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The Rescissions Act of 2025, signed into law by President Trump on July 24, retracts approximately $8 billion in funding from the US Agency for International Development (USAID) and other foreign assistance programs. While the legislation does not abolish USAID outright—a step requiring congressional action—it marks a significant reduction in the agency’s budget and operations. For libertarians and advocates of limited government, the cuts are a meaningful policy victory.
In January, the administration announced a broad reevaluation of US foreign aid. The following month, it released a report from the Department of Government Efficiency (DOGE) identifying examples of “waste and abuse” within USAID. Notable expenditures included $70,000 for a DEI-themed musical in Ireland, $2.5 million for electric vehicles in Vietnam, and $6 million for tourism development in Egypt.
Elon Musk, then overseeing DOGE, publicly criticized USAID, tweeting, “USAID was interfering in governments throughout the world and pushing radical left politics.” It was “time for it to die,” he added. Although USAID had been distributing foreign aid since 1961, Secretary of State Marco Rubio announced the cancellation of approximately 83 percent of USAID’s contracts—around 5,200 in total. The remaining 1,000 would be transferred to the State Department.
By July 1, the agency had been absorbed by the State Department, and roughly 5,800 employees had been laid off or placed on leave. In public remarks, Rubio stated, “USAID viewed its constituency as the United Nations, multinational NGOs, and the broader global community—not the US taxpayers who funded its budget…. Too often, these programs promoted anti-American ideals and groups, from global ‘DEI,’ censorship and regime change operations, to NGOs and international organizations in league with Communist China and other geopolitical adversaries. That ends today ….”
The rescissions were carried out under the authority of the Congressional Budget and Impoundment Control Act of 1974, which allows Congress to reclaim unspent funds. Some of the rollbacks:
Other programs affected include International Peacekeeping Activities, the Democracy Fund, the Complex Crises Fund, the Inter-American Foundation, the US African Development Foundation, and the US Institute of Peace.
For decades, scholars at the Cato Institute have argued for the termination of USAID and the broader foreign aid apparatus. As stated in the Cato Handbook for Policymakers (9th edition): “Congress should abolish the US Agency for International Development and end government-to-government aid programs.” As for the billions spent by the US on overseas development assistance every year, Cato Vice President for International Studies Ian Vasquez reports in the Handbook:
The empirical record, Vasquez contends, consistently shows that foreign aid fails to achieve its intended outcomes and can be counterproductive. The redistribution of US tax dollars abroad has little demonstrable benefit and, in many cases, undermines economic development and national interests.
Back in 1955, the libertarian writer Henry Hazlitt wrote in his Newsweek column, “Once a government bureaucracy has been set up to do any job whatever, it will find endless excuses for expanding, prolonging, or perpetuating that job. This is the sad history of our postwar foreign aid. Originally urged by Secretary Marshall in 1947 to meet what was then regarded as a temporary emergency situation, foreign aid has gone on and on, from year to year, constantly changing its stated purposes, constantly changing its name, but showing not the slightest tendency to terminate or even taper off.”
The Rescissions Act of 2025 breaks with that pattern. It took 70 years, but we now know that a government program may not be the closest thing to eternal life on this earth—that a government bureaucracy can be tapered off, if not de facto terminated. True, it is a small victory—$8 billion rescinded—but it’s a good start. Hazlitt is likely smiling somewhere, and we should, too.
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A Good Start: Congress Cuts Funding for USAID and Other Foreign Aid Programs – Cato Institute
