 percent less -- than the $54.6 billion that was requested for the same accounts in fiscal 2011.

Obama is also requesting $8.7 billion in supplemental funding for the State Department and USAID in fiscal 2012, so that they can take on increased roles in Iraq, Afghanistan, and Pakistan. This represents a $2.3 billion increase over the fiscal 2011 request.

"We had to make tradeoffs. We had to cut some things to grow other things," Nides said. "The amount of money we are requesting reflects what we believe are the priorities for this department... This is a national security budget."

The State Department and USAID's plan to increase its cadre of foreign service officers by 25 percent, which was supposed to be completed in fiscal 2012, will now be delayed until at least fiscal 2014.

The administration eliminated or scaled back requested funding for dozens of small foreign assistance programs around the world. The request would eliminate funding for bilateral programs for six countries: North Korea, Tonga, Kuwait, Qatar, Saudi Arabia, and the UAE, for a total savings of $4.5 million. The funds allocated for North Korea -- which was being used to fund non-governmental organizations, not the North Korean government -- could still come out of general funds.

International Military Education and Training (IMET) program funding in the budget was abandoned for nine countries: Equatorial Guinea, Iceland, Kuwait, Madagascar, Qatar, Russia, Saudi Arabia, Somalia, and the UAE. These cuts represent a savings of under $1 million. Foreign Military Financing was eliminated in the request for Chile, Haiti, East Timor, Malta, and Tonga, for a savings of about $5 million.

"We're trying to move our budget toward less very small programs, because we are going to have less money down the road to allocate and we want to make sure we allocate it to the highest priorities," a State Department official said. "So the savings from these cuts are very small but you have to start somewhere."

Funding requested for Mexico assistance is $335 million, $250 million less than fiscal 2010, $282 million of which is designated for the Merida initiative. $400 million is requested for aid to Columbia. Both of these accounts were reduced because the programs are being transferred to more local control, a State Department official said.

Big cuts were proposed to development assistance to over 20 countries, including many in Europe, Eurasia, and Central Asia.

"Countries like Albania, Macedonia, Montenegro, Serbia, Cyprus, Poland, are all countries that we think we just can't afford to give the kind of assistance we have in the past," a State Department official said. "We can't fund everything, everywhere, any longer."

The administration requested $1.55 billion in aid to Egypt and $100 million in aid for the Lebanese Armed Forces, both at about the same levels as fiscal 2010.

As the budget battle inside the Republican Party heats up, a large group of conservative House Republicans called Thursday for a drastic defunding of the U.S. Agency for International Development and a host of other programs.

The Republican Study Committee (RSC), a loose conglomeration of 165 self-identified conservative GOP House members, unveiled their plan Thursday that they argue could save $2.5 trillion in federal spending over ten years. The proposal is centered around legislation that would slash or eliminate federal funding for USAID, the Corporation for Public Broadcasting, the U.S. Trade Development Agency, the Woodrow Wilson Center, the USDA Sugar Program, economic assistance to Egypt, and many other programs.

The RSC plan calls for $1.39 billion in annual savings from USAID. The USAID operating budget for fiscal 2010 was approximately $1.65 billion. The RSC spending plan summary was not clear if all the cuts would come from operations or from USAID administered programs.

The bill is being led by Rep. Jim Jordan (R-OH), the RSC chairman, Rep. Scott Garrett (R-NJ), chairman of the RSC Budget and Spending Task Force. Sen. Jim DeMint (R-SC) is expected to offer a Senate version of the legislation.

The RSC plan also calls for Republicans to fulfill their campaign promise to trim $100 billion from the budget this year by returning "non-security" discretionary spending to 2008 levels in the next funding bill for fiscal 2011, which is needed to keep the government running when the temporary funding bill expires March 4. It would also call for spending to be cut to 2006 levels and then remain flat for the next ten years.

"The current continuing resolution (CR) will expire on March 4th. Under your leadership during the campaign, House Republicans boldly pledged to cut federal spending by $100 billion by returning current spending back to FY2008 levels," read a letter circulated Jan 20 and addressed to House Speaker John Boehner (R-OH). "Despite the added challenge of being four months into the current fiscal year, we still must keep our $100 billion pledge to the American people."

The GOP plan to defund USAID goes even further than Majority Whip Eric Cantor's  suggestion last October to halt foreign aid to countries that don't share U.S. interests, but Cantor gave a lukewarm endorsement to the RSC plan Thursday.

"I applaud the Republican Study Committee for proposing cuts in federal spending, and I look forward to the discussion on reducing spending that our country so desperately needs to have," Cantor said in a statement. "I look forward to these cuts and others being brought to the floor for an up-or-down vote during consideration of the CR, and I support that effort."

If the RSC plan was ever implemented, which is doubtful, the State Department would be in the firing line for huge cuts. Ileana Ros-Lehtinen (R-FL) announced, on her first day as chairwoman of the House Foreign Affairs Committee, that she wanted to take an axe to the State Department and foreign aid budgets. Her appropriations counterpart, House Appropriations State and Foreign Ops subcommittee chairwoman Kay Granger (R-TX) has made similar statements in the past.

Reached by The Cable Thursday, an aide to Granger said, "Everything is on the table for potential cuts. We appreciate the RSC's suggestions as a starting point and will consider their ideas going forward."

Of course, "everything" suggests that the defense budget, previously sacrosanct in the GOP, is now part of the debate over cuts. That's one key area where the divisions inside the GOP caucus will come to light, said Tom Donnelly, director of the American Enterprise Institute's Center for Defense Studies.

The House GOP leadership is caught between those in their caucus who want to slash and burn federal spending right now and those who want to have a more protracted debate over spending priorities to make sure key items like defense are protected, he said.

"The GOP House leaders have to take account of their new members. They also understand that the Tea Party impulse is not something they can manage, so they have to respond as well as lead and they can't dictate. It's not like 1994, where Newt Gingrich was a colossus who could dictate the landscape. This is a bottom up shift not a top down," Donnelly said.

The tensions inside the GOP caucus were on full display Wednesday evening, when freshman South Carolina Tea Party Rep. Tim Scott successfully added an amendment to the Republican's budget rule that removed flexibility in timing for the budget cuts. Scott was able to change the language from demanding a "transition" to 2008 levels to insisting that change be enacted right away, as was advocated by GOP Budget Committee Chairman Paul Ryan (R-WI).

The RSC plan is so drastic and extends its projected cuts so far out into the future that its chances for implementation are slim to none, Donnelly said. But the struggle inside the GOP on the issue is real.

"This debate will do a lot to define the nature of what conservatism is, going forward -- whether it's a more libertarian or Reaganite movement," he said. "The House Democrats are largely spectators at this point."

The development community is up in arms about the persistent delays in the administration's two major reviews of development policy, as internal disagreements continue to plague the ongoing efforts to reconcile America's development and foreign-policy goals.

The administration's two major development reviews, the White House's Presidential Study Directive on Global Development (PSD-7) and the State Department's Quadrennial Diplomacy and Development Review (QDDR) are both missing in action as the administration crosses the 18-month mark. The interim report of the QDDR was never released and there's concern the final document might not be ready by the stated September deadline.

The PSD, a draft version of which was first published on The Cable, is being held up by a continuing and mounting disagreement between the White House and the State Department over how to divide power over development between Foggy Bottom and the U.S. Agency for International Development (USAID).

According to administration sources and development-community leaders, the dispute between the National Security Council and the office of the Secretary of State Hillary Clinton came to a head at a principals' meeting in late June, when a near-final version of the PSD was discussed. Clinton, our sources report, refused to sign off on the PSD because she disagreed with that document's determination that USAID should be the lead agency in charge of individual development missions in the field.

Multiple issues are still in dispute between State and the NSC concerning the reviews, including the role of USAID Administrator Rajiv Shah and what level of autonomy USAID will be granted in determining its own policies, budgets, and priorities. Shah has been rebuilding USAID's intellectual capacity, but the aid community fears that Clinton intends to consolidate real power inside her office despite her promise to "elevate" and "integrate" development as the third pillar of national security alongside diplomacy and defense.

Many believe that the White House launched a not-so-subtle salvo at Clinton by releasing a statement on development at the G-8, just days after the contentious principals' meeting, that closely tracks what's known about the PSD and declaring it as U.S. policy before the internal negotiations with State were completed.

Leading development community-voices are now openly venting their frustration with the delays in the process.

"Eighteen months into the administration, the federal government remains abysmally organized to address Haiti, Pakistan and other development challenges," wrote Nancy Birdsall, the president of the Center for Global Development, on the organization's website Thursday. "When it comes to global development, I'd give President Obama and his top advisors an A for strategic vision and a big fat F for failure to get on with it."

In an open letter to Clinton, National Security Advisor Jim Jones, and National Economic Council chairman Larry Summers, Birdsall raised several issues that resonate with development advocates. She called the Millennium Challenge Corporation "pathetically underfunded," lamented that no one seems to know who's in charge of big initiatives on food security and global health, and complained that USAID still has vacancies for several senior staff positions.

Birdsall's calls for giving USAID total independence and cabinet-level status aren't likely to be  final recommendations from either the White House or the State Department.

But her overall anxiety about USAID's status is widely shared in the development community. A team of top development leaders including former USAID administrator Brian Atwood wrote today to protest the cuts in the foreign aid budget that Congress is calling for.

"We are grateful for the emphasis the President has placed on development and foreign assistance -- a tradition he continues from President Bush. And we strongly support Secretary Clinton's call to make USAID ‘the premier development agency in the world,' they wrote. "But this goal will only be achieved when USAID's personnel capacity is rebuilt and its funding enhanced."

World Food Prize Laureate Rev. David Beckmann, who co-chairs the Modernizing Foreign Assistance Network (MFAN), told The Cable, "The Obama administration is doing smart and creative things to help hungry and poor people around the world. But they are hung up by organizational confusion, and the president needs to make it clear that USAID, not the State Department, has lead responsibility for development."

MFAN even has a running counter on its website tracking the days since President Obama pledged to release his overall development policy. 

Adding to the concern is the fact that two of the lead officials who are in charge of the QDDR will be departing the State Department soon. Deputy Secretary of State Jack Lew has been tapped to become the next director of the White House's Office of Management and Budget. Policy Planning chief Anne Marie Slaughter has made it known that her two-year leave from Princeton will require her to return to New Jersey at the end of the year.

State Department officials assure The Cable that the QDDR will be completed before Lew and Slaughter leave Foggy Bottom. Nevertheless, the delays are having an own effect of their own, said Birdsall. 

"Time is not on our side," she told The Cable in an interview. "We're missing in action as a country."