StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

Yes...What's Happening In Egypt Could Reduce The Deficit

08 Jul 2013
Posted by Stan Collender

In one sense this is simple: The U.S. spends about $1.5 billion a year on all aid to Egypt and, based on the fiscal 2012 Consolidated Appropriations Act (Public Law 112-74), foreign aid is prohibited to any country where there has been a military coup of a democratically elected government. If aid is suspended, that could mean that federal spending and, therefore, the deficit, will be lower than had been projected.

So much for the easy part.

1. The first question is whether the aid will actually be suspended. The Obama administration so far has refused to use the word "coup." This presumably is at least partly to preserve its ability to continue to provide aid if it sees a need to do that.

2. If the aid is suspended, the impact on the current fiscal year deficit will depend on how much has already been spent. In theory, one-quarter of a total appropriation is supposed to be spent each quarter of the fiscal year, but the actual spend out rate can vary substantially by program. I'm still checking, but it's definitely possible that the full $1.5 billion has already been spent this year and that suspending the aid will have no immediate budget impact.

3. Given the likelihood that the situation in Egypt may take some time to resolve, there could definitely be savings in fiscal 2014, which doesn't begin until this coming October 1. Given the likelihood that there will be a continuing resolution for fiscal 2014, this could mean a $1.5 billion savings.

4. However, any savings from a suspension of foreign aid to Egypt may not be realized until close to the end of the fiscal year if Congress and the White House agree to appropriate it for 2014 but to hold off spending it pending events. That would provide the U.S. with the foreign policy carrot of being able to offer aid if elections are held relatively quickly.

5. That could mean that, if elections are not held, the savings will only be realized when fiscal 2014 is over and the final numbers are compiled by Treasury. Until then, official budget projections will continue to assume that the aid will be provided and the estimated deficit will not change.




Why are we talking about

Why are we talking about this? $1.5 billion is basically nothing in the scope of the entire federal budget.

$1.5B could offset most of

$1.5B could offset most of the civlian defense furloughs. $1.5B is significant. This is why I was upset this aid was still on the table when civilian employees are being furloughed. A

Across the Federalworkforce I don't know how much each agencies are saving through furlough, but $1.5B could probably reduce them all by 1/3rd... while I'm impacted by the defense furloughs I'm not naive to the fact that other agencies have issues too.

If you want to get

If you want to get tongue-in-cheek technical, wouldn't the $1.5 billion also have a GDP impact/tax impact since most of the $1.5 B actually goes to purchase U.S. manufactured goods (e.g., weapons)?

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