The Debt Commission: Goodbye to Locality Pay, and Hello Post Closures, Again?

Pho failImage by interpunct via FlickrThe bipartisan National Commission on Fiscal Responsibility and Reform was created by President Obama to to address our nation’s fiscal challenges. The Commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run. The Commission is tasked with proposing recommendations designed to balance the budget, excluding interest payments on the debt, by 2015.

The Commission has put up online a document called $200 Billion in Illustrative Savings.  Read the whole thing here. Excerpted below are the items included in the list that affect the State Department, particularly the “locality pay” for overseas employees, USAID and slowing foreign aid growth, reduction of contribution to the UN and the elimination of OPIC. And charge for services by US Foreign Commercial Service.

14. Reduce overhead cost of diplomatic operations.
The administration has requested $9.55 billion for Diplomatic and Consular Programs (D&CP) in FY2011, with plans to increase this to $12.5 billion by FY2015. Diplomatic and Consular Program funding provides for the day-to-day costs of running U.S. diplomatic operations such as maintenance and security of embassies and consulates, the salaries of ambassadors, and Foreign Service staff. This option would cut the budget by 10 percent. This reduces the rate of growth by trimming overhead costs while still allowing for significant growth from FY2010, when Diplomatic and Consular Programs were funded at $8.2 billion. 30
This reduction in future growth can be achieved in many ways and can be done in such a way that does not jeopardize the security of Americans and our allies working in embassies and consulates around the world.

One area that will cost the State Department a significant amount in resources is any decision to pay Foreign Service Officers serving overseas an additional bonus called “locality pay.” Locality pay is paid to federal employees, including Foreign Service Officers who live and work in Washington D.C. but not federal employees serving overseas. Foreign Service Officers have sought to end this so-called “pay gap” which they claim is above 20 percent.31 The Department of Defense’s employees serving overseas do not receive any locality pay either, but there are currently no proposals to give them this benefit. Proponents of this benefit claim that it is needed to address recruiting and retention problems, but the foreign service career field remains highly competitive with 25,000 applicants competing for 300 to 900 positions annually. The “pay gap” was temporarily fixed in 200932 and 201033 but a permanent fix has not been legislatively implemented. Based on Congressional Budget Office assessments, permanently repealing Washington D.C. locality pay for overseas State Department workers could save $427 million in FY2013.34

The State Department should also examine all consulates to determine cost savings from closing down those consulates that may have been more relevant in the Cold War, but are not longer absolutely necessary for the U.S. to conduct its diplomatic mission. Another area that the State Department should review is its plans for new construction. Many of these plans have included costly security measures that may not be necessary, or may cost more than is justified by the benefit they will give to the United States. For instance, in Krakow, Poland, the United States plans to build a consulate that will cost U.S. taxpayers $80 million but will house only ten American employees.35 The State Department should determine whether expensive security measures are appropriate for all countries. In addition it should consider whether there are some consular areas that should be consolidated or utilize teleconferencing and the internet to more efficiently perform its mission.

15. Slow the growth of foreign aid.36

The President’s budget calls for over $14 billion of increases in international affairs spending between 2011 and 2015. Nearly all of this growth is due to large increases in spending for international development and humanitarian assistance. 37 Since 2008, the budget for international development and humanitarian assistance has increase over 80 percent from over $17 billion to over $32 billion, and is expected to grow another 40 percent to over $45 billion by 2015 – more than double previous levels. This option slows the growth of this budget category, reducing the allocations 10 percent from the President’s budget, saving $4.6 billion in 2015.
A cut of this amount will slow the growth over the period, while still allowing for an increase of about 30 percent by 2015.

26. Reduce voluntary contributions to the United Nations.

According to the Office of Management and Budget, the United States provided over $6.3 billion in taxpayer funds to the United Nations in FY2009. Less than half ($2.7 billion) of that total went to “assessed”  dues – payments that the United States is charged for being a member and for its share of peacekeeping operations around the world.57  The United States is by far the largest donor to the United Nations in terms of assessed dues. However, the United States gives the United Nations more than $3.5 billion in “voluntary” funds each year.58 This option allows the United States to remain a member in good standing of the United Nations by contributing the full dues that will be assessed, but reduces voluntary payments by 10 percent, which will save $300 million per year.

28. Eliminate the Overseas Private Investment Corporation
The Overseas Private Investment Corporation (OPIC) offers private U.S. companies subsidized financing for foreign investments and insurance against political risks to those investments, including nationalization. The aim is to support economic development in some countries that are “strategically important” to the United States. This option would eliminate new activity by OPIC, although it would continue to service its existing portfolio. The main rationale for implementing this option is that the activities of OPIC may not provide net public benefits to the United States. Its subsidies deliver benefits to foreigners and selected U.S. businesses. Furthermore, its subsidies to nations of strategic importance to the United States tend to overlap with and duplicate those provided by the U.S. Agency for International Development and by private insurance firms. They also could hamper the development of local financial institutions and markets in those countries.

36. Charge beneficiaries for the cost of the International Trade Administration’s trade promotion activities.74The International Trade Administration (ITA) of the Department of Commerce oversees a trade development program that monitors the competitiveness of  U.S. industries and operates the U.S. and Foreign Commercial Services to promote exports. Currently ITA’s mission is to create prosperity by strengthening the competitiveness of U.S. industry, promoting trade and investment, and ensuring fair trade and compliance with trade laws and agreements. The President’s FY2011 budget request for the ITA was $534.3 million, a 20 percent increase from the FY2010 request. This increase includes an additional $78.5 million to support ITA’s export promotion efforts. Services provided by ITA’s U.S. Commercial Services and other Divisions directly providing assistance to U.S. Companies should be financed by beneficiaries of this assistance. While the agency charges fees for those services, its fees do not cover the costs of all its activities. Additionally, it is argued that the benefits of trade promotion activities are passed on to foreigners in the form of decreased export costs. According to a study by the Office of Management and Budget (OMB), businesses can receive similar services from state, local, and private-sector entities. The CBO option to eliminate ITA’s promotion activities or charge the program’s beneficiaries saves $267 million in 2010 and $1.6 billion through 2014.

Active links added above. 

By the way, the last time the State Department had a huge round of post closures was during the tenure of Warren Christopher in the 1990’s. Some 32 US embassies and consulates were closed between 1993 and 1997.

You can have your say on these issues —
“The Commission welcomes your input as we seek out creative solutions to our nation’s mid- and long-term fiscal challenges. Anyone can submit comments, ideas, and suggestions at anytime via email by contacting All comments received, including attachments and other supporting materials, are part of the public record. Due to the volume of comments we receive, we are not able to respond to each submission.”

How about for item#59, we add, “Bring all the troops home from Iraq and Afghanistan and let these countries do their own nation building.”

How many billions would that save us?