The Cable

State Department’s new Middle East fund in trouble on Capitol Hill

The biggest single new initiative in the State Department's $51.6 billion budget proposal for next year was a Middle East Incentive Fund -- $770 million in mostly new money to help State respond to the Arab Spring by supporting emerging democracies and their civil societies. But the House of Representatives declined to fund it in their version of the appropriations bill.

The House Appropriations Subcommittee for State and Foreign Ops didn't give any money to fund the initiative in their fiscal 2013 appropriations mark, released last month. The leaders of that subcommittee claim that State failed to give them enough detail about the program to justify the new outlay of funds. Now, the State Department is depending on its allies in the Senate to save the program when the Senate Appropriations Committee marks up its bill next week. The episode is an example of the disconnect between State and Congress over how to respond to the Arab Spring as well as the difficulty of securing new money for diplomatic initiatives in this tight budget environment.

"This is something that Secretary Clinton has really -- and with the President -- has focused principally on," Deputy Secretary of State Tom Nides said in February when announcing the initiative. "The notion is we're in a new world. The Arab Spring has come; we need to make sure we have the tools and the flexibility in which to fund these initiatives. I cannot tell you today where that money will be spent because we'll be, obviously, in consultation with the Hill. We'll be coming up with initiatives that we'll then be discussing with the Hill."

"But this is something we coordinated and talked a lot about with our friends on the Hill, the idea is to have some flexibility to support everything from Tunisia, to support areas like potentially in Egypt and in areas where things are changing every day in Syria, things where changing, the world is evolving as we see it, and we felt it was important to have a pool of money," he said.

At the time, budget experts warned that it would be difficult for the State Department to get Congress to spring for the program because State didn't seem to have a lot of detail about what the money would be used for.

"That will be controversial because there's no content. It's a contingency fund and Congress doesn't like to give State contingency funds," said former Office of Management and Budget National Security Director Gordon Adams at the time.

State did brief all the relevant committees on the new fund and provided as much detail and context as they could, but it wasn't enough for the House subcommittee leaders, Reps. Kay Granger (R-TX) and Nita Lowey (D-NY).

"The administration could not justify the broad authority requested to override existing laws. However, the House bill does provide State some flexible funding to be responsive, within the existing account structure, while increasing congressional oversight on key countries," Granger's spokesman Matt Leffingwell told The Cable.

The "existing account structure" he referred to is the economic support funds that are given each year on a country-by-country basis. Congress prefers granting State country-specific aid because it's easier to track and oversee.

"Congresswoman Lowey supports U.S. engagement in the region and believes we must have the flexibility to respond to rapid changes and developments.  Existing accounts within the bill provide that important flexibility," Lowey's spokesman Matt Dennis told The Cable.

Outside experts working closely on the issue said that the State Department didn't properly explain the new fund or its benefits to Congress and didn't have specific enough proposals to give lawmakers assurance the money would be spent wisely.

"This incentive fund is an important new initiative, but unfortunately it seems the administration has done a pretty poor job of pitching it to the hill. There's a lot of confusion in Congress about what this fund is for and why it's important," said Stephen McInerney, executive director of the Project on Middle East Democracy.

"This fund should be a signature initiative of the administration to respond to the historic events in the region, and these funds could be essential to the administration's ability to respond to events that haven't yet unfolded in places like Syria, where there is no existing U.S. assistance package in the budget," said McInerney.

Using economic support funds is not a great option  because those funds are already devoted to specific causes and diverting them from other places would hurt other priorities, McInerney argued.

"The administration won't be able to use that flexibility without significant cuts to existing programs. Without some support from Congress, it's really tough to get it off the ground," he said.

Tamara Wittes, head of the Brookings Institute's Saban Center on the Middle East, pointed out that within the $770 million State requested for the new fund, it included a $65 million annual request for an existing program called the Middle East Partnership Initiative (MEPI), which is how State has been funding civil society development in the region. So now, MEPI's funding is also at risk.

"Congress may not realize that MEPI funding was embedded in this proposal, but they need to be aware of the impact of their decision on America's ability to partner with citizens in the region who are working for positive change," she said. Wittes was head of the MEPI office and deputy director of State's new Middle East Transitions Office before she left government earlier this year.

The new Middle East Incentive Fund is State's way of trying to shift America's aid approach in the region from the military-dominated focus of the recent decades to an approach focused on the promotion of civil society and political reform, said Wittes.

"We have to look at the overall ratio of our assistance and how that is seen by the people of the region. In order to seize the opportunity that the Arab Spring presents, we need to shift the logic of our relationships to one that emphasizes projects with people," she said.

The fight to save the fund now goes to the Senate, where the Senate Appropriations Committee is set to mark up its State and Foreign Ops bill as early as next week. David Carle, the spokesman for State and Foreign Ops subcommittee chairman Sen. Patrick Leahy (D-VT), told The Cable, "Sen. Leahy does intend to include some amount for the fund, for the reasons the administration requested it -- to provide flexibility to respond to changing events in the ME and NA regions."

The Senate subcommittee hasn't decided how much of the request to support. Their version of the bill could be conferenced with the House version. More likely, Congress will not complete any appropriations bills this year and the two versions will simply inform a temporary funding measure crafted by congressional leadership in late September.

The new fund does have one powerful staunch supporter in Congress, Senate Foreign Relations Committee chairman John Kerry (D-MA).

"This is something that's been percolating a long time on the Hill and in the administration and it's really a no-brainer," Kerry told The Cable in a statement. "We're witnessing a period of historic change in the Middle East, and it's impossible to predict what will happen next month, let alone next year, which is why the State Department should have the flexibility to deal with unforeseen contingencies. Positive incentives for economic and democratic reforms also make sense. American assistance in itself may not convince governments that are resisting reform to change, but in places that have already begun to chart a new course, like Tunisia, Egypt, and Libya, it can help empower moderates and reformers."

The State Department declined to comment.

UPDATE: A reader points out that the House Appropriations State and Foreign Ops subcommittee's report on the bill does direct $70 million to MEPI, separate from the Middle East Incentive Fund. 

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